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Compliance Issues for Managing a Virtual Workforce

March 24, 2020

Author: Lisa Handler Ackerman

As the world around us quickly changes in the face of the COVID-19 pandemic, so does the work environment for most Americans. Many offices and work sites are increasingly uninhabited as a result of “stay at home” orders such as those issued in California, Connecticut, Delaware, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, New Jersey, New Mexico, New York, Ohio, Oregon, Washington and West Virginia; orders directing all nonessential businesses to close such as those issued in Maryland, Nevada, Kentucky and Virginia; Georgia’s order requiring “medical fragile” employees to shelter in place; Kansas’ mandatory quarantine for its residents who recently traveled to certain identified states; and similar measures taken by local governments. As a result, many employees are now working from home.

This article describes key employment laws and measures that employers need to consider while their employees are working from home.

Make sure employees record time worked.
To comply with the wage-and-hour requirements of the Fair Labor Standards Act (FLSA) and your state’s applicable wage-and-hour laws, it is imperative that most (if not all) employees record their hours worked. Specifically, nonexempt hourly employees (i.e., those who are entitled to minimum and overtime pay) need to track the time they spend performing compensable work so that the amount of regular and overtime pay to which they are entitled can be calculated.

The regulations promulgated by the U.S. Department of Labor (DOL) require that employers covered by the FLSA maintain records for each nonexempt employee, which include but are not limited to hours worked each day and total hours worked during each workweek.

The DOL’s regulations do not require covered employers track the hours worked by exempt employees; nor does federal law prohibit employers from tracking exempt employees’ hours. In fact, in its preamble to the 2004 final regulations, the DOL states that employers may require exempt employees to record and track hours and to work a specified schedule.

State law, however, may require employers to record hours worked by all employees, including those who are exempt. In Illinois, for example, the Illinois Department of Labor’s Administrative Code governing the Illinois Wage Payment and Collection Act (IWPCA) requires that every employer maintain records for all employees, irrespective of their status as exempt, including the hours they work each day and in each workweek. Employers should review their applicable state laws to determine what record-keeping obligations exist at the state level.

Even if not required by law, there may be valid reasons for tracking exempt employees’ hours worked on, for example, client billing, determining Family Medical Leave Act (FMLA) eligibility, or calculating 401(k) plan accounts, health insurance hours-based benefits and paid time off (PTO) benefits, among others.

Also, time records may be necessary to manage particular exemptions. For employees who are exempt only from overtime requirements but not minimum wage, records of hours worked are necessary to ensure employees were paid minimum wage. As another example, the overtime exemption for commission-paid employees of a retail or service establishment requires that the employee’s regular hourly rate of pay in a workweek must be more than 1.5 times the FLSA’s minimum wage.

Finally, not all employers’ time-keeping systems are accessible by employees working from home. In this circumstance, employers should implement a policy that requires employees to track their time using another reliable method.

Make sure nonexempt employees do not perform work off the clock.
There are new challenges for employers in not having direct oversight of employees working from home, many for the first time. Employers must therefore take action to ensure that nonexempt employees are not performing work off the clock and not working overtime without authorization.

Employers must count as hours worked the time employees perform work, even at home, if the employer knows or has reason believe that the work is being performed. Therefore, if an hourly, nonexempt employee is sending work emails to his or her supervisor while off the clock, the employer may be charged with knowing the employee performed work for which he or she was not compensated.

Ensure employees take meal and rest breaks as required under applicable law.
Many states have laws mandating meal and rest breaks, along with requirements for breaks for women who are breastfeeding. Employers should consult with their applicable state laws to ensure their employees are adhering to meal and rest break laws while working from home. Indeed, the Patient Protection and Affordable Care Act enacted in 2010 amends the FLSA requiring certain employers to provide nursing mothers with reasonable break time to express breast milk.

The FLSA does not require employers provide meal or rest breaks to employees; however, under the FLSA, employees must be paid for rest breaks that last 20 minutes or less, and these short breaks are to be included when determining if employees work overtime. Employers do not need to pay employees for meal breaks that last 30 minutes or more provided employees are relieved of all work duties during the meal break.

workforceaDepending on applicable state law, employees may need to be reimbursed for business expenses incurred while working from home.
Employees who moved from working exclusively or primarily in an employer-provided office to working at home may incur expenses in connection with their work.

Many states, including California, Illinois, Iowa, Massachusetts, Montana, New York and Pennsylvania, as well as the District of Columbia, have enacted laws requiring employers to reimburse employees for all or certain necessary expenditures or losses incurred in the discharge of the employee’s duties that primarily benefit the employer.

Specific business expenses that employees may incur while working from home include home office expenses, cell phone/data plan expenses and wireless internet expenses – in addition to expenses not unique to work from home arrangements during this pandemic, such as mileage, business travel and customer or client entertainment.

Employers should review the business expense reimbursement laws in their jurisdiction and update their policies as necessary so that they are compliant with applicable state law and address their current business practices.

Employers need to consider whether work-related injuries or illnesses sustained by employees while working from home are recordable or reportable under OSHA.
In addition to the DOL’s OSHA Guidance on Preparing Workplaces for COVID-19, as more employees may be required to work from home, it is a good time for employers to review OSHA’s regulations as they relate to worked-related injuries or illnesses sustained by employees working from home.

OSHA’s regulations require many employers with more than 10 employees to record any work-related injury or illness on an OSHA 300 Log if it results in death, days away from work, restricted work or transfer to another job, medical treatment beyond first aid or loss of consciousness, or if it involves a significant injury or illness diagnosed by a physician or other licensed health care professional.

OSHA also requires employers to record work-related injuries involving medical removal, occupational hearing loss and work-related tuberculosis. In addition, employers are required to report work-related incidents that result in death within 8 hours, and to report work-related incidents resulting in amputation, loss of an eye or hospitalization within 24 hours.

OSHA’s regulations provide that injuries sustained by employees while working from home are work related “if the injury or illness occurs while the employee is performing work for pay or compensation in the home, and the injury or illness is directly related to the performance of work rather than to the general home environment or setting.”

The regulations provide the following examples:

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Employers require employees to immediately report all injuries or illnesses sustained in connection with the furtherance of their job duties at the worksite and at home. Such requirement ensures that employers are in a position to comply with their OSHA recording and reporting obligations, and may protect employees’ rights under their states’ respective workers’ compensation laws.

Employers should document when employees are unable to perform all of the essential duties of their job while working from home.
Under the Americans with Disabilities Act (ADA), qualified individuals with a disability are entitled to reasonable accommodations that will enable them to perform the essential duties of their job provided the accommodations do not cause an undue hardship on their employers. Based on the facts and circumstances, working from home may be a reasonable accommodation.

During this pandemic, many employees are working from home even though they are not able to perform all of the essential duties of their job. In these instances, it is advisable that employers make it clear in writing that they are permitting employees to work from home to assist in fighting the spread of the COVID-19 virus, even though the employees are unable to perform all of the essential duties of their job.

This caveat will assist employers in the event any employees seek accommodations under the ADA to work from home after the pandemic is over, and refer to the fact that the employer permitted them to do so during the pandemic.

When nonexempt employees are “on call” while at home, employers need to determine if the “on call” time is compensable.
There may be situations where employers require their employees who are at home to be “on call” to respond to specific business needs.

The DOL’s regulations provide, “An employee who is not required to remain on the employer’s premises but is merely required to leave word at his home or with the company officials where he may be reached is not working while on call.” An employee in this scenario is waiting to be engaged and does not need to be compensated under the FLSA.

During instances when employees are completely relieved from their duties for periods of time that are long enough to enable them to use the time for their own purposes are not hours worked. Employees are not completely relieved from their duties and cannot use the time effectively for their own purposes unless they are definitely told in advance that they may leave the job and they will not need to commence work until a definitively set time. Whether the time is long enough to allow the employee to use the time effectively for his own purposes depends on the facts and circumstances of each case.

Employers should give consideration to whether the particular facts and circumstances of an employee’s work arrangement is such that the employee is “waiting to be engaged” – time for which he/she does not need to be compensated. However, if employees are prevented from using time at home for their own purposes, they would need to be compensated. This may involve an examination of the frequency of phone calls or emails that need to be addressed, and whether they interfere with the employee’s ability to spend time performing nonbusiness tasks of his or her choice.

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