The Basics on California’s Remote Work Legislation
Remote work has become an integral part of many employers’ operations, and California law has adapted to meet the realities of employees working from home. Remote work legislation in California is particularly challenging for employers because California has some of the most stringent labor laws in the country. The law in this area has previously focused on the idea that remote workers were somehow different from their telecommuting counterparts. However, recent legislation has officially acknowledged that remote workers are not inherently different from telecommuting employees and have evolved to meet the fevered demands of the new normal.
Only a few years ago, many California employers did not have to worry about the complexities of remote work because their employees commuted into the company office on a daily basis. However, with the rise of remote work and the COVID-19 pandemic, employers and employees alike are testing the waters of this relatively uncharted territory.
At the end of both 2020 and 2021, the government urged employees to Work from Home when possible. While COVID-19 was the primary reason why some companies implemented work-from-home policies, several organizations have adopted permanent work-from-home policies because it has proven lucrative for both parties. Remote work is not a new idea. However, the amount of workers telecommuting has drastically increased over the past few years making the need for a remote work policy more important than ever.
Employers with remote workers are subject to strict employment laws in California and cannot restrict an eligible employee’s ability to work from home if the employee requests a remote work arrangement as a reasonable accommodation based upon a disability or medical condition. In 2022, many of California’s work-from-home laws remained on the books, but a handful were either revised and see below for an overview of the major laws that were enacted in 2020 and 2021.
In 2020, AB 1867 was passed which gave food sector workers who worked outside the home and certain public-facing health care workers paid sick days to be used for specific COVID-19-related reasons. In 2021, SB 95 expanded paid sick leave for those same workers. Paid sick days may now be used for testing, vaccination, or vaccine recovery . Taking these additional days off for COVID-19-related reasons compared to California’s standard sick leave accrual made coverage difficult for employers.
As a result, many companies adopted policies allowing remote employees to request additional sick days if employers could also provide remote employees with a means to work and stay at home. Because employees are remaining at home, new considerations are coming up regarding how employees are compensated for work from home.
Under California Labor Code § 2802, employers must reimburse employees for all necessary expenditures or losses incurred in the direct consequence of their duties. This includes compensation for reasonable expenses or losses incurred by the employee in performing job-related duties or in direct consequence of the discharge of their respective duties. It can be difficult to ascertain the parameters of What is "reasonable expenses." Employers may have to reimburse employees for internet service, cell phone, and other expenses incurred while working from home.
On September 30, 2021, AB 701 was passed to protect warehouse workers in California by placing restrictions on quotas which have negative consequences for warehouse workers. Employees that violate these quotas cannot be disciplined, fired, or retaliated against for those violations. Employers would have to give their employees a list of all quotas upon hire and if any changes have occurred throughout the employee’s time with the company. Employees also have the right to rebut these quotas.
On march 29, 2021, AB 1305 was passed prohibiting janitorial employers from requiring employees to work consecutive days without a day off. This is also known as a "day of rest." Employees can file lawsuits for this violation.
Benefits to a flexible workplace include increased productivity, lower overhead, and higher employee retention. Flexible work arrangements are attractive to top talent and many workers never want to return to their cubicles again. In response to the changes in remote work, many companies are enacting new work from home policies to deal with the growing demands, including setting core business hours and mandating that employees notify supervisors when they are unavailable. However, employers must be cautious when drafting these policies to ensure that they comply with California labor laws and regulations.
Employee Protections in California for Remote Work
California’s remote work laws extend the rights and protections traditionally afforded to employees who report to a physical work location. An employer’s obligations to its remote workers vary based on a number of factors.
Wage and Hour Laws
California’s Wage Orders, which require a one-hour meal break if an employee works five or more hours in a workday, and a second meal break if an employee works more than 10 hours in a workday, are equally applicable to remote employees. Employees in California, even those who work remotely, are entitled to receive payment for all hours worked under Wage Order 5, which requires that non-exempt employees be paid for all hours worked including all hours actually worked in excess of eight during a workday to the extent not compensated at 1.5 times the regular rate of pay.
Workers’ Compensation
Remote employees are also protected by workers’ compensation laws. As a general rule, if a remote employee suffers a work-related injury while conducting work-related business activities, he or she is entitled to a workers’ compensation claim and should immediately report the injury to the employer. While workers’ compensation typically extends to injuries that occur within the course and scope of employment, remote employees can present claims for injuries sustained in the home under the "portal-to-portal" doctrine. To establish that a location outside the traditional place of work is part of the work environment, a remote employee must show that the area is reasonably necessary to enable the employee to perform his or her duties, that the employee reasonably believed that this area was part of his or her employer’s employer’s premises, and/or that the area would be viewed as part of the employer’s premises by a reasonable person.
Labor Laws
In addition to the above protections, remote employees are entitled to the same protections as all employees under California labor laws. For instance, employers must ensure remote employees have the potential to receive employee breaks and "suitable seating" pursuant to California Labor Code sections 1194 and 1198, and must allow for employees to take a reasonable amount of time off to ensure the health and safety of the employee as it relates to lactation periods pursuant to California Labor Code section 1030, and requires employer-provided break rooms be stocked with an adequate supply of potable drinking water pursuant to California Labor Code sections 32700 and 3360.
Under the prohibition against discrimination, remote employees are also entitled to equal pay under California Labor Code section 1197.5. This law requires equal pay for "substantially similar work" for employees who perform work that requires "equal skill, effort, and responsibility."
Employer Obligations Toward Remote Employees
As the number of new and beginning businesses continues to grow, so does the popularity of remote employees. This growing trend often raises questions regarding California labor laws, such as: What are your obligations to your remote employees? Are there any different considerations for commuting employees? The following will help clarify what your obligations are.
Safe and Healthful Workplaces
Under California law, employers have an affirmative duty to provide their employees with safe and healthful working environments. While you may not have any control over your remote worker’s home office, you are responsible for ensuring the employee’s safety in the place where your employees perform their work for you. This means that the standards you are required to maintain to provide a safe work environment apply to your remote workers, just like any other employee. If remote workers are transporting products or services that you provide to them, you have to ensure that those products or services are safely delivered. For example, your remote workers are covered by workers’ compensation, so if they cut themselves and require a Band-Aid, employers should cover any related costs. However, as the employer, you are not required by state law to reimburse your employees for these items. Companies are not liable for any equipment that is owned by the employee, only for items that the company owns. Therefore, employees are typically responsible for maintaining their own equipment, unless the company is covering the repairs. Employers should also keep in mind that travel time between different worksites must be compensated.
Maintenance of Equipment
As an employer, you are required to provide your employees with tools, equipment, and supplies that are necessary to perform their jobs. Your company policies should cover this, and it should be communicated to your employees so that they are aware of your expectations. If your employee needs additional equipment that you have not provided, you should address the need with the employee. As mentioned above, you will not be liable for maintaining any equipment in the employee’s home, but if the company issues equipment, then it is expected that it be kept maintained. Some general rules for equipment management are as follows:
What Are My Rights as the Employee?
As an employee, you have the right to be compensated for all hours worked, even if the work was performed at home. All work-related injuries during compensated time, whether during working hours or not, are covered under workers’ compensation. You also have the right to have the tools and supplies necessary to perform your job, and it is your right to ask for those items. Regarding safety equipment, if you are injured as a result of not having the correct safety equipment, you have the right to compensation through workers’ compensation.
Taxation Issues When the Job Includes Remote Work
The state of California has established nexus requirements for different tax purposes. Nexus refers to the connection or link between business entities and taxing jurisdictions having the ability to enact taxes. Compliance with nexus requirements allows entities to avoid future tax liability. Tax nexus can trigger income and franchise tax registrations at the entity level, sales and use tax obligations, employer payroll tax compliance, and municipal business license obligations. Unlike some states, physical presence is not necessary for a company to establish tax nexus in California. For example, a non-California business could establish California tax nexus if it is deriving income from California customers with the order being received by California residents, and the non-California business is regularly delivering goods into California. (see Cal. Rev. & Tax Code § 7204; see also Cal. Rev. & Tax Code § 6203.) This means employees may unknowingly create nexus when conducting business for their employer outside of California (e.g., by making deliveries outside California for their employer). An out-of-state company with no physical presence may find itself having nexus in California while its California tenant conducts similar activities in California without triggering nexus with California. California has numerous other nexus requirements. Nexus for income taxes and the franchise tax can arise through maintaining an in-state presence that is "individual, casual, continuous, or regular". The presence of an employee or representative can create the requisite quality and amount of activity necessary to establish these nexus triggers (see Cal. Rev. & Tax Code §§ 23101, 23101.7). California’s employment tax law generally apply to employers with a certain number of employees or whose payroll is above a threshold amount (see Cal. Lab. Code §§ 200-249 and 2700-2861). California’s sales and use tax applies to businesses that sell tangible personal property (e.g., office supplies) that is used inside California. California’s business licensing law is applicable to businesses conducting business in cities or counties with a population over 5,000. What constitutes conducting business in a city varies by city. Because California nexus requirements are expansive, an analysis of nexus for tax purposes is vital to understanding the implications of remote work in California. By contrast, the nexus requirements for employees are much more stringent. The nexus requirements for income taxes and the franchise tax requires an in-state presence that is "sufficiently more than a de minimis economic presence." (Cal. Code Regs. § 17942(d).) Employee nexus under California’s employment tax law is based on payroll calculations (Cal. Lab. Code §§ 200-249). The nexus requirements for sales and use tax are based on selling tangible personal property and delivery travel time spent in California. California cities and counties have their own jurisdictional licensing requirements, but license fees are not generally applied to employees. Other generally applicable business duties can also pose liabilities for employers regarding actions in California, e.g., payment of wage and hour costs, providing disability insurance and obtaining workers compensation insurance. In addition, Telecommuting could permit employees to take full advantage of California’s low unemployment insurance tax rates (see Cal. Unemp. Ins. Code §§ 13020(c) and 970). This also places many of California’s highly lucrative credits at risk, as these credits are generally unavailable to employers with employees outside California. Since California has its own state income tax, remote work may cause positive and negative tax results, both for employees and for employers. Companies considering a remote work policy in California should first review their business activities to understand the potential California franchise tax, sales and use tax, income tax and employment tax consequences of having a California nexus.
Workers’ Compensation Considerations for Telecommuting Workers
Remote work raises unique questions in the area of workers’ compensation, namely when an employee who is working from home gets injured in an accident, can they successfully bring a claim? The answer to this question is yes, but also sets the stage for further inquiry because their claim is first weighed against whether it occurred within the "course and scope" of their employment. This means that the injury had to occur at or around the time of the accident. For instance, if an employee is injured while texting on their phone about work and not actually performing work activities, courts will not find that they were within the course and scope of their employment. On the other hand, if they were typing an email or accounting for their sales that day right before the accident , the court may very well find otherwise.
Another complicated issue is the concept of "frolics." A "frolic" is generally defined as a deviation from work duties that exceed the minor and insignificant such that the injury suffered is not considered to be in the course of employment. A good analogy for this is the 3-5 minute coffee break at work. While the employee was not technically required to be working, this monopolizes such a small amount of their time that the court has found it reasonable to consider it as being within the course and scope of employment. Conversely, if the employee spends 45 minutes or more at lunch and is injured in the parking lot or in a nearby sandwich shop, this would be grounds for a finding that the employee was not within the course and scope of employment.
Far Reaching Effects of California’s Remote Work Laws
When an employer and a worker agree to remote work, it can impact the terms of the employment contract. Sometimes changes are straightforward, in the sense that the job description does not necessarily alter, but the setting does. Other times, unique requirements are added, such as a clause surrounding use of internet and other technology, due to the additional privacy concerns associated with a remote workspace. Even if the same job description remains in place, there can be a change in the expectation. For example, if commuting was originally part of the job (including those necessary last-minute visits around the state, such as sales meetings or onsite medical appointments), a change in whether the employee is expected to commute might require reevaluation of the employment agreement. If shifting from on-premises work to remote work, this could necessitate change to the clauses on reasonable expectation of hours worked, availability for short-fuse meetings, and calls and email outside of regular working hours. An employer might make the argument that what is reasonable as to an anticipated schedule and availability when the employee is expected to be onsite for job duties should be different than the expectation when the employee is able to be home. Similarly, as to things like expense reimbursement, this is typically governed by the contract. If the contract simply provides for reimbursement when the employee is physically onsite, odds are they are not entitled to reimbursement for a remote office, even though the employer may pay for items like internet access. Some companies have started hiring employees in cheaper areas of the state and agree to pay more for the position, but with the understanding the person will work remotely, so there is less cost inherent in the overhead of working in a high-rent area. Due to the ongoing litigation surrounding meal and rest breaks while working from home, many employers have added language about how these breaks will be observed in the remote workplace. It has also become important for some businesses to have clauses addressing such topics as which side of the electricity bill the cost of internet services will be allocated.
Issues and Strategies for Complying with Remote Work Laws
While California remote work laws offer various incentives for companies to implement remote work policies, they also present unique challenges for employers tasked with navigating this complex legal landscape. Among the many questions that arise are:
How do we negotiate the tension between California law and the laws of other states? What amenities and tools should we provide? What should we expect from employees in terms of reporting work hours? How do we handle non-exempt employees who travel for work?
To address these concerns, we will discuss common challenges that arise and practical solutions employers can implement to ensure legal compliance while encouraging a positive and productive remote work environment.
Tension Between California Law and Other States
Remote work laws can pose a potential conflict if a company has employees living in other states, whose laws may differ from the requirements in California. This issue is further complicated by California’s laws which allow employees to bring suit for violations of both federal and state laws, including litigation in multiple forums (federal and state) for a single set of unpaid wages or missed meal and rest break claims.
The tension between California law and other states is exacerbated by the issue of flexible remote work. Specifically, an employee may live in a state with less flexible remote work laws and the company is based in California. Even an employee’s physical presence at the company’s office does not guarantee that the employee is subject to California law, especially if the employee spends the majority of the time performing work remotely and the company has not established its own remote work policy.
Employers should consider working with counsel to create a remote work policy that is enforceable in every state where the company does business, and the terms of this policy should be explicitly outlined in the remote work agreement issued to employees. Even absent the issuance of a formal remote work policy, it is essential for employers to understand the remote work laws in each jurisdiction in which they have employees . For example, the District of Columbia and Wisconsin have laws requiring employers to reimburse employees for one-time and recurring expenses associated with telework. Likewise, the District of Columbia, Maryland, and Washington have laws requiring employers to reimburse employees for the business use of personal cellular phones. By complying with remote work laws, employers can mitigate employee claims and potential class action lawsuits, including claims involving unpaid overtime wages, missed meal and rest breaks, unpaid business expenses, and properly applying minimum wage requirements.
Telecommuting Laws and Reimbursable Expenses
Many employers also struggle with what expense reimbursements they may need to provide employees who work remotely. California law requires employers to reimburse their employees for any expenses necessarily incurred in the course of their work. While this concept is simple in the context of job-related fuel or using an employee’s personal equipment for work purposes, when it comes to remote workers, it can create several gray areas that may be difficult to categorize, such as cell phone usage and internet service fees.
To be reimbursable, an expense must involve some "required" element of the job that the employee is now personally responsible to pay. Typically, expense reimbursements should cover a proportionate part of an employee’s cell phone bill or internet bill to reflect the amount of work time spent on a personal device or property. For example, if an employee uses his or her personal phone for work purposes 50 percent of the time, as reflected on the phone bill, the employer should provide an expense reimbursement for 50 percent of the bill amount.
Some states also require employers to reimburse employees for incidental expenses related to the employee’s use of personal devices and vehicles for business purposes. For example, an employee who uses his or her personal vehicle for business purposes is often entitled to reimbursement for wear and tear, depreciation, and insurance. Even if reimbursement is not legally required, some companies choose to reimburse employees for expenses related to telecommuting given the savings on leasing and maintaining a separate commercial space.
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