Tag: The Fair Labor Standards Act (FLSA)

Workers’ Compensation and Telecommuting: Enjoying the Benefits While Controlling the Risks

Although telecommuting is not a new phenomenon, it has certainly gained traction since the turn of the century. According to the American Community Survey, which is conducted annually by the U.S. Census Bureau, the employee work-at-home, or WAH, population grew 61% from 2005 to 2009. Though the past few years have shown a small decline, which is generally attributed to a decline in the overall labor market, the outlook suggests significant growth over the next five years.

A report prepared by the Telework Research Network identifies various factors that will fuel the projected increase in telecommuting in the coming years, such as:

  • Forty-five percent of the U.S. workforce has a job that can be performed, at least partially, by telecommuting;
  • Improving communications and collaboration technologies;
  • Improved and expanded high-speed broadband internet access and the proliferation of web-based applications;
  • Increasing sophistication in managing and working with distributed (distance) workers;
  • Continued pressures on employers to reduce overhead costs, including office space, management, and operations;
  • Escalating fuel prices and increasing pressure on employers to reduce their carbon footprint; and
  • Continued emphasis on cost containment and bottom-line performance.

Despite the many benefits, telecommuting does create unique risks, some of which can be significant. What many employers fail to realize, or adequately consider, is that a telecommuting employee’s home will generally be considered that employee’s workplace.

The consequence of this distinction is that many employment-related laws follow a telecommuting employee home. Since a telecommuting employee is still an employee, employers must ensure compliance with all applicable laws governing their entire workforce, including those who telecommute, and each employment-related law presents its own unique challenges.

Consider the Fair Labor Standards Act (FLSA), for example, which is the federal law governing minimum wage and overtime compensation. Since an employee covered by the FLSA does not forfeit his or her rights merely by telecommuting, employers must be prepared to control the manner in which telecommuters perform their work to prevent wage and hour violations.

How, for example, does an employer monitor the number of hours worked, keep track of start- and stop-times, prevent unauthorized overtime, or prevent employees from working off the clock? The number of wage and hour claims filed annually reflects that these tasks pose a challenge for employers dealing with their traditional employees. Needless to say, ensuring FLSA compliance with telecommuting employees can prove even more challenging.

In addition to the FLSA, employers must ensure compliance with various other laws, such as the Americans with Disabilities Act, the Family and Medical Leave Act, and Title VII of the Civil Rights Act. However, one of the more challenging legal obstacles facing those who employ telecommuters involves workers’ compensation.

Workers’ compensation generally provides benefits to employees who have suffered an accidental compensable injury or death arising out of work performed in the course and scope of employment. Despite some statutory variations among the states, an employee who suffers an accidental workplace illness or injury will typically be entitled to workers’ compensation benefits.

This general rule also applies to those employees who telecommute. However, telecommuters create a unique challenge because they are working at home without direct supervision or observation. Consider how difficult it would be for an employer to determine whether a filing cabinet drawer broke an employee’s hand when the employee was filing documents, or whether that same hand was caught in the drier while the employee was doing a load of laundry between work-related telephone tasks.

If a lack of supervision or witnesses makes it difficult, or impossible, to conclusively establish the cause of a workplace injury, then an employer may be unable to detect and defend against false or fraudulent workers’ compensation claims. When dealing with workers’ compensation matters involving telecommuting employees, the vulnerability to fraudulent claims may be the biggest risk faced by employers.

Since it is impossible to prevent all work-related injuries, employers must decrease the likelihood that a telecommuting employee will file a false or fraudulent workers’ compensation claim by eliminating the opportunity to do so. This is typically accomplished by implementing policies and procedures designed to control an employee’s workday in a manner designed to decrease the likelihood of fraud.

Since these policies and procedures must be tailored to accommodate an employer’s specific needs and resources, creating a one-size-fits-all approach is not an option. Nevertheless, those employers currently employing telecommuters, or those who may do so in the future, should consider the following suggestions.

  • Understand that the applicability of employment-related laws does not change merely because an employee telecommutes. Accordingly, it is necessary to consider each laws requirements, how those requirements are controlled and managed for traditional employees, and how to best go about controlling those requirements for telecommuting employees.
  • Understand that not all positions or jobs can be accomplished by a telecommuting employee. Appropriate positions generally involve mainly electronic documents, telephone communication, and minimal supervision.
  • Establish policies and procedures, possibly even a customized employee handbook or agreement that is specifically tailored for telecommuting employees. Given the different dynamics and risks, traditional policies or procedures may not be sufficient to deal with telecommuting employees.
  • Require telecommuting employees to immediately report any injury or illness they consider work related. Any failures to abide by this policy should raise a red flag. For example, if an employee is unable to reach his or her supervisor to report an injury because the office was closed, this fact could make it easier for an employer to establish that the injury did not arise out of work because it occurred after-hours.
  • Establish a fixed schedule for work, meals, and breaks. If an injury occurs when the employee was not supposed to be working, it makes it more difficult for an employee to claim the incident was related to work. Various techniques, such as computer/network logins, telephone use monitoring, and video devices, can be used to track an employee’s adherence to schedules.
  • Provide the necessary training for telecommuting employees to reduce the likelihood of a work-related incident. The training should be tailored to each employee’s specific job functions. Generalized training in ergonomics, back safety, etc. should also be considered.
  • Confirm that the telecommuting employee has a separate work area to help define, and determine, when the employee is working or “on the job.”
  • Perform an inspection of the employee’s work area to ensure maximum safety and to deter or eliminate clutter or hazards that are not related to work.
  • Provide telecommuting employees with the proper equipment to perform their work safely and efficiently. This equipment may include computers, furniture, tools, electronic devices, extension cords, fire extinguishers, smoke detectors, etc.
  • Develop policies or guidelines regarding the manner and extent to which the telecommuting employee must communicate with his or her supervisor or manager.
  • Be cautious of letting new or inexperienced employees telecommute.
  • Be selective when deciding which employees should be permitted to telecommute. Only those employees who have a history of good judgment, responsibility, dedication, motivation, organizational ability, discipline, loyalty, and productivity should be authorized to telecommute.
  • Employers electing to make telecommuting a part of their organizational profile will likely enjoy numerous benefits. However, for those employers who fail to appreciate the significance of their decision, these benefits may quickly be negated by the risks that accompany an employment relationship that physically separates the employer from the employee.
  • Since it is likely that the risks associated with a telecommuting workforce will be greater than those associated with a traditional workforce, shouldn’t the employer’s efforts to control those risks be greater too?
  • If you would like to receive a sample Telecommuting Agreement, please contact us.

Insuring Against Claims Brought Under the Fair Labor Standards Act

Employers face numerous federal laws that govern the employment relationship. These laws, such as Title VII of the Civil Rights Act, the Family and Medical Leave Act, and the Americans with Disabilities Act, impose requirements on employers regarding the manner in which they interact with their employees. If these requirements are overlooked, employers can expect to be called upon to pay a potentially substantial damage award to the aggrieved employee. While avoiding a violation of all applicable employment laws is the goal of every organization, there is one law which employers should be concerned about above the others—the Fair Labor Standards Act.

The Fair Labor Standards Act (FLSA) is the federal law that establishes the minimum wage and that governs the payment of overtime compensation. Its broad applicability, the manner in which it was drafted, and its complex and highly technical requirements, make it one of the most feared federal employment laws. The significance of potential FLSA violations has only increased since the economy began taking a turn for the worse because the ever-increasing number of laid-off employees has served to increase the number of potential plaintiffs.

The FLSA has been described as the perfect plaintiff’s law. Consider that in most cases, the FLSA’s attorney’s fee provision operates to only benefit the employee. Under the FLSA, an employer who successfully defends an employee’s claim is typically not entitled to an award of attorney’s fees. The FLSA also allows a single employee to file a lawsuit on behalf of all similarly situated employees. Under the FLSA’s collective action provision, the burden a plaintiff must satisfy before being authorized to notify all potential class members is relatively low. This means that an employer may be faced with the prospect of defending a collective action involving dozens, or even hundreds, of current and former employees.

In addition to the procedural benefits afforded employees under the FLSA, the complexity of the law itself serves to increase the level of concern faced by employers. Unlike laws that prohibit discrimination or harassment, which are relatively easy to understand, the FLSA is replete with complex and technical provisions which, in many cases, are counterintuitive. For example, when does the amount of time an employee spends on a break constitute hours worked? If an employee is compensated at two or more different rates, how is the overtime calculated? When can an employer make salary deductions without jeopardizing the employee’s exempt status? If an employee violates company policy and works overtime without permission, does the employer have to pay the employee overtime? In many cases, the answers to these questions cannot be obtained by relying on common sense. So, in addition to being relatively plaintiff-friendly from a procedural standpoint, the FLSA’s complex and highly technical nature increases the likelihood of a violation.

Given the confluence of these factors, it should not be surprising to discover that literally thousands of lawyers and law firms have developed a niche practice involving nothing more than filing lawsuits under the FLSA. These firms seek out recently laid-off employees for the purpose of putting their former employer’s compensation practices under a microscope. And in most cases, the employer’s attorney will likely recommend settling the lawsuit as soon as possible.

Electing to settle the lawsuit early is virtually predetermined by the FLSA itself. In most cases, the employee will be entitled to a relatively small amount of unpaid wages. The real evil lurking behind the lawsuit is the attorney’s fees. Almost immediately after filing the lawsuit, the amount of attorney’s fees that the employee will be entitled to receive from the defendant-employer likely dwarfs the amount that may have been due the employee under the FLSA. This amount does not include the amount the employer will have to pay its own attorney. From a purely economic standpoint, it makes more sense to settle the case early for $10,000 and be done with it, than it does to litigate the case by paying at least twice that amount for the employer’s own attorney, and still face the prospect of having to pay the employee’s damages plus the employee’s attorney’s fees. Thus, the most common course of action is to settle the lawsuit, even if the employer has a valid defense to the employee’s allegations.

These reasons, coupled with the surge in lawsuits brought under the FLSA, compelled many insurance companies to exclude claims brought under the FLSA from standard employment practices liability insurance (EPLI) policies. Since the numbers simply did not support insuring against FLSA claims, FLSA exclusions found their way into virtually every EPLI policy.

However, some insurance companies are beginning to offer defense coverage for FLSA claims in their EPLI policies once again. Although the coverage may be subject to a sub-limit, some coverage is being provided nonetheless, oftentimes at very reasonable premium rates. By purchasing this coverage, employers no longer need to be held hostage by the plaintiff-friendly FLSA. The existence of such coverage gives employers, through their insurance company, the option of actually defending against such claims rather than being forced by the economies to settle. In the current economy, no amount of money is considered disposable, and by obtaining an EPLI policy that offers coverage for FLSA claims, employers no longer have to feel compelled to buy their way out of a lawsuit brought under the FLSA.

If you would like to learn more about obtaining an employment practices liability insurance policy to insure against FLSA claims, contact us.