By UpCounsel Employment Attorney Josh Garber

One of the most noticeable changes to the workplace in recent years has been a dramatic increase in remote work and distributed teams.

According to a recent study by Gallup, 43% of employed Americans spend at least some time working remotely, with 3.9 million Americans working from home at least half the week.

Globally, the numbers are even more staggering. According to a recent study of full-time employees located around the world, 70% work remotely at least one day each week, while 53% work remotely for at least half the week.

Companies can benefit in many ways from hiring distributed teams, including saving money on rent, having an increased pool of talent from which to hire, and being able to attract workers who value this type of flexibility.

Before hiring a remote team, below are 4 factors that companies should consider before hiring remote workers.

1) State and Local Employment Laws

As a general matter, when a company hires a remote employee in the United States, the company needs to comply with the local and state employment laws of the state where the remote employee is located. So, for example, if a Texas-based company wanted to hire a remote worker in Los Angeles, the company would want to ensure (among other things) that it:

  • Classified the employee correctly under California employment law;
  • Provided paid sick leave in compliance with the Los Angeles paid sick leave ordinance;
  • Had an anti-harassment policy in place that complied with California law;
  • Provided breaks and overtime in accordance with California law;
  • Paid a wage that complied with the Los Angeles minimum wage requirement; and
  • Reviewed any non-compete or non-solicit provisions with an attorney experience in California employment law

In the above example, it wouldn’t be enough for the employer to comply only with California law – the company would also need to comply with Los Angeles paid sick leave and minimum wage laws, both of which are more stringent than California state laws.

As a result, even for positions where individuals could theoretically work from anywhere, companies should still consider the city and state the employee is located in. Additionally, companies should consider adopting a provision in their employment agreement that requires a remote employee to alert the company before they move.

2) Culture.

Companies benefit from creating an environment where workers thrive. And while remote work is becoming more and more common, a recent study found that 62% of employee prefer working in an office. Perhaps surprisingly, the rate was even higher among younger workers (aged 18-24), with 65% preferring to work in an office.

In addition to some workers preferring an office environment, a lack of in-person interactions can make it harder to instill company values in employees and can sometimes lead to workers feeling disconnected from their employer.

When in-person meetings aren’t always possible for remote teams, Harvard Business Review recommends having a “virtual water cooler” with the goals of establishing trust and fostering engagement for a longer period of time by recognizing the employees as human beings, learning about their lives outside of the office, and establishing trust.

3) Compensation and Benefits.

Companies should consider the location of an employee when determining how much to pay the employee. For example, an offer that is considered to be reasonable in a state with a low cost of living, such as Mississippi, might not be feasible for an employee based in Hawaii.

The same can be true with benefits, including with paid time off. As an example, if a company is looking to hire a remote worker in the Bay Area, it may need to offer more time off to that worker than it would for an employee located in Arizona, as generous vacation packages are fairly common in Silicon Valley.

Companies will want to ensure their offer is competitive when compared to the local market, both to get the remote worker to accept the employment offer and to keep them with the company when another company tries to poach them.

4) Unanticipated Business Expenses.

Some states are beginning to crack down on employers who are using remote work as a way to shift their operating expenses on to their employees.

California Labor Code section 2802, for example, requires an employer to “indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” In Cochran v. Schwan’s Home Services, the California Court of Appeals relied on this Labor Code provision in its ruling that employers cannot avoid paying an employee’s business expenses by claiming that an employee incurred no marginal cost in performing remote work. In short, this means that companies may be responsible for paying cell phone, internet, and co-working space bills for their employees.

As a result, companies should consider consulting with an experienced employment law attorney or HR professional before determining what business expenses it should cover before making an offer to a remote employee.

Conclusion

While remote work is becoming more prevalent, it raises unique employment law issues that should be considered by any company before determining whether to hire a distributed team.

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About the author

Josh Garber

Josh Garber

Josh has worked on nearly 200 projects through the UpCounsel marketplace and all 100 of his clients who have reviewed his work gave him 5 Stars. Josh, a graduate of the University of Pennsylvania Law School, regularly represents businesses in employment matters, business transactions and formations, contract drafting and management, and IP and corporate governance matters. Though he is dedicated to helping his clients avoid litigation, Josh has extensive trial experience and has obtained favorable outcomes in state and federal courts, mediations, arbitrations and DLSE hearings. Josh's clients include HotelTonight and Tesla.

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