The COVID-19 pandemic has accelerated the trend toward remote work arrangements, with many companies embracing work-from-home as the new normal. While remote work offers benefits like increased flexibility and reduced commute times, it also creates new challenges for employers when it comes to wage and hour compliance.
In this digital age, it's more important than ever for companies to ensure they are following all applicable labor laws and properly compensating remote employees for all hours worked. Failing to do so can result in costly lawsuits, penalties, and damage to your company's reputation.
When it comes to paying remote workers, there are several key federal and state laws that employers need to comply with:
One of the biggest wage and hour risks when it comes to remote workers is misclassification. Employers must be careful to properly classify remote workers as either exempt or non-exempt employees.
Misclassifying non-exempt employees as exempt to avoid paying overtime is illegal. Penalties for misclassification can be steep, including back pay, liquidated damages, civil penalties, and attorney's fees.
Another challenge with remote work is accurately tracking all compensable time. When employees work from home, it can be harder to monitor when they are working and ensure they are paid for all hours worked.
Employers should have a clear policy in place for remote workers that covers:
It's a good idea to have remote employees certify the accuracy of their time records each pay period. Consider using electronic timekeeping systems or time tracking software to help monitor employee hours.
With remote work blurring the lines between work and personal time, it's important to prevent off-the-clock work. This is any work performed by non-exempt employees outside of their scheduled work hours for which they are not compensated.
Some common examples of off-the-clock work include:
To prevent wage and hour violations, make sure remote workers understand that all time spent working must be recorded and paid, even if it's just a few minutes. Prohibit off-the-clock work in your policies and train managers not to contact non-exempt employees after hours or expect responses to emails outside of working time. If employees do perform off-the-clock work, make sure they are paid for that time.
Many states require employers to provide non-exempt employees with meal and rest breaks during their shifts. While it may seem like remote workers can take breaks whenever they want, employers are still responsible for ensuring these breaks are provided.
For example, California requires employers to provide non-exempt employees with a 30-minute unpaid meal break for every 5 hours worked and a paid 10-minute rest break for every 4 hours worked. Employees must be relieved of all duties during breaks.
Remote work policies should specify meal and rest break requirements and instruct employees to accurately record break times. Consider requiring workers to take breaks away from their workstations and avoid sending communications during scheduled break times.
When employees work from home, they may incur various expenses in order to perform their jobs, such as:
Some states, like California and Illinois, have laws requiring employers to reimburse employees for necessary business expenses. The FLSA also requires reimbursement if expenses would cause a worker's pay to fall below minimum wage.
To minimize risk, develop a clear expense reimbursement policy for remote workers that outlines which expenses are reimbursable and the process for submitting expenses. Don't assume employees will absorb these costs.
Things get even trickier when you have remote employees spread across multiple states. Employers must ensure they are complying with the wage and hour laws of each state where remote workers are located. This includes things like:
Multi-state employers should work with legal counsel to develop compliant pay practices for each jurisdiction. You may need to maintain different pay rates and policies for employees in different states.
So how can employers manage all these wage and hour challenges and minimize compliance risks with a remote workforce? Here are some key tips:
By taking proactive steps to promote wage and hour compliance for remote workers, you can avoid costly missteps, maintain positive employee relations, and set your business up for success in the digital age.
The explosion of remote work has created new compliance challenges for employers when it comes to paying workers properly and adhering to applicable wage and hour laws. While the flexibility of remote arrangements is appealing, it's crucial that companies update their practices and policies to address the unique issues that arise with remote workers.
From tracking hours and preventing off-the-clock work to managing multi-state compliance and reimbursing expenses, there are a myriad of considerations to juggle. But by understanding the legal requirements, establishing clear processes, and utilizing the right tools and expert guidance, employers can effectively navigate this new landscape and remain compliant.
Prioritizing wage and hour compliance isn't just about avoiding penalties—it's about doing right by your employees, enhancing your reputation, and positioning your business for long-term success in an increasingly remote world. The effort you put in now to update your practices will pay dividends for years to come.
Navigating wage and hour compliance in a remote world? Stay informed, stay compliant, and protect your business and your people.