Remote Workers Pose Wage and Hour Challenges

Remote and hybrid workers present wage and hour compliance challenges for employers managing hourly workers not exempt from the Fair Labor Standards Act's (FLSA's) overtime rules, said Brenda S. Kasper, SHRM-SCP, speaking June 15 at the SHRM Annual Conference & Expo 2022 in New Orleans.

Employers that don't set and enforce policies on where and when nonexempt employees can work risk expensive class-action lawsuits that can combine small wage and hour mistakes into big liability packages, said Kasper, founding member of the law firm Kasper & Frank LLP in San Diego, during the concurrent session "Managing Employees in the Virtual/Hybrid and In-Person Worlds: Avoiding Wage and Hour Pitfalls."

While HR teams can never eliminate all overtime risks around fully remote and hybrid work arrangements that mix onsite and offsite work, they can take steps to lower the odds of being sued by employees or of facing enforcement actions brought by regulators.

A Multitude of State and Local Laws

Many states and localities have statutes that go beyond the federal FLSA, and the law deemed most favorable to employees generally will apply, Kasper said.

The local/state exempt-pay threshold for crossing from overtime-nonexempt to overtime-exempt is higher than the federal threshold in many states and some localities, meaning more workers qualify for mandatory overtime pay.

State and local statutes can also be more generous to workers on issues including minimum wages, mandatory paid and unpaid leave, vested-vacation payouts and employment taxes.

California has some of the nation's most stringent—and, for employers, most cumbersome—worker protections, Kasper noted.

These issues come to the forefront when employees don't stay put and begin working in different jurisdictions.

Risk-Reducing Measures

The problem of roaming remote employees can be tackled at the start, in the employment offer letter, Kasper advised. She suggested using language such as "You are being hired to work in the location of [state in which they have a primary address, sometimes noting the municipality]. You are not authorized to work anywhere else. The law of [state/locality] will apply to this working relationship."

If employees move to another state while working remotely, employers should contact them immediately and reiterate that they are not authorized to work elsewhere. Alternatively, employers may choose to accept and confirm with an employee that the law of their new state of residence will apply. Either way, the notice should be documented.

"Don't leave the matter unresolved," Kasper said.

Employers should have a legitimate business reason for approving or rejecting the employees' move and should frame it in strategic terms, she suggested, adding, "It's generally OK to say, 'We hire from this geographic scope and not from elsewhere.' "

The same issue may come to the fore if, say, a California employee were to move from San Diego to San Francisco, which has more-burdensome compliance rules.

"Explain to employees that you don't have the capacity to operate in all 50 states" when that's the case, Kasper suggested. Employers can be geographically restrictive as long as they avoid anything that could be viewed as discriminating against employees in protected categories, such as race and ethnicity.

Kasper raised the issue of an employee who purchases a recreational vehicle and decides to travel the country working from everywhere, making an employer manage multiple state and sometimes multiple municipal work rules.

"You have the right to tell them 'no' and to enforce the condition of employment described in the job agreement letter" on penalty of termination, she said.

What about applying California's employee-friendly law everywhere? "It's not so easy. Don't try it," she advised.

Compensable Time

Under the FLSA's legal standard, "if you 'suffer or permit' employees to work, they must be paid," Kasper said. "Not expressly telling hourly workers they can't respond to e-mails off the clock could be risky," even if managers never told them they had to respond to e-mails at night.

Similarly, managers should tell nonexempt employees in a hybrid work arrangement not to begin their day working from home, including responding to e-mails. "If they start to work at home before their commute, their drive time becomes compensable under the FLSA," Kasper explained.

For exempt employees who are paid salaries, it's a different story, she said, as employers generally can grant them flexibility over when and where they work. Still, exempt workers could suddenly need to be paid hourly if working in places with a higher income threshold for overtime exemption.

Non-overtime issues when employees work from multiple jurisdictions affect exempt workers as well, Kasper pointed out, such as varying state and local leave laws and employment taxes, so HR shouldn't let its guard down when salaried workers also choose to roam.

Related SHRM Articles:

DOL Overtime Claims Are on the Rise, SHRM Online, June 2022

Watch Out for Overtime Compliance Challenges, SHRM Online, June 2022

Employees Working Out of State Often Fail to Let HR Know, SHRM Online, February 2021

[Visit SHRM's resource page on Remote Work.]