HRMN 408 Assignment 3: The Law and Ethical Considerations

• Teleworking

• Flextime

• Contingent Workers

CHAPTER 20

Alternative Work Arrangements

C o p y r i g h t 2 0 1 7 . S o c i e t y F o r H u m a n R e s o u r c e M a n a g e m e n t .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

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Book: The SHRM Essential Guide to Employment Law : A Handbook for HR Professionals, Managers, Businesses, and Organizations Author: Charles Fleischer Date: 2017

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The SHRM Essential Guide to Employment Law370

Employees, especially those in two-wage-earner households, are becoming less interested in money and more interested in lifestyle issues, such as time with their families and opportunities for leisure activities. In a tight labor market, employers have to recognize these trends to compete for quality employees.

Employers that are willing to be creative and to consider alter- native working arrangements can reap huge rewards in terms of worker satisfaction, leading to greater productivity and less turn- over. A number of options are suggested below.

TELEWORKING Teleworking (also known as telecommuting) means working at a remote location that is connected with the office by high-tech com- munications equipment. Many jobs are susceptible of being per- formed at the employee’s home or elsewhere than at the employer’s place of business. There is no technical reason why a computer pro- grammer, for example, or a customer service representative, cannot work just as effectively in the suburbs as in a cubicle in the cen- tral business district. And establishing a virtual office for selected employees may well be in the employer’s best interests. Consider the following:

• Many quality employees find the idea of teleworking attractive. Implementing a teleworking program should therefore help attract and retain just such employees.

• So long as care is taken in selecting participants for a telework- ing program, productivity should not suffer. With fewer distrac- tions, productivity may even increase.

• Teleworking encourages employees to work independently and to problem-solve on their own (again, careful selection is critical).

• Office space (and rent) can be reduced.

Employers that are considering a teleworking program often worry about trust. They are concerned whether an employee who

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spends most of his or her time out of the employer’s presence will work as diligently as in the office. This concern is probably overstated, given that good candidates for teleworking are the very employees who should be encouraged to work independent- ly and whose productivity is not measured by hours logged. The programmer, for example, is evaluated less on the time put in, or even on the sheer volume of code produced, and more on the quality and timeliness of the product. If his or her programs work as required and are delivered by deadline, it makes little differ- ence that he or she may have attended to personal matters during normal working hours.

Teleworking is not risk-free. The employer has less direct con- trol over participating employees, office supplies and equipment, and confidential business information. Perhaps for these reasons, some large companies have recently been curtailing their tele- working programs.

If you decide to try teleworking, consider these suggestions: • Start the program on an experimental basis. For example, limit the program to a particular department, start it on a one- or two-day-per-week basis, and set a trial period of no more than six months.

• Establish eligibility requirements for participation: limit the program to particular job categories and to persons who have been with the company for a minimum time period.

• Choose no more than half of those eligible as participants. That way a control group is retained to compare such things as pro- ductivity, turnover, and job satisfaction.

• Select participants carefully. Those who require close supervi- sion and constant feedback, who do not enjoy working alone, or who do not have appropriate work space at home are not good candidates.

• Select only those who want to try teleworking. And allow them to opt out if they find their work quality or job satisfaction deteriorating.

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• Insist that teleworkers designate an appropriate space at home that is dedicated to work. (Some employers actually inspect the work area before allowing an employee to begin teleworking.)

• Consider whether a local coffee shop, with associated confiden- tiality and security concerns, qualifies as an approved location for telecommuting.

• Stress that teleworking is not intended to resolve day care prob- lems, nor is it a fringe benefit or perk. It is simply a different job assignment. (Some employers require evidence that the employee has made appropriate day care arrangements, although inquiring about day care arrangements may seem unnecessarily intrusive.)

• Be sure that teleworkers understand they must be willing to come to the office for face-to-face meetings as needed.

• Remind participating employees that they, not the employer, are responsible for any tax consequences of maintaining a home office and for complying with zoning laws.

• Require nonexempt employees (those subject to minimum wage and overtime requirements) to maintain an accurate log of hours worked for Fair Labor Standards Act (FLSA) purposes. An employee who was nonexempt before he or she began teleworking continues to be nonexempt while teleworking.

• Do not consider a switch to teleworking as an opportunity to reclassify your employees as independent contractors.

• Do not consider a switch to teleworking as an opportunity to reduce employee pay. This may give rise to equal pay violations, and it will certainly hurt morale.

Teleworking also raises some legal issues.

FLSA Under the FLSA, nonexempt employees must be paid time-and- a-half for overtime. As with other nonexempt employees, a non- exempt teleworker must keep accurate time records so that wage and hour laws can be complied with. It may be more difficult to

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track hours and ensure compliance for teleworkers.

OSHA The Occupational Safety and Health Administration (OSHA) initial- ly took the position that the federal safety and health law applies to all worksites, including home worksites. OSHA withdrew its ruling in the face of widespread opposition. OSHA continues to take the position that the federal act does apply to hazardous or dangerous work assigned to teleworkers.

Workers’ Compensation An accidental personal injury that arises out of and in the course of employment is covered by workers’ compensation. For traditional employees who work nine to five at the employer’s regular worksite, an injury that occurs offsite and after normal working hours would generally not be covered. But with an injury to a teleworker, chances are there were no witnesses, so neither the employer nor the work- ers’ compensation carrier can verify the employee’s version of how the injury occurred. In other words, in the teleworking situation, the employer is at the mercy of the employee in terms of coverage for injuries.

ADA The Americans with Disabilities Act (ADA) requires employers to make reasonable accommodations for persons with physical or mental disabilities. If a disabled worker requests teleworking as an accommodation, the employer should at least consider such an arrangement. On the other hand, at least for some jobs, being phys- ically present is an essential job function, so in those situations tele- working is not a reasonable accommodation.

Title VII Discrimination laws apply to all employment policies and practices, including teleworking. The opportunity to telework must be made

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available, without discrimination, to both genders and without regard to race or other prohibited criteria.

Intellectual Property Unless you have a contract with your employees as to ownership of intellectual property (see Chapter 19), employees may have a claim to any copyrightable works or patentable devices they create. Their claims may be particularly difficult to defeat if they are teleworkers and spend most of their time at home.

Business Tax Liability Most companies have obligations to file business reports and pay income, payroll, and other taxes to the state in which they do busi- ness. Generally, however, companies do not have any such obliga- tions to states where they do not maintain a business presence. But what if an employee teleworks in a state where the company other- wise has no business presence—will that trigger reporting and tax obligations to the employee’s home state? At least one court has said yes.

CASE STUDY: TAXATION BASED ON TELEWORKER’S RESIDENCE A Delaware corporation that did business in Maryland allowed one of its employees to work from home in New Jersey. A New Jersey appellate court ruled that, due to the teleworker’s presence in that state, the company was subject to New Jersey’s annual corporate franchise tax “for the privilege of doing business, employing or owning capital or property, or maintaining an office, in this state.”

FLEXTIME Flextime is an arrangement by which an employee works a normal 40-hour week, but does not work the normal five 8-hour days. Instead, the employee and employer agree on some alternative that yields 40 hours. If, for example, an employee’s long-term,

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trusted babysitter is available only Mondays through Thursdays, the employee could work four 10-hour days and take Fridays off. Another employee might have a much easier commute working 10 a.m. to 6 p.m. rather than 9 a.m. to 5 p.m. If you can accommodate these needs without significant disruption or loss of productivity, then it may be to your benefit to do so. Listed below are some sug- gestions that could make a flextime policy workable in your business environment:

• Flextime means only that the employer is flexible in setting an alternative schedule. It does not mean that the employee can con- stantly reshuffle his or her workweek to suit the employee’s day- by-day whim or convenience.

• As with all other employment decisions, the decision to permit or deny flextime must be made on a nondiscriminatory basis.

• Flextime may not work for all positions. Identify in advance which positions are likely candidates and which positions are not.

• Granting flextime may be a reasonable (and therefore a required) accommodation under the ADA in situations in which, for exam- ple, a disabled employee needs regularly scheduled medical treatment.

• Remember that whatever arrangements are made, the total number of hours a nonexempt employee can work in any given workweek without triggering overtime pay obligations is 40.

CONTINGENT WORKERS The term contingent worker is loosely defined as any worker who is outside the employer’s core workforce of full-time, long-term employees. As used here, the term refers to independent contractors, part-time employees, job-sharing employees, temporary employees, leased employees, and employees of joint employers.

Independent Contractors Classifying workers as independent contractors is fraught with peril. Nevertheless, in a few, carefully designed situations, an independent

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contractor arrangement can be both safe and effective. Suppose a key employee, with years of experience and a wealth

of institutional knowledge, is approaching retirement age. With the employee’s stock options, retirement plan, and independent savings, the employee no longer needs to work and is looking forward to the free time retirement offers. Yet the employee is not quite ready for a clean break from the company.

A possible solution? A consultant agreement for a fixed time period, say two years, renewable year-by-year thereafter if both par- ties agree. The employee retires and then signs on to be available whenever needed to advise on strategic planning, special projects, and the like. In consideration for agreeing to hold himself or herself available, he or she is paid a monthly retainer by the company, per- haps in the neighborhood of one-half or two-thirds of the employ- ee’s former salary. However, the employee is not expected to work any particular hours, no longer has his or her own office or support staff at the company, receives none of the fringe benefits provided regular employees, and is free to consult with other companies. The employee therefore will likely qualify as an independent contractor.

An independent contractor relationship also arises when a com- pany contracts out certain functions without retaining control over who specifically performs those functions or how they are per- formed. Examples might include operating a company cafeteria and processing payroll. Legal and accounting services are examples of functions that could be performed by in-house employees or by out- side independent contractors.

Part-Time Employees Say a valued employee or well-qualified candidate for employment is available only on a part-time basis. In the past, the company took an all-or-nothing approach—an employee worked either full time or not at all. By abandoning this rigid approach, the company can benefit from the services of a valued worker, and the worker can remain productive without being tied to the daily 9 a.m. to 5 p.m.

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grind. Many companies report that their part-timers are so appre- ciative of the opportunity that their briefcases are always filled with homework, and they end up working close to full time. If you are uncertain whether a part-time arrangement will work, try it on an experimental basis.

If you decide to try a part-time arrangement, be sure that you and the employee are clear about what benefits the employee will and will not qualify for. While it is theoretically permissible to provide the same benefits to part-timers as to full-timers—medical expense insurance or retirement, for example—your plan documents may limit eligibility to employees who work a minimum number of hours, such as 1,000 hours per year. Other benefits, such as vacation and sick leave, need to be considered as well.

Finally, keep in mind that discrimination laws apply to part-time as well as full-time employees. For example, the opportunity to go part time should be made available without regard to sex, race, etc. Allowing a disabled employee or candidate to work part time may also be a required reasonable accommodation under the ADA, so long as the employee can still perform the essential functions of his or her job.

Job-Sharing A variation on part-time employment is an arrangement by which two part-time employees share the same job, either long term or for a temporary period. The difference is that, from an organizational viewpoint, the job is still considered a single position.

Frequently, although not always, a proposal to job-share will be initiated by the employee whose changed circumstances limit him or her to part-time work. Before making the proposal, the employee should first choose a compatible partner.

The employer and employees also need to think through issues such as the following:

• How will the time be shared? Will the employees work half days? Alternate days? Half weeks? Alternate weeks?

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• How will the work be allocated? Will each employee perform all functions or only certain tasks?

• How will the employees communicate with each other to keep current?

• Will they overlap on a scheduled or as-needed basis? • When travel is necessary, will they both go? • Will the nonworking employee be available, if necessary, to pro- vide continuity in resolving an ongoing problem or working on a long-term project?

• What impact will job-sharing have on the cost of employer-pro- vided benefits?

• Will the employees be evaluated individually or as a team? • What will the effect be on the remaining employee if one of the job-sharers quits or is fired?

Job-sharing can reduce an employer’s overtime pay obligations. Even though the job is considered a single position for organiza- tional purposes, if two part-time, nonexempt employees together work more than 40 hours per week, but neither employee individ- ually works more than 40 hours, the employer will not have to pay time-and-a-half for the excess hours.

Temporary Employees The term temporary employee is used here to mean a full-time or part- time employee whose salary or wages are paid by the employer in the usual way, but whose job is expected to last for only a limited period of time. It does not refer here to a temp who is provided by an agency and who remains on the agency’s payroll. When an employer hires a temporary employee, say to perform a specific, nonrecurring job, the employer usually indicates that the employment is expected to termi- nate by a certain date. In doing so, the employer should also make clear that, despite the stated duration of the employment, the employ- ee is still at will and can be terminated at any time. The employer should also make clear what benefits will or will not be provided.

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ALERT! If the temporary employee is kept on past the expected termination date, the employer

should consider the need to enroll him or her in the same benefit plans it provides to

regular employees. Failure to enroll a so-called perma-temp in plans for which he or she

is eligible could violate plan documents and cause loss of favorable tax treatment for the

plan.

Leased Employees Leasing arrangements may take several forms. In the familiar temp situation, a temp agency provides a worker for a short period of time, typically to fill in for an employee on leave or to help finish a major project. The employer describes the position to be filled but does not identify any particular employee to fill it. Although the temp is subject to the employer’s control while actually at the employer’s worksite, the agency hires, compensates, and fires the employee.

Another leasing arrangement involves shifting a company’s exist- ing employees from the company’s payroll to a leasing agency’s payroll, although the company, not the agency, continues to make all hiring and firing decisions. The purpose is simply to free the employer from payroll and related duties while retaining operational control over the employee.

In a leasing arrangement a question may arise as to who the actual employer is for discrimination law purposes. The Equal Employ- ment Opportunity Commission has issued guidelines addressing the question under various scenarios. For example, the true temp is generally considered the employee of the temp agency only, whereas the leased employee is generally considered an employee of both the leasing agency and the company that has retained operational control. In the final analysis, these distinctions may not really matter. The company that operates the worksite will be guilty of illegal dis- crimination if it discriminates against temps or leased employees at its worksite, if it encourages a temp agency to discriminate with regard to the selection and treatment of temps, or even if it simply knows that the temp agency discriminates.

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Professional Employer Organizations When a worksite employer enters into arrangements with a profes- sional employer organization (PEO), its employees are considered to be jointly employed by both the worksite employer and the PEO. While the arrangement is similar to leasing, a PEO typically provides a wider range of employment-related services than just payroll. For example, a PEO might provide workers’ compensation and unem- ployment insurance, and it might assist in hiring, evaluations, dis- cipline, and firing (with the worksite company retaining ultimate control over those decisions). It might also provide qualified ben- efits (for example, health insurance, disability insurance, pension plan), and it could handle discrimination and other employment-re- lated claims. PEOs advertise themselves as being in the business of employment, enabling the PEO’s client to focus on the business of business. Through economies of scale, PEOs may well be more cost-effective and efficient in providing employment-related services.

The relationship between a PEO and the worksite company is based on a lengthy written contract that spells out in detail the par- ties’ responsibilities and their respective liabilities. Any employer considering the PEO option will want to review the contract with great care and arrive at a thorough understanding of just how the relationship works. The PEO should also be able to provide a com- parative cost analysis showing whether the arrangement will, in fact, be a financial benefit. Finally, the employer should be satisfied as to the PEO’s integrity, experience, and financial standing before sign- ing on. The employer should also inquire whether the PEO is a member in good standing of any PEO trade associations or certifi- cation agencies and whether it is registered or licensed under appli- cable state laws.

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