New Jersey Law Journal: Special Concerns for Employers Who Have Remote and Hybrid Employees

Prior to 2020, we rarely heard of the concept of “remote workers” let alone “hybrid workers.” Sure, there were the occasional “telecommuters,” as they were often called, but it was not very common, and in the rare cases where employees telecommunicated, they were usually located in the same state as the employer.

Then COVID changed everything. Suddenly, essentially every employer had employees working remotely from their homes or other locations. Over time, there were remote employees who moved to other states, some of whom neglected to advise their employer of their relocation. Now, even though the pandemic has ended, and employers are bringing employees back to the physical workplace, remote/hybrid workers, in some form, are here to stay. There are employers who have remained fully remote and are benefitting from the reduced overhead of having a physical workplace. Other employers have adopted a “hybrid” model where employees work a portion of the time in the office and the other time remotely. Some employers are also offering flexible schedules.

While the flexibility and convenience of remote work has many benefits for both employees and employers, all too often employers fail to appreciate the legal implications of having remote employees, in particular those located in different states than the employer’s office. The biggest legal concern is that employees are protected by the laws of the state in which the employee is performing services, which may not be the same state where the company is located, has an office or provides good and services. Thus, permitting remote work will certainly impact an employer’s legal exposure, and require special attention to the employee handbooks and policies, leave laws, wage and hour issues such as classification of employees as exempt or non-exempt, employee agreements such as restrictive covenants and severance agreements, and other factors that come into play upon a termination of employment.

Employee Handbooks

When much of the workforce was sent home in March 2020, most employers did not have remote work policies in place. Once it became evident the pandemic was going to last for a while, various employers prepared and implemented remote work polices, but to date, many employers still have not done so. It is crucial that any employer with remote workers have a written policy in place that clearly defines the requirements of remote work arrangements, including:

  • An express statement that remote work is a privilege, not a right.
  • The parameters around eligibility, who is eligible to work remotely, and how often.
  • Expectations regarding office hours, attendance and availability expectations, and noting that remote work does not mean flexible hours.
  • If the employer permits hybrid work arrangements, identify requirements around those arrangements, such as how much in-office time is required and how is that monitored.
  • Explain the different requirements for exempt and nonexempt employees, in particular with regard to timekeeping responsibilities.
  • Identify what home office materials and expenses will the company cover—this may be governed by applicable state law depending on where the employees are performing services. For example, an employee working remotely in California is entitled to have certain home office expenses such as internet and equipment costs reimbursed by the employer, regardless of where the employer is located.
  • A statement that all company policies (such as harassment policies and requirements around security and protecting confidential information) still apply even though an employee may be working remotely.
  • Require that all employees (remote or not), keep the employer apprised of the employee’s home address, and changes thereto, as well as of any other locations from which a remote worker performs services for any substantial period of time.

A remote work policy must also include detailed security procedures and requirements in order to protect the company when employees are working remotely. This should outline the risks of using company laptops or other devices in public places and require use of computer “privacy mode,” and protections such as logging or shutting down when away from a computer in any non-private space. The policy should also require that all sensitive or confidential information be secured in the remote work area at the end of day and when gone for an extended time.

Another change affecting the workplace that should be memorialized in a handbook or separate policy relates to working hours. The old 9-to-5 schedule no longer works for many of employees who got a taste of flexible work schedules when working remotely during the pandemic. Consequently, many employers are facing demands for flexible working hours. Any employer permitting such arrangements should craft a policy with clear and transparent explanations as to what employees can work flexible work schedules, that defines expectations around such arrangements, and includes guidelines on how the time will be tracked.

Finally, employee handbooks need to include a state supplement for every state where the company has employees performing services. This is necessary because there are states that require certain language be expressly included in handbooks. Plus, state laws vary on certain polices included in handbooks such as categories protected from discrimination and harassment, leave laws and wage and hour requirements.

Wage and Hour Issues

The laws governing hours of work and payment of wages have become a leading source of employee claims, as well as audits from the federal and state departments of labor. Employers tend to be familiar with federal compensation laws and the state laws applicable to the company’s main office, but stricter laws may exist in the cities and states where individual employees are working remotely. Consequently, an employee who would be exempt from overtime pay in the state where the company is based, may not satisfy the test to be exempt in the city or state where the employee works remotely, and thus, such employee may be misclassified as exempt from overtime and actually entitled to overtime pay under applicable local law.

For example, the test for whether an employee is exempt from overtime has a minimum salary requirement. In New Jersey, which is consistent with federal law, an employee must earn a minimum of $35,368 annually to be exempt. However other states such as New York, California, Colorado, Maine and Washington have a higher minimum salary requirement. Consequently, a New Jersey employer classifying an employee earning $36,000 per year as exempt would be in compliance with the law if that employee is working in New Jersey. However, if that employee is working remotely across the river in New York, or in California, Colorado, Maine and Washington, that employee is not earning the requisite minimum salary required by those states to be exempt from overtime, and the employer could face severe legal liability and penalties for that misclassification.

Employee Agreements

Restrictive covenants, such as confidentiality, non-competition and non-solicitation agreements, are useful tools to protect business interests, information and relationships from misappropriation by current and departing employees. However, these documents are similarly governed by the law of the state where the employees are performing services, irrespective of where the employer is located, and state laws vary as to the legality and enforceability of such agreements. In several states, non-competition agreements are or largely, or even entirely, unenforceable, regardless of the impact that competition may have on an employer’s business. For example, in California, employee non-competition agreements restricting post-employment conduct are generally void and unenforceable.

State laws also vary as to what is considered sufficient consideration for such restrictive covenant agreements. For example, for an employee working in New Jersey “continued employment” is sufficient consideration if that current employee is asked to sign such an agreement, but if that employee works remotely in Pennsylvania, continued employment is not sufficient consideration and the current employee must be provided something else of value in exchange for signing such an agreement.

An employer’s ignorance on the applicable laws it this regard may result in such agreements being void and unenforceable.

Terminations and Severance Agreements

At the end of employment, employers often use separation agreements that offer severance pay in exchange for an employee’s release of legal claims against the employer. However, similar to any agreement with employees, severance agreements must comply with the laws of the state where the employee performed services. Thus, a one-size-fits-all approach to severance agreements is not possible in this world of remote workers.

For example, certain specific state laws must be expressly released and cited in the severance agreement. The different states also have varying requirements as to the date by which terminated employees must receive their final paycheck. While New Jersey permits the final paycheck to be paid to terminated employees on the next payroll date following the termination date, a terminated remote employee working in Connecticut must get their final paycheck on the next business day after termination, and a remote employee in California must receive their final paycheck on the termination date. States also vary on what must be included in that final paycheck. For example, some states require terminated employees be paid for unused paid time off upon termination and other states do not. Failure to timely and properly make these payments in accordance with applicable state law (again where the remote workers are performing services) may result damages, attorneys’ fees and costs, and even personal liability for certain corporate officers.

This is only the tip of the iceberg in terms of issues that result from having remote workers. In order to minimize the risk of non-compliance with applicable laws, employers need to stay informed as to where all their remote employees are performing services and ensure compliance with all the applicable state laws.

Reprinted with permission from the March 12, 2024 issue of the New Jersey Law Journal. © 2024. ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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