Rules and Issues Involving Work-From-Home Arrangements

By Robert S. Nelson, Esq.

Nelson Law Group

To paraphrase Homer Simpson, you can conjure up statistics to show just about anything. Forty percent of all people know that.

How else then to explain that U.S. Census data shows a 15 percent increase in the number of stay-at-home moms in the last decade, whereas other evidence suggest a significant jump in the number of dual-income households? On one hand, mothers appear to be "opting-out" of the work force (a phrase made popular in an October 2004 broadcast of 60 Minutes) in increasingly greater numbers. On the other hand, skyrocketing costs of housing, school, gas, etc. are requiring more and more families to have two breadwinners, whereas in the past they may have made do with only one. One possible explanation for this dichotomy is that increasing numbers of stay-at-home moms (and/or dads) are finding ways to continue working professionally, in some capacity, even while at home. Between feedings and play time and naps, these really, really full-time parents send and respond to e-mails, make client calls and otherwise do what they can to continue earning an income. Many employers welcome and encourage these types of work-from-home arrangements. But as with most employment scenarios, home work arrangements can create liability if not handled properly. Employers should therefore recognize and understand the potential pitfalls of allowing employees to work from home.

1. Stay-at-Home Office: Wave of the Future?

Employers are struggling to cope with the "opt out" phenomenon, whereby working parents (predominantly mothers) are walking away from promising jobs and careers to be full-time caregivers to their children. The trend has baffled and/or frustrated many who assumed that women would not voluntarily give up the job opportunities that the feminist movement helped to create. Even more interesting is the fact that many of the mothers who are choosing to opt-out of the full-time workforce are among the best and the brightest of their respective generations. Opt-outs are generally most common in professional fields where women earn good incomes, and/or where work demands and schedules are particularly intense (e.g., lawyers, business executives, etc.).

Recognizing these dynamics, employers are increasingly willing to do whatever they reasonably can to keep talented female employees from walking away for good. One of the most common accommodations employers make is to allow mothers (or at least new mothers) to perform some or all of their work from home. Work-from-home arrangements generally help reduce turnover, and/or boost employee morale. They also better the chances that mothers will eventually return to their jobs full-time by allowing them to "keep a foot in the door" of the workplace until their children are old enough to go to school (thereby freeing up time for them to return to work).

2. Work Status: Employees or Independent Contractors?

Employers can structure their relationships with people working from home so the people are either employees or independent contractors. There are various potential benefits and disadvantages to either arrangement; employers should structure work-from-home relationships strategically according to their respective interests and goals. Employment relationships generally allow employers to have much more control and authority over stay-at-home workers, whereas independent contractor relationships (if properly handled) significantly reduce employers' potential liability if anything goes wrong. Independent contractor relationships will likely be strictly scrutinized to ensure that they are in fact valid, rather than just pretexts for de facto employment relationships. There are numerous criteria that determine whether stay-at-home workers will be considered employees or independent contractors, the most important of which is the degree of control that employers have over their workers.

3. Potential Problems with Stay-At-Home Employees

If stay-at-home workers are truly independent contractors, then employers theoretically cannot be held responsible for wrongs or injuries that they would otherwise be vicariously liable for if the workers were employees. But if the workers are deemed to be employees, then employers can be held liable the same as if the employees were working in an office or at a job site. Overtime is arguably the biggest legal problem that employers can have with employees working from home. Because of the lack of structure and oversight, employees can easily say they worked far more at home than they actually did. Work-related injuries can also be a significant problem with stay-at-home employees. Employers want to make sure that they cannot be held responsible for injuries that may happen to employees during work hours, but which may not be related to the employees' respective job duties (i.e., an employee trips while walking the dog during a break from work).

In addition to legal problems, production is also a significant practical challenge with employees working from home. For better or worse, employees often are simply not as motivated or efficient if they do not have supervisors and/or peers watching over them. Consequently, employers should take steps to ensure that they get a reasonable amount of output from employees who they allow to work at home.

4. What Should Employers Do?

If handled properly, stay-at-home work arrangements can be popular and effective ways to retain and/or reward talented employees. The following are some suggested steps for employers considering work-from-home arrangements:

•· Be flexible

Few things highlight the philosophical gaps between the different generations in the workforce (Baby Boomers, Gen X, Gen Y, etc.) more distinctly than the concept of work-from-home and/or part-time work arrangements. Older generations often disdain alternate work arrangements; younger workers, in contrast, increasingly are coming to expect them as a standard employment benefit. For reasons already explained (e.g., the opt-out phenomenon), progressive employers are increasingly recognizing that it is generally in their best interests to be flexible regarding alternative work arrangements.

•· Know what you want at-home workers to be

Employers generally like workers to be independent contractors because it reduces both liability and tax concerns. However, simply calling a worker an independent contractor will not necessarily make it so. There is a complicated set of criteria that must be met before a worker will be deemed to be an independent contractor; there also is a general preference for workers to be employees, so independent contractor scenarios that in any way appear to be de facto employment relationships will often not hold up. Employers should thoughtfully decide whether and to what extent it would even be possible for their stay-at-home workers to be independent contractors (if that is in fact what the employers want), and then diligently follow all the steps needed to maintain the independent contractor relationship. One of the worst positions employers can find themselves in is to find out that workers who they had long considered to be independent contractors are in fact employees.

•· Set parameters for stay-at-home employees

Employers should take certain steps to limit their liability for stay-at-home workers who clearly will be considered employees (or who the employers intentionally want to treat as employees). Specifically, employers should establish detailed written parameters about what employees should (and should not) be doing as part of their work at home. This will narrow the scope of the kinds of employee activities for which employers can be held vicariously liable. Employers should also establish clear guidelines about how much home-based employees are expected to work (e.g., 8 hours a day, no overtime unless previously authorized by a supervisor, etc.), and require hourly employees to diligently track their time. This will help reduce the chances that employees will attempt to claim they worked excessive amounts of overtime while at home.

•· Incentivize

As previously noted, motivation and productivity are often problems for employees working out of their homes. Employers should therefore do whatever they can to keep stay-at-home employees motivated, such as by making compensation directly related to work time (i.e., pay by the hour) and/or tasks (i.e., commissions or task-based compensation). For salaried employees, employers should consider incentive bonuses, where feasible, and also closely monitor output to make sure the employees are in fact working while at home.

Robert S. Nelson is the founder of the Nelson Law Group, a San Bruno, California based law firm specializing in labor and employment matters. He can be reached at 415-689-6590, or by email.

(Homer Simpson quote)

percent of working women are mothers)

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