Employers Permitting Remote Work Must Weigh Policies and Privacy

Demands for remote work arrangements are rising, and employers that allow employees to work remotely must prepare to face numerous compliance challenges, payroll professionals said March 21.

States have moved away from the lockdowns that were frequent at the start of the Covid-19 pandemic, but the remote work arrangements that initially arose out of necessity are sticking around as an employee perk, said Robert Davis, a partner at Davis & Harman LLP.

“We’re kind of entering a new phase of this,” Davis said at the American Payroll Association’s Capital Summit. “It’s not just about people having to be at home or having to work remotely. Now it’s about people wanting to work remotely.”

The new demands on employers bring a new focus on enforcement, Davis said. In particular, remote work performed when employees cross state lines may cause a range of complications for employers.

Employers that offer remote work options as a benefit should become familiar with the ways that remote work can affect payroll operations, said Peter Isberg, vice president of government relations at ADP, LLC.

After determining areas of compliance risk, employers should create policies that outline requirements for working remotely and clearly explain monitoring methods that may be in place, Isberg said.

Remote Work Risks

The issues posed by remote work affect multiple aspects of payroll processing, from state income tax withholding to worker classification, Davis and Isberg said.

Employers generally become subject to a state’s income tax withholding laws after an employee works in a state for a threshold number of days, Isberg said. Many states did not enforce these requirements at the start of the pandemic, but most of the relief provisions have since expired; employers must continue to track how long employees have remained in a state in order to determine when withholding liability starts, he said.

Employers can also become subject to requirements for paid sick leave, family-leave insurance, minimum wages, overtime, and workplace safety, Davis said, noting that in some states these provisions take effect as soon as an employee starts work in the jurisdiction.

Worker classification laws also vary, Davis said. A worker classified as an independent contractor in one state may be considered an employee in another state, which could trigger income tax withholding and other liabilities.

Policies & Privacy

A remote work policy should clearly outline that, as a condition of employment, employees must notify employers of a change in work location in advance, Isberg said. Employers should establish a formal approval process and determine the course of action when employees decide to work in a state in which the employer has decided not to operate, he said.

An employer may have to adopt different policies depending on where it already operates, Isberg said. It may need to “blackout” some states, rejecting requests to work remotely in jurisdictions pose too much compliance risk, he said.

Travel and expense systems should be programmed to flag data that indicates that the employee has started working in a new location, Isberg said.

There are multiple technologies available for tracking when employees are actively working, Isberg said. For example, employers may use programs that determine when employees have worked through required meal breaks, or to send reminders about breaks to employees.

However, employers should be aware of laws that prohibit certain tacking methods, Isberg said. More privacy laws are expected to be enacted in the coming years as more employee monitoring options become available, he said.

Early waves of legislation will likely focus on disclosure requirements, Davis said. The requirements could include notifying employees in writing about monitoring systems and keeping records of the disclosures, he said.

Communicating transparently with employees about monitoring measures in place, regardless of existing legal requirements, is generally a best practice, Isberg said.

The legal landscape of remote work is likely to continue to remain complex, Isberg said, noting that states tend to prioritize the impact of additional revenue over ease of employer compliance. However, payroll systems will likely continue to update in order to keep pace with changing requirements, he said.

Davis emphasized that proper compliance planning can reduce the volume potential issues from allowing employees to work remotely.

“You can’t solve every problem,” Davis said. “But, a lot of the issues we’re talking about, you really could manage or mitigate the risks associated with it if you have a good, thoughtful, remote work policy in place.”