The Yahoo! Decision: Telecommuting Issues Facing All Employers

Yahoo! CEO Marissa Mayer recently made headlines for doing away with the company’s telecommuting policy and requiring all employees to report for work at their respective offices.  Reportedly, Yahoo! was suffering from “productivity” issues with many of its employees who were working from home.  While employee productivity is always of paramount importance to employers, telecommuting also poses a variety of legal risks that can similarly affect an employer’s bottom line.  Some of the most common legal issues will be addressed here.

 Different Laws in Different Locales — An employer located in Colorado that allows an employee to work from her home across the border in Nebraska may inadvertently subject itself to Nebraska’s labor and employment laws, for example.  For certain states, this may not be a big deal.  However, for employees that live in states (and in some cases, cities) with progressive, employee-friendly labor and employment laws, this could be a huge problem that could lead to increased time, resources, and in the event of noncompliance, liability.  Employers may also find themselves responsible for income tax and collecting sales tax in the states in which telecommuting employees work.  

Wage & Hour Liability — Employers that allow employees to telecommute face a host of potential wage and hour issues.  Most employees are “non-exempt” under the federal Fair Labor Standards Act, meaning they must be paid for all hours worked and must be paid overtime, which in most states equals one and one-half times the employee’s regular rate for any hours worked over 40 in a workweek.  It is therefore essential (and indeed legally required) that employers maintain accurate, contemporaneous records of all hours worked by non-exempt employees.  In addition to overtime, non-exempt employees may be eligible for “extra pay” under state law when they work a split shift, when they work more than a certain number of hours in a day, and when they report to work but are sent home early.  Many states also have strict rules regarding meal breaks and rest periods.  Employers must comply with all of these laws, regardless of whether their non-exempt employees work from an office in suits and ties, or from home in their pajamas.  

Telecommuting as a “Reasonable Accommodation” — The Americans with Disabilities Act of 1990, as amended, as well as many state and local laws, require a “covered” employer to provide “reasonable accommodation” to individuals with “disabilities” who can otherwise perform the essential functions of their jobs, except when such accommodation would cause the employer “undue hardship.”  Employers should be aware that under certain circumstances, working from home can be a reasonable accommodation that employers must provide absent an alternative effective accommodation or a showing of undue hardship (a difficult burden to meet).  

FMLA Eligibility — The federal Family Medical Leave Act (FMLA) requires covered employers provide eligible employees with 12-weeks of job-protected, unpaid family medical leave in a 12-month period.  Among the requirements for eligibility is that the employee must work at a location where the employer has at least 50 employees within 75 miles, and that the employee have worked 1,250 hours during the 12-month period immediately preceding the need for leave.  For the purpose of determining whether a telecommuter works within 75-miles of 50 or more employees, the employee’s worksite is the office to which the employee reports and from which assignments are made, not the employee’s home.  This means an employee that works remotely from her Texas home and reports to a New Jersey office could be eligible for FMLA leave (assuming all other eligibility requirements are met), even if she is the only employee working in Texas.  Employers should also be aware that all “work from home” hours count towards determining whether the employee has worked 1,250 hours during the preceding 12 months.  In addition to the FMLA, many states have similar family and/or medical leave laws that employers should be aware of, including California, Connecticut, Hawaii, Maine, Minnesota, New Jersey, Oregon, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia.        

Security Concerns — Employees who work from home are often given access to the intellectual property, trade secrets, and confidential business information of their employers and their employer’s clients.  Proper caution should be taken to make sure the appropriate safeguards are in place (e.g., encrypted computers and password protected networks) to protect this valuable information. 

Safety Concerns — The Occupational Safety and Health Act requires certain employers maintain records of work-related injuries and illnesses.  These employers are responsible for keeping these records, regardless of whether an injury occurs in a warehouse, on the road, or in an employee’s home office.  Additionally, most state workers’ compensation laws cover work-related injuries incurred while telecommuting.

Zoning Issues — Certain cities’ zoning laws may restrict or require telecommuting that borders on “operating a home business” to obtain a permit or license.

Discriminatory Implementation / Enforcement — Employers that permit telecommuting must do so in a non-discriminatory manner.  The employer may reserve the right to determine who is able to telecommute, but should base such determinations on objective criteria unrelated to an employee’s protected class such as gender. 

Despite the foregoing risks, and others, all hope is not lost for employers that allow employees to telecommute.  To the contrary, employers can realize significant benefits from telecommuting, including increased work quality, improved employee morale, reduced overhead, improved employee recruitment and retention, and reduced absenteeism.  However, to realize these benefits, employers must properly manage telecommuting employees, and this starts with developing and consistently enforcing a well-reasoned telecommuting policy.