Teleworking in Response to the Pandemic

Mindful of the coronavirus threat, government and health authorities continue to encourage employers to allow employees to work from home if possible.

When stay-at-home orders were issued in mid-March, many employers scrambled to establish teleworking arrangements for their employees. Companies that didn’t have an established teleworking policy made do as best they could. Now that the dust has settled, it’s time to understand the legal implications of teleworking and to contemplate whether teleworking will remain a viable option as business opens up.

Establishing a Telework Policy

If your company has not done so, establish a policy for teleworking. If teleworking is new to you, and you intend to support it only during the stay-at-home period, the policy needn't be implemented as a formal part of the employee handbook. It may be a stand-alone document, or even a group email to staff currently working from home. Some employers might decide to make teleworking a new benefit after stay-at-home orders are lifted. In such cases, policies should be drafted for that benefit, and be integrated into the employee handbook.

The policy should clearly address the issues discussed in the following subsections.

Work Hours and Timekeeping

Working from home under the stay-at-home orders can be challenging for some employees who are managing child care, online schooling for their children and the lack of a dedicated workspace. Although the FFCRA provides some relief through expanded leave for eligible employees per the Family and Medical Leave Act, if the crisis lasts much longer, most workers will have exhausted that benefit, and must figure how to work effectively from home.

When possible, employers should be flexible in how they define the workday and work hours. For example, they could allow employees to manage their own time, which might include working outside normal business hours. That isn't feasible for all workers, so working part time, for example, might allow such employees to care for their families and fulfill other obligations while continuing to work in some capacity. Employers who are creative now can retain valued employees and return to normal operations once the crisis passes.

A flexible schedule might be most effective with exempt employees who aren’t subject to timekeeping requirements and overtime. But there are rules about how exempt employees must be paid. They are discussed in the subsection below, Compensating Exempt Employees Who Telework.

If an employer allows nonexempt employees to work a flexible schedule, it must be mindful of the wage-and-hour implications. California's Labor Code requires employers to pay hourly nonexempt employees only for the hours they actually work, including overtime. So employers must have an accurate means of tracking all the hours those employees work. And employees must record their start and stop times every day, when they break for meals, and for all work performed outside the normal workday (for example, off-hours work involving text messages, telephone calls, emails, etc.).

Teleworking policies must address when meal breaks be taken, and that the employee is required to clock in and out for each such break. Nonexempt employees should be instructed to take job-free meal breaks; that is, they should not eat while working in order to shorten the workday. Several strategies can accurately report time and maximize teleworker productivity. Workers punching in and out for meal breaks enables employers to ensure that their meal breaks begin before the end of the fifth hour of work in any given workday. Failure to take a timely meal break could result in employer penalties like those to which it's subject if an employee misses a meal break –– one hour of pay for every late or missed meal break.

If a nonexempt employee’s shift ends after six hours, employers should give him or her the option to waive the meal period. The waiver should be in writing.

All nonexempt employees are entitled to rest breaks. Encourage teleworking employees to take a 10-minute rest break for every four hours worked, or close to it. Employees needn't clock out during that interlude, but they shouldn't be discouraged from taking a break. If an employee feels unable to take a break because of employer pressure, he or she could be entitled to a rest-break premium –– one hour of pay for missed rest breaks.

Overtime

For almost all nonexempt private sector California employees who are not covered by collective bargaining agreements, overtime pay is based primarily on the number of hours worked in each day and each workweek. Daily overtime pay requirements are:

• 1.5 times the employee’s regular rate of pay for:
1. all hours worked in excess of eight in a single day
2. the first eight hours worked on the seventh consecutive day in a single workweek
• double the employee’s regular rate of pay for:
1. all hours worked in excess of 12 in a single workday
2. all hours worked in excess of eight on the seventh consecutive day work in a single workweek

Employees also are entitled to weekly overtime –– employers must pay employees 1.5 times the employee’s regular rate of pay for all hours worked in excess of 40 straight-time hours (defined as the usual number of hours and the usual amount of pay for a period of work) in a workweek. Only hours worked at straight time apply to the weekly 40-hour limit. Employees are entitled to daily overtime or weekly overtime, whichever is greater.

An exhaustive review of overtime requirements is beyond the scope of this guidebook; employers should familiarize themselves with overtime rules and regulations in drafting teleworking policies for their nonexempt employees.

Other Wage-and-Hour Considerations for Nonexempt Teleworkers

If employers permit flexible scheduling for nonexempt workers, they must consider the effect of split shifts. A split shift is any two distinct work periods separated by more than a one-hour meal period. If the interval between shifts is more than one hour, the employee must receive one hour’s pay at no less than the minimum wage rate for the time between shifts.

The minimum wage rate is based on either the state’s minimum wage or the local minimum wage, whichever is greater. Case law has held that split-shift premiums aren’t due if total pay for the day is at least minimum wage for all hours worked, plus an additional hour at minimum wage. Note: no split shift pay is owed if the employee requests to work that schedule for his or her own convenience. So, if your business allows employees to create or request a flexible schedule, be sure that they do so in writing to avoid having to pay a potential split-shift premium.

Calculating split-shift premiums is complicated; employers should contact us with questions on this topic.

Employers might consider reporting time pay also for nonexempt employees working flexible schedules. That practice discourages employers from requiring nonexempt employees to report to a job unless there is work to be done. Typically, reporting time pay is owed when an employee reports for work but there is no work, or he or she is given less than half of the hours for which the worker was scheduled or usually works. Reporting time pay for these situations is at least half of the hours scheduled or usually worked, but never fewer than two hours' pay or more than four.

It's unclear whether reporting time would be due for nonexempt teleworking employees, as they are not required, technically, to return to the workplace after a shift ends nor, technically, to “report” to work only to find insufficient work available. But given the uncertainty, employers at least should consider the potential ramifications of reporting time pay requirements. The California Division of Labor Standard Enforcement (DLSE) advises employers that reporting time pay be required when nonexempt employees are directed to attend meetings on a day they're not scheduled to work, or if meeting attendance is required after the employee’s regular shift has ended and the worker must return to work. If employers call meetings and expect nonexempt employees to attend, they should try to schedule them during the employees’ workday.

The availability of flexible scheduling for nonexempt employees might affect whether reporting time pay is owed. Pay is not required when work is interrupted by an act of God or other causes not within the employer’s control, among other minor exceptions. Although initially the pandemic crisis and stay-at-home orders might have qualified as “an act of God or causes outside the employer’s control,” the ongoing crisis probably would not be considered an exception because businesses have had the opportunity to regroup and fashion policies and practices for their teleworking employees.

On-call and standby pay also might be considered for teleworking nonexempt employees. If a business requires nonexempt employees to work on call or standby, the waiting time might qualify as hours worked, depending on how much you restrict their ability to have free time. Hours worked is defined as “the time during which an employee is subject to the control of the employer, and includes all the time the employee is suffered or permitted to work, whether required to do so or not.” If an employee is under the employer’s control, he or she must be paid even if the worker is sitting around waiting for something to happen. This is called “controlled standby.”

On-call time, however, is not compensable if the employee can use the waiting time for his or her benefit. This is referred to “uncontrolled standby.” There are separate rules for the health-care industry.

The factors for determining whether an employee is on controlled standby and, therefore, must be paid include:

• whether there are excessive geographical restrictions on the employee's movements;
• whether the frequency of calls is unduly restrictive;
• whether a required response time is unduly restrictive;
• whether the on-call employee easily can trade the responsibility with another employee; and
• the extent of personal activities engaged in during on-call time.

The simple requirement that the employee carry a cellphone, pager or beeper does not mean that he or she must be paid for all hours the device is on. In addition, the DLSE does not take the position that requiring an employee to respond to calls is so inherently intrusive as to find that he or she is under the employer's control. If the teleworker is free to do whatever he or she chooses at home while awaiting a call to begin work, wages probably aren't due for that time.

Employers with an on-call or standby workforce, must implement teleworking policies that expressly address workers' ability to use the on-call time for their own purposes. The policy should address: expected productivity standards; connectivity and logistical issues (such as how to submit work and engage in conference calls and online meetings); and parameters for bringing work documents home, mindful of their adherence to confidentiality and data security protocols.

The policy should be subject to re-evaluation and modification at will, in the employer's sole discretion. Once the pandemic subsides, the policy might be terminated if employee presence at the workplace is essential.

As noted, not all jobs are conducive to teleworking. Employers may offer teleworking to some workers, but not all: Bank tellers, for example, can perform no useful work functions from home, but bank administrative workers might be able to work in that setting. In selecting who may work from home, employers must take care not to discriminate on the basis of race, gender, age or other legally protected characteristic. For example, employers should not mandate that all employees older than 60 must work from home, although they may give certain employees that choice as long as the option is not offered on a discriminatory basis.

Compensating Exempt Employees Who Telework

For California employees to be considered exempt, generally they must meet strict job duty tests specific to each exemption, as well as meet minimum salary requirements.

The minimum monthly salary for exempt executive, administrative and professional employees is no less than two times the state minimum wage for all full-time employment. Exempt employees must earn a fixed salary not subject to change based on productivity or hours worked. Minimum wage is based on the current state –– not local –– minimum wage. In 2020, the minimum salary threshold for these exemptions is:

• For employers with 25 or fewer employees, the state minimum wage is $12 per hour; the minimum monthly salary is $4,160.
• For employers with 26 or more employees, the state minimum wage is $13 per hour; the minimum monthly salary is $4,506.67.

Employees who fall within the computer professional exemption or the outside sales exemption are subject to different salary requirements.

The job duty test for exempt employee classification depends on the specific exemption. The executive, professional and administrative exemptions all require employees to perform exempt duties more than 50% of the time. One common requirement for exempt status is that employees must customarily and regularly exercise discretion and independent judgment. Such judgment has been subject to extensive litigation, so employers that question if their exempt employees are performing exempt duties under the test requirements should seek a legal evaluation.

Employees considered exempt must receive a salary, and it must be a predetermined amount paid each pay period. The amount may not be reduced because the worker's hours or performance varied from period to period.

During the pandemic, businesses must understand these rules, as exempt employees who are teleworking might be performing more nonexempt duties than normal, and employers should ensure that they don't fall below the mandatory 50% of time spent on exempt duties. Many businesses have reduced employee salaries as a result of financial losses from the pandemic. That might be permitted if certain standards are met, but employers must take care that those salaries don't fall below the threshold discussed above. If that happens, the employee automatically will be deemed a nonexempt employee regardless of his or her job performance. Nonexempt status confers eligibility for overtime, and requires meal and rest breaks. So it's vital that employers know how their employees are spending their time while teleworking, and the minimum salary for that classification.

Expense Reimbursement While Working at Home

Employers must reimburse employees for all monies they expend or lose directly related to performing their duties or following the employer’s instructions, per Labor Code § 2802.

In addition to standard reimbursements such as mileage, travel and meal expenses, other expenses pertaining particularly to teleworkers must be reimbursed. An employer must reimburse an employee if he or she is required to use a personal cellphone to make work-related calls. Employees now required to telework probably use their personal cellphones in the service of their employers. One court held that an employer must pay “some reasonable percentage” of the employee’s cellphone bill to comply with the Labor Code.

Unfortunately, there is no guidance as to what constitutes a “reasonable percentage,” but if a teleworking employee uses his or her cellphone in the course of the workday, a reasonable percentage is at least half of the cellphone bill. Many employers have established flat reimbursement amounts for employee use of their personal cellphones. Reimbursing all teleworking employees $100 per month for cellphone use, for example, might be reasonable and administratively expedient. Employers also should reimburse a portion of a teleworking employee’s internet expense. Here, too, many employers have found it administratively wise to reimburse each such worker a fixed amount each month for the business use of his or her personal account.

If employers ask their teleworkers to use their personal computer and printer, reimbusement might be in order for supplies and equipment wear and tear. Similar to a car allowance, a set allowance might be set for employee use of their computer equipment. Teleworkers should keep receipts of reasonable office expenses and instructed how to submit them for reimbursement.

Under the Private Attorney General Act (PAGA), failure to properly reimburse employees for reasonable expenses can open up employers to penalties and legal action.

Potential Disability Issues

Employers must consider disability accommodation issues when employees are teleworking. If an employee has a disability-related accommodation at work (for example, taking additional breaks or using an ergonomic keyboard or chair), employers should determine how to provide the same accommodations for that teleworking employee, subject to undue business hardship considerations.

Although the EEOC has loosened its regulations for accommodating the disabilities of pandemic teleworkers, employers still must follow their policy and procedures for: securing doctors’ notes; engaging in the interactive process; considering alternatives; and making an effort to provide accommodations while the employee is teleworking. Disability and accommodation considerations are discussed in depth in the previous sections, Disability and Reasonable Accommodations Under the Americans with Disabilities Act & the Fair Employment and Housing Act.

Monitoring Productivity and Communications

How do businesses monitor productivity when employees are teleworking? They can and should track work progress, but they also must remind employees not to expect privacy when they work from home –– companies may monitor their actions during the workday.

Most employee handbooks make clear that communications performed on company equipment, including email, work product and internet site visits, may be monitored. If your company has not communicated such a policy, do so before implementing teleworking operations. These policies diffuse claims that employees had a reasonable expectation of privacy in using the employer’s system, and that it violated privacy rights by monitoring employees' use of it.

It's also important to determine how to measure the productivity of teleworking employees. Will the employer require daily employee check-ins to report the progress of their assignments to supervisors? Will conference calls be initiated to ensure employees understand instructions, and report progress?

How best to monitor productivity depends on the nature of the business and the employee’s job duties. So productivity measures will look different for each industry and each employer.

Because schools are closed and children are at home (often taking classes online), employees might be juggling child care with their job responsibilities during the pandemic. Employers should remain flexible about the nature of the workday and the hours worked, and how productive a worker can be in a given work period. Employees might not have dedicated work areas in their homes; they might be interrupted and distracted as they work. Flexible teleworking policies during the pandemic can benefit employers by enabling employees to handle family responsibilities during otherwise normal workdays, as long as they're mindful of wage-and-hour issues.

Employers should provide resources employees need to work from home effectively, such as computers and telephones. If that's not possible, they should evaluate employees' personal equipment they must use on the employer’s behalf, and determine if and how to reimburse these business expenses (see the subsection above, Expense Reimbursement While Working at Home).

Occupational Safety and Health

OSHA and Cal/OSHA obligate employers to provide a workplace free from recognized hazards, even when working from home. Employers should ask employees to review their work area to ensure that it is free from tripping, electrical or other hazards. Sometimes, injuries that occur at home while an employee is working may be covered under workers’ compensation. This topic is discussed extensively in "Sullivan on Comp" Chapter 5: Injury, and in this guide's Workers' Compensation Law section, Injuries at Home or Due to the Home Office.

Employee Personnel Records

Employers should ensure that employee information is current for home address and contact information. Some employers might want to set up an internal website and team and/or companywide distribution lists for information-sharing.

Protect Confidential and Proprietary Information

It's essential that businesses remind teleworking employees of their obligation to protect confidential and proprietary company information. Such protection might require employees to work on the company’s servers, not on their own personal computer, and not saving copies of documents to their personal computer, or printing them at home. Depending on the type of business and who is working remotely, a simple reminder to protect company confidentiality might be sufficient. For companies and workers managing trade secrets, for example, higher-level protections might be required.

Wage-and-Hour Enforcement and Penalties

Businesses must compensate employees properly, or risk being assessed penalties for violating wage-and-hour laws, and damages. The California Division of Labor Standards Enforcement (DLSE, or Labor commissioner) is charged with enforcing these laws and adjudicating wage claims. An employee may file a wage claim in civil court; if successful, his or her attorney may collect fees from the employer.

Failure to pay the minimum wage subjects the employer to fines and imprisonment, and restitution of the wages to the employee. The Labor commissioner may assess a civil penalty of $100 for each underpaid employee for each pay period during which the employer failed to pay minimum wage. For each subsequent intentional failure to pay the minimum wage, the penalty is $250.

The Labor commissioner also may assess damages for an amount equal to the amount of the wages improperly withheld, plus interest. In the past, employees could obtain these damages only through litigation. The commissioner may issue a citation for a minimum wage violation and recover the civil penalty and wages. The penalty for a citation includes payment for liquidated damages.

Unlawfully withholding wages or failing to pay the minimum wages is a misdemeanor. Any employee receiving less than the applicable minimum wage or the legal overtime compensation is entitled to file a lawsuit in court. The employee might win damages, penalties, liquidated damages and attorneys' fees, making wage-and-hour actions potentially quite expensive. And these types of actions are rarely covered by insurance.

Beginning Jan. 1, 2020, employees have the right to seek enforcement of these additional penalties. Under the new law, they may bring a private action either to recover the statutory penalties in a hearing before the Labor commissioner, or bring a civil action under the Private Attorneys General Act (see the following subsection).

Individuals may be held personally liable for a company’s failure to comply with certain wage-and-hour laws. The Labor commissioner’s authority to assess civil penalties for Labor Code and wage order violations extends not only to the employer, but to any “other person acting on behalf of the employer.” Individuals who may be personally liable for wage payments and penalties include company owners, directors, officers and managing agents. So, a court could allow a winning employee to collect the judgment from individuals if the business is unable to pay.

Labor Code § 558.1 states that any person acting on behalf of an employer may be held liable when he or she violates (or causes to be violated) any of these wage-and-hour laws:

• minimum wages and any minimum wage provisions found in the wage orders;
• any provision regulating hours and days of work found in the wage orders;
• timely payment of wages;
• provision of a pay stub/itemized wage statement;
• meal and rest breaks;
• overtime compensation;and/or
• reimbursement of expenses incurred in the discharge of duties.

If an employee is terminated or quits and the employer fails to pay the employee in timely fashion, the employer might face waiting-time penalties. The business might be required to continue the exiting employee’s wages on a day-to-day basis, to a maximum of 30 days, until the final paycheck is ready. This rule applies to both exempt and nonexempt employees.

If an employer terminates or lays off an employee with no specific return date within the normal pay period, all wages and accrued vacation or PTO earned but unpaid are due and payable immediately.

If an employee voluntarily quits with at least 72 hours' notice, the employer must pay all wages and accrued vacation or PTO earned but unpaid on the last day of work.

If an employee quits with less than 72 hours' notice, the employer must pay all wages and accrued vacation or PTO earned but unpaid within 72 hours after notice is given. The 72-hour requirement is clock hours, not business hours.

If the employer fails to provide the employee with the final paycheck within this time period, it's subject to waiting-time penalties as described above for as long as 30 calendar days.

An employee has three years to file a lawsuit to enforce a statutory obligation, including violations of wage-and-hour rules. The California Supreme Court found that failure to pay earned wages, including overtime, is an unfair business practice and a violation of the California Unfair Competition Law (UCL). An employee may file a claim for unpaid wages for as long as four years after the alleged failure to pay. Employees may collect as much as four years of back wages under the UCL, versus three years under the Labor Code.

Private Attorneys General Act (PAGA)

An aggrieved employee, acting on his or her own behalf and/or on behalf of other current and former employees, may bring a civil action to enforce provisions of the Labor Code if the government does not do so.

An aggrieved employee may recover the applicable civil penalty on behalf of himself or herself and other current or former employees. Penalties are in addition to wage-and-hour damages.

PAGA lawsuits are becoming increasingly common as stand-alone lawsuits, in conjunction with other legal theories or as an add-on to class-action lawsuits.

As with other wage-and-hour lawsuits, an employee who prevails is entitled to an award of reasonable attorneys’ fees and costs.

When a specific wage-and-hour law does not provide for a penalty, the court may assess:

• a civil penalty of $500 if the business has no employees at the time of the alleged violation ;
• a civil penalty of $100 if the business employs one or more people at the time of the alleged violation, and $200 for each aggrieved employee per pay period for each subsequent violation.

PAGA actions are always expensive and easily can result in penalties of several hundred thousand dollars, even when applied to workplaces with a moderate number of affected employees. An exhaustive review of PAGA actions is beyond the scope of this guidebook, but employers are encouraged to contact us should they have additional questions about the act, including how to avoid becoming involved in a PAGA action.