Labor Secretary Alexis M. Herman yesterday retreated from a policy interpretation that had explicitly stated employers were responsible for federal health and safety violations that occur in their employees' home offices.

Business leaders and GOP lawmakers strongly protested the policy, which was articulated in an advisory letter to a company in Texas that suggested employers could be liable for such issues as unsafe stairs, improper lighting and inadequate ventilation in home offices. A number of companies immediately put on hold plans to expand telecommuting privileges to employees, and the White House, in the words of one official, also expressed "surprise and shock."

Herman said the letter, which was posted on a Labor Department Web site in November but only became widely known on Tuesday, has caused "widespread confusion and unintended consequences." She acknowledged that the "letter of interpretation" had never been received by her office for policy review.

The letter, however, was developed by Labor's Occupational Safety and Health Administration after a two-year review and was considered a declaration of existing policy by OSHA officials. A Labor Department official said yesterday that if Herman had not withdrawn the letter, it might have been used by courts to make it easier to hold employers accountable for injuries that occur in home offices.

The flap over the OSHA action suggests a rough road ahead for policymakers as they navigate the conflict between existing laws and the rapidly changing workplace--a shift as significant in the minds of some union and business leaders as the changes that created the labor laws in the 1930s as a newly industrialized nation shed its agrarian past and struggled for a new set of workplace values. Nearly 20 million Americans now telecommute from their homes.

Herman, in fact, yesterday called for a national dialogue to determine the "rules of the road" to reflect the changing nature of work. "We really need to know more about this subject," she said. "The nature of work is changing. We need to examine what it is."

Despite Herman's announcement, Republican lawmakers yesterday signaled they would hold hearings into the circumstances surrounding the letter when Congress returns from winter recess.

Rep. Peter Hoekstra (R-Mich.), chairman of the investigations panel of the House Committee on Education and the Workforce, said yesterday that his staff was preparing a letter to the Labor Department asking for the documents showing how this decision was made.

"I think the [OSHA] letter was very, very disappointing and demonstrated an ignorance of what's going on in the workplace today," Hoekstra said. "The Department of Labor should be encouraging these kinds of work policies."

The decision to withdraw the letter came after numerous telephone calls between Herman and the White House. According to Herman, she called the White House early Tuesday after seeing news accounts of the OSHA letter.

Both the White House and Herman agreed that the immediate strategy Tuesday was to try to clarify the department's position. But at the end of the day, the White House official said, "they realized there was no clarifying this, so they yanked it."

Nevertheless, since OSHA officials had originally regarded the letter a statement of existing policy, it is unclear whether withdrawing the letter had much practical effect.

Herman, in fact, would not respond to questions regarding an employer's liability for health and safety violations at the home work site. In a statement announcing the department's action, Herman said that under the 1971 safety act, employers have always had the responsibility for making sure that "all employees work in safe and healthful conditions." But she indicated OSHA did not plan to perform inspections of homes. "OSHA only inspects homes in the events of fatalities or serious injuries," she said.

Two of the nation's largest business groups--the National Association of Manufacturers and the U.S. Chamber of Commerce--praised Herman's action, but the NAM was skeptical about the impact of Herman's move.

"If OSHA and the Department of Labor are actually rescinding their interpretation of health and safety rules for home work sites, we are delighted," said Pat Cleary, NAM vice president for human resources. "But if they are just 'withdrawing the letter' but sticking to the interpretation, the confusion remains."

Cleary said his organization won't be satisfied until the department "clearly states that OSHA's jurisdiction stops at the door of our homes."

Bruce Josten, executive vice president of the chamber, appeared to have less doubt about the impact of Herman's move. "The Labor Department made the right choice in the end by reversing their earlier interpretation that employers were responsible for safety regulations in workers' private homes," Josten said in a statement. "It's a rare and welcome event when government regulators realize they have overstepped the bounds of reason."

Staff writer Charles Babington contributed to this report.

CAPTION: Labor chief Alexis Herman cited "widespread confusion" over policy.