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Thinking of permanently ditching the office? Here’s what to consider before going fully remote.

As the pandemic prolongs remote work for many employees, workers should consider financial and legal consequences

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Remote work is a growing — and in some cases, permanent — reality for employees across the nation, and many workers have been embracing the flexibility to work from home during the pandemic.

But be aware: Legal ramifications and workplace pitfalls could be abundant if you aren’t careful.

From cross-state noncompete clauses to overtime pay and complex tax codes, first-time remote workers could face a bevy of new challenges if they’re not prepared. In some of the worst-case scenarios, workers could get hit with pricey lawsuits or slapped with heavy tax fines. And they could miss out on some of the benefits to which they’re entitled.

“It’s a new world,” said Jill Kirila, co-leader of the global labor and employment practice at law firm Squire Patton Boggs. “We see these issues come up every single week.”

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Many companies are turning to fully or partially remote environments, especially as the omicron variant complicates safety at the office. Occupied desks are expected to be 37 percent lower this year compared to 2019, according to a December survey conducted by management consulting firm Gallup. Meanwhile, 58 percent of full-time office workers are working in hybrid work arrangements, in which they work remotely part-time, a recent study from a consortium of institutions led by Slack showed.

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But as first-time remote workers settle into this new style of work, they may want to consider familiarizing themselves with a few issues that may arise.

Noncompete rules can get tricky

One of the most important things workers can do when they’re joining a new company is simple: read the contract in its entirety.

That could mean running the contract through a lawyer or checking the fine print for noncompete clauses or legal statements that prohibit employees from working for a rival for a certain amount of time. It also could mean familiarizing oneself with local and state laws, as their stance on noncompete clauses could differ.

In the case of Sung Shin, a Washington resident and former Groupon employee, a noncompete clause turned into a pair of legal actions — one against him and one against his former employer.

Last year, Shin, a former senior business leader at Illinois-based digital coupon service Groupon, landed a job at California-based Yelp, an online directory that provides recommendations to local restaurants and services. But Shin’s second day of work was cut short after a judge granted Groupon a temporary restraining order, citing an 18-month noncompete clause that was buried at the end of his employment contract, said Aaron Schur, Yelp’s general counsel.

To complicate Shin’s situation, Groupon litigated the case in Illinois. Schur said Illinois is considered a more favorable place than Washington for employers to litigate noncompete cases. But in Washington, employees must be allowed to litigate noncompetes in their home state, Schur said. In the meantime, Shin is left with a case that will be litigated thousands of miles away. Shin’s lawyer declined to comment.

Yelp filed its own lawsuit against Groupon, alleging that the employer’s use of noncompetes is illegal and that it’s tying up the talent pool. Groupon says it has complied with all obligations under Washington law and there is no basis for Yelp’s claims.

“The lesson from this case is certainly closely look at your contract and even [digitally search] for ‘compete’ or ‘noncompete’ to see what kind of provision is there and where you might have to fight that,” Schur said. “[When you work] remotely [for an] employer, they might not be respecting the spirit of your local law.”

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Jennifer Shinall, professor of law at Vanderbilt University, says workers should also be upfront and ask whether there are any noncompete, nondisclosure or nonsolicitation agreements and for the terms.

“One thing employees should try to negotiate is for the new employer to bear the litigation costs of any lawsuits that arise from disputes relating to an agreement with old employer,” she said. “You can do that not knowing whether an issue will arise.”

Your office may be your home, but most rules and entitlements remain

Unless a workplace policy specifically states otherwise, rules and benefits exist despite a worker’s location in most cases, experts say.

That means workers need to make sure they’re tracking and reporting their working hours if they’re getting paid hourly. They should be aware of work times and forms of communication and adhere to the company’s set time zones. And they need to adhere to office rules, even if they’re not in the office.

For example, if an employer has specific rules around sensitive data, those rules remain intact whether a worker is in the office or on their living-room couch.

“It’s a lot easier to be more relaxed with that information because it’s coming into your home,” Kirila said. “You may print out stuff and leave it out on the printer. It may not be intentional, but it’s leading to more leaks of confidential information.”

Similarly, workers’ entitlements like workers’ compensation are still intact in a remote environment. That means if a worker is injured while on the job in their home office, for example, that person could be entitled to compensation. The best way workers can make a strong case is to have a dedicated workspace, whether that’s a home office or even just a work nook in the corner of a room, Kirila said.

Workers who work from home should use their medical leave or sick days if they really need them. “You don’t want to try to just squeeze by and work from home,” she said. “If your performance slips and you didn’t take the legal leave, you’re not protected.”

A couple of laws that could differ based on a worker’s location: overtime pay, work breaks and certain benefits. Despite differing state laws, employers are required to follow the laws of the state in which the worker, not the company, is located. So if the company is in New York but the employee is in California, the employer will be required to roll over any vacation time earned until the employee leaves as part of California law.

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Employers could consider reclassifying workers

Employees whose jobs have changed after moving to remote work could face an unfortunate consequence: They could be reclassified from employees to independent contractors, which could cause them to lose some benefits and entitlements.

Shinall said employers who may offer more flexibility in terms of when and how workers work and base their pay on the completion of projects may be able to reclassify workers’ status.

“As soon as a business tells a worker I care about the task, not when, where and how you work, it starts to look like an independent contractor situation,” she said. “The linchpin is the amount of control the employer has over you.”

Shinall said the more employees can point to defined work hours, tasks, locations and expectations, the better the case they have for keeping their employee classification. If workers have any doubt, they should speak to their boss or human resources. As an added layer of protection, workers should document how their arrangement more closely resembles an employer-employee relationship, in which the company largely has control.

Your pay and taxes could change

One of the biggest things that could change as workers move around for remote work? How much they ultimately earn.

Employees will be required to pay the taxes associated with the state, and in some cases the city in which they work. That means if employees move from their office in Austin to their hometown of New York City, they’ll have to start paying state and city income taxes. And employees could be held accountable for taxes even if they were working from a state temporarily. States have differing rules on how much time workers can spend there before being subject to taxes.

Employees should make sure their employers know where they’re working so that the company can withhold the correct estimated tax payments from their paychecks. If not, employees could be responsible for paying the quarterly payment that their employers usually handle, said Lynn A. Gandhi, partner and business lawyer with Foley & Lardner.

The situation gets even more complex if workers have been hopping around states or countries.

“Don’t assume your employer or your payroll processing system will get it right,” Gandhi said. “This is on the employee to understand.”

Separately, some companies — including Facebook, Slack and Twitter — are adjusting workers’ salaries based on the cities in which they work. So a worker who moves from San Francisco, which has a much higher market pay rate for certain jobs, could see a pay drop after relocating to Ohio, for example.

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The main thing to keep in mind is making sure the pay is equitable for the job at hand, says Jessica Methot, associate professor of human resource management at Rutgers University.

“This requires doing some research, doing some digging and reaching out to people,” she said. “Some companies do pay transparency audits. You can ask for that.”

Tech tools and resources that can help

There are also some tech tools and resources employees can turn to that may help them navigate the complexities of remote work.

Apps like LegalShield and Rocket Lawyer can help workers with legal documents and legal questions, but you may have to pay a price or a monthly membership fee. Meanwhile, H&R Block and TurboTax, for example, can provide workers with assistance on tax-related questions. Workers, in some cases, can use the automated system to help them walk through whether they’re correctly filing their taxes or pay for more premium services for more individualized help.

Shinall of Vanderbilt suggests that workers check the websites for organizations like A Better Balance, National Conference of State Legislatures and National Partnership, which keep working lists of state-level employee benefits. Some state and local government websites might also provide clarity on employment laws and taxes policies.

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