With the large shift to remote and hybrid workforces — and the growing likelihood that some of your employees may work from home in different cities and states — it’s important to pay close attention to your wage and hour compliance with federal, state and local laws.
Wage and hour laws were largely written before the sudden rise in remote and hybrid work due to the COVID-19 pandemic, so you can expect to see changing regulations in the years ahead. That makes it even more important for your current workforce policies to be documented, compliant and ready to adapt.
Let’s start by examining three areas that can get trickier with today’s work arrangements:
- Out-of-state remote employees
- Hybrid workforces
- Off-the-clock work
Out-of-state remote employees
Remote work has increased your ability to hire employees regardless of where they live, even if it’s across the nation from your headquarters. Similarly, you may have employees who formerly commuted in from another state but now work from home.
The good news is that remote arrangements can increase your potential talent pool and improve employee relations. But they can also add complexity with wage and hour issues in multiple jurisdictions. In addition to the federal Fair Labor Standards Act (FLSA), you will need to track state and local laws that could apply to the residence of your remote workers.
Potential differences in wage and hour laws include:
- Hours worked (including pre- and post-shift activities that may or may not count as time worked)
- Minimum wage
- Overtime pay
- Payroll deductions
- Pay stub information
- Payday frequency
Paid leave is another area to watch, especially since an increasing number of municipalities and states are putting laws on the books. Stay up to date on state and local requirements regarding:
- Paid family leave
- Sick leave
- Disability leave
- Jury duty
- Voting leave
- Bereavement leave
In addition, you should track potential differences in areas that are easy to overlook with remote employees, including:
- Notice and posting requirements
- Meal and rest break laws
Hybrid workforces
According to attorneys at Post & Schell P.C., wage and hour laws for hybrid workforces are not yet definitive. However, these legal determinations could impact important aspects of your business, including:
- Payroll deductions
- Unemployment contributions
- Family leave laws
- Temporary disability programs
If you offer a hybrid arrangement, talk to your counsel or trusted advisers to determine answers to the following questions:
- If your employees mostly work from home in a different city or state than your office, which labor laws could potentially apply?
- If the annual split between home and office is equal, and employees live in a different city or state, which labor laws should apply?
- Can wage and hour issues arise if your employees work just one day in a different jurisdiction?
Even though the law is still evolving, you should immediately begin tracking the working locations of each employee — and how often they work there — to determine which laws could potentially apply. By making an official determination and documenting your reasoning, you show a good faith effort that could help your cause in potential Department of Labor (DOL) audits.
Off-the-clock work
The federal Fair Labor Standards Act (FLSA) requires you to pay employees for all hours worked. This is particularly important for nonexempt employees, who generally must be paid be an overtime rate for any work time beyond 40 hours in a workweek.
This can be complicated with work-from-home arrangements, especially if your employees are allowed to set their schedules outside of normal operating hours. Common examples might include employees:
- Briefly logging onto your network from home to look up a report
- Checking emails early in the morning and/or late at night
- Performing handwritten work, brainstorming or other time-intensive functions that aren’t recorded electronically
FLSA regards most job activities as work time unless they are de minimis - a legal term meaning too small and insignificant to bother with. If, for example, an employee logs on for two minutes to see if an important email arrived, that time might not need to be tracked. But if this happens every day over a long period of time, that time starts to add up.
For FLSA compliance, the DOL mainly looks at principal activities that are integral to job performance. But be sure to check applicable state laws in addition to FLSA because states can have different standards for de minimis work time.
Also, note that all time worked must be paid, even if the employee was not authorized to do it or worked in violation of your policies. This situation can be addressed with discipline, as appropriate, but the time must be paid.
Steps to take
Wage and hour laws for remote and hybrid employees are evolving, and the application is not yet straightforward. That makes it vital to document your efforts.
Initial steps include:
- Determine whether you will allow remote or hybrid work. You may want to place restrictions on where employees can work remotely, depending on applicable laws and your business needs.
- If you allow remote or hybrid work, be specific with details on how often work-from-home arrangements will be allowed and whether employees can work remotely in a different city or state. Document restrictions on any job positions that cannot be performed remotely.
- Examine remote work considerations as a reasonable accommodation for employee requests under the Americans with Disabilities Act so you are prepared if requests are made.
- Document all policies — and your reasoning behind them — to ensure you avoid subjective, discriminatory practices.
To further prepare for compliance with wage and hour laws, follow these best practices:
- Keep an updated file on where your employees are working as well as any applicable state and local wage and hour laws.
- Maintain written records of sick, medical, disability and paid leave laws in any applicable jurisdiction.
- Define work time, including checking email, as well as meal and rest breaks for remote and hybrid employees.
- Keep accurate records of all hours worked by nonexempt employees.
- Update your employee handbook, and regularly communicate these policies to your employees.
Remote and hybrid workforces can be a valuable part of your business strategy, but they can also create compliance challenges. To take full advantage of these work arrangements, consult with your legal counsel and trusted advisers to make sure you follow all applicable wage and hour laws.
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