As a result of the COVID-19 pandemic, many employees have been working from home since March with no end in sight. This has led some to speculate whether a permanent work from home model makes sense for employers going forward, even after the pandemic is over. In the 2021-22 Budget: California’s Fiscal Outlook published two weeks ago, the Legislative Analyst’s Office (“LAO”) posed an interesting question worth exploring: “Could the pandemic create a permanent shift toward remote work and, if so, will this shift change people’s and businesses’ decisions about locating in California?”
California’s complex labor laws often dissuade employers from allowing employees to work at home. For example, the laws mandate by when and for how long hourly employees must take breaks. Although an employer is technically not required to “police” employees to make sure they take those breaks on time, in reality employers must monitor breaks to avoid liability. California law is also unique in that it provides for daily overtime after 8 hours. Having employees work from home where their supervisors cannot see them with constant access to work emails and calls makes it difficult to ensure employees are not working unapproved overtime or working off the clock. A working parent who would rather work ten hours Monday through Thursday to take Friday off for family obligations cannot do so unless the employer is willing to pay the overtime, which many businesses cannot afford right now, or two thirds of their “work unit” agrees through a secret ballot process to implement that schedule for the entire unit. Liability for unpaid overtime is costly. An employee who is owed even just five minutes of overtime pay can also sue for waiting time penalties (for up to 30 days of pay), penalties for failure to provide accurate wage statements, and penalties under the Private Attorneys General Act. Reimbursement costs have also significantly increased for many businesses due to telecommuters using personal cell phones, computer equipment, and home internet for work. Employers must reimburse employees using their personal phones for work purposes even if using the phone for work has not increased the employee’s phone bill. Employers can also be on the hook for injuries employees sustain at home. Employees who have fallen while working at home have successfully filed workers’ compensation claims to have those injuries covered.
Updating these laws to provide more opportunities for employees to telecommute is an important issue that benefits both employees and employers and is very popular among California voters. In a recent survey conducted by the California Chamber of Commerce, 86% of polled voters agree ( 42% strongly) that the state’s labor laws should be changed so employees working at home have more flexibility and 92% agree (55% strongly) with policies that would make it easier for businesses to allow employees to telecommute. Earlier this month, voters also overwhelmingly approved Proposition 22, which provides flexibility to certain independent contractors to be able to set their own schedules and work for multiple companies at once if they so choose.
Because California has not updated its labor laws to reflect the realities of a telecommuting workforce, as the LAO indicates some employers may be forced to move out of state or to a business model where they hire remote employees residing outside of California. Although the issue is not completely settled, California’s labor laws would likely not apply to such employees. While there have been some instances where overtime rules have applied to non-California employees during days on which they travel to California for work, courts have also recognized that there are limits on state laws’ extraterritorial reach and have generally been reluctant to find that California laws apply to non-residents performing work outside of the state. The Legislature should update labor laws to reflect the modern workforce given the rising popularity and necessity of remote work and to ensure that businesses remain in California and that California jobs remain in the hands of Californians.