Nomads Working from Anywhere (i4cp login required)

Productivity

COVID-19 almost instantly
reshaped the traditional workplace. Then employees realized that if they were
working remotely anyway, why not be near distant relatives or on the beach? As
the pandemic continues, companies field daily requests to make temporary remote
working permanent, and to allow employees to live anywhere while working from
home. From the extreme of “working nomads” without a physical home, to
employees moving outside large-city headquarters regions, individuals are
asking to move in-state, across the U.S., or abroad to continue working
remotely. Entire nations are trying to seize opportunities as countries such as
Greece and some island nations in the Caribbean now offer longer-term visas.

But is the reality of allowing
employees to relocate as advantageous to employers as it seems? With states
adjusting their laws in reaction to COVID-19, the shifting legal landscape is changing
at an accelerated rate. Employers should be aware of the myriad issues
occurring with remote work, and seek proper legal advice before allowing employees
who work remotely to relocate. Only one working nomad on an employer’s payroll
can result in serious and expensive consequences.

Labor
and Employment Implications

Countless labor and
employment implications arise when an employee relocates. The employment
relationship is governed largely by the laws of the state in which
the employee actually does the work. For example, in Sullivan v. Oracle Corp., 51 Cal. 4th 1191 (2011), the
California Supreme Court held that California’s overtime and unfair competition
laws applied to nonresident employees from Colorado and Arizona who were
temporarily working in California for a California-based employer. It further
held that these laws did not apply to work performed outside of California. Other
examples include:

  • Wage and hour laws
    regarding minimum wage, overtime, and child labor will be based on the
    employee’s new workplace.
  • Job worth:
    Employers are navigating the implications of moving from high- to low-labor
    cost markets and whether to normalize the pay to the employee’s new location.
  • Safety: Employers
    will be required to obtain workers’ compensation insurance and comply with all
    workplace safety laws.
  • Employee benefit laws regarding
    paid time off, sick leave and medical leave, pensions, childcare benefits, and insurance
    will be based on where the employee works and lives. Health plan options and costs
    can vary based on the new jurisdiction.
  • Hiring laws are
    based on the location from which the employee is recruited. For example, an
    employer can ask about salary history in Minnesota, but not in California.
  • Anti-discrimination laws
    vary from state to state, and in some cases county or city laws will apply.
    • Equal pay laws
      vary:
      • The
        California Equal Pay Act bans employers from seeking the wage rate history of
        job applicants (though employers can rely on information voluntarily disclosed
        by applicants), requires employers to provide wage information to applicants
        upon “reasonable request,” and requires employers with over 100 employees to
        file an annual pay data report with the state.
      • Colorado’s
        Equal Pay for Equal Work Act (EPEWA) is a new, far-reaching law that bans employers
        from seeking the wage rate history of job applicants, requires heightened pay transparency
        and job posting requirements, provides a private right of action, and limits
        defenses for employers.
      • The
        Washington Equal Pay and Opportunities Act bans employers from seeking the wage
        rate history of job applicants (unless certain circumstances apply), requires
        employers to provide wage information upon request to applicants who have
        received offers, and requires heightened transparency.
      • Many
        states do not have an equal pay law.
    • Protected classes
      vary by state. For example, depending on the locations involved, an LGBTQ employee who moves from
      one state to another may gain or lose protections that are not provided under federal
      laws.
  • Non-compete agreements
    and other employment agreements are governed by state law. A move to a
    different state could invalidate the non-compete entirely, or change the
    effectiveness of geographic limitations.

Tax
Implications

Tax law is filled with nuances
on state and local levels, and myriad unknown variables affect how tax law
applies to an employer—not only payroll or other employment taxes. Sophisticated
tax advice is essential before allowing an employee move. The two biggest tax
items of which employers should be aware are nexus and withholding issues.

  • Nexus.
    The standard for imposing state income and sales taxes requires a “substantial
    nexus.” Under certain circumstances physical presence may constitute a
    substantial nexus in one state, but not in another. An employer must adhere to
    each state’s legal framework, and properly apply its apportionment rules. While
    some states have enacted COVID-19-specific nexus rules and guidance, these
    rules are not uniform, may provide selective relief, and have varying
    expiration dates.  
  • Employee
    withholding
    . Many states require employers to
    withhold funds from paychecks based on the employee’s residency. However, state
    regimes vary. For example, New York has a “day one” rule based on mere
    presence. This day one regime requires withholding for nonresident employees
    who are paid wages for services performed within the state and does not provide
    a grace period under certain circumstances. As is the case with nexus, some
    states are implementing their own COVID-19-specific withholding rules.

Corporate
Law and General Business Implications

Corporate law
implications can range from business registration requirements to specific
rules that could alter an employer’s nonprofit status. Because the relocation
of even a single employee could have far-reaching consequences, employers
should make sure they are well-informed.

Non-legal business
decisions are also worth considering. For example, if an employee relocates
from a large city to a rural town, the employer can choose to lower the
employee’s wage (outside of employment areas that legally require certain wage
scales). Having the proper legal advice can facilitate such decisions and keep employers
abreast of smart business opportunities.

International
Travel and Relocation

An increasing number of
countries are declaring themselves havens for working nomads. With nations
offering sandy beaches, high-speed internet, and special nomad visas, what
could go wrong? As it turns out, a lot.

International remote work
presents a drastically different landscape compared with domestic remote work.
A nomad visa will not protect ill-prepared employers (and employees) from suffering
serious and expensive consequences. Employers may inadvertently create a tax
nexus in the foreign jurisdiction. Intellectual property protections vary.
Wage/hour, employment, discrimination, and termination laws are different. If
an employee is traveling internationally or working remotely from another
country, it is imperative that employers seek advice from sophisticated
attorneys.

Work from Anywhere, the Business Perspective

Employers have a distinct risk-reward interest in pursuing a
work-from-anywhere practice. The employer has a fiduciary responsibility to act
in the best interest of multiple stakeholders, including customers, employees,
suppliers and shareholders. This is no small task as good stewards of people
and other resources try to make good decisions for the benefit of many. While this
is not an exhaustive list, leaders, as representatives of the business, will
take into account these fundamental interests:

  1. Tax
    and legal compliance
  2. Business
    continuity and performance
  3. Workforce
    creativity, collaboration, and connectivity
  4. Policy
    and practices consistency

Work from Anywhere, the Employee Perspective

Employees also have a distinct risk/reward interest in an
employer who encourages a work-from-anywhere culture. The employee is faced
with unique challenges of balancing personal health, home/family
responsibilities and the obligations associated with work hours, work product,
and work results that benefit customers and the business. Employees are highly
valued resources, without whom the company is not in business. However, while
employees may be able to understand the employer interest, their interest is
much different. While it is not an exhaustive list, many public and private
research surveys indicate that employees frequently mention these fundamental
concerns:

  1. Personal
    well-being
  2. Flexibility
    to manage work hours
  3. Convenience
    of work location
  4. Resources
    that promote work productivity

Guidance for Employers

In summary, we suggest employers deliberately and comprehensively
consider the extent to which they will promote a work-from-anywhere practice. We
encourage these affirmative policy and practice statements as a starting point:

  1. The
    employer welcomes solutions that properly balance employee need for flexibility
    and the company’s need to achieve business goals.
  2. Alternate
    work locations in the same country for more than four weeks per calendar year
    must be requested by an employee in good standing and authorized by the
    company. Alternate work locations in a different country are subject to the
    existing global mobility policy and will only be authorized for circumstances aligned
    with business opportunity.
  3. The
    employer and the employee mutually agree to engage in frequent and transparent
    communication as necessary for legal and tax compliance by jurisdiction.
  4. All
    job roles are not eligible for alternate work location. (However, employers
    would be wise to invest in tools and technology that promote flexible work
    solutions where possible.)
  5. Competitive
    pay varies by geographic location, a practice already in place at the company.
    When the employee requests approval of an alternate work location, it is with
    the understanding that base pay will be adjusted accordingly until a different
    work location is authorized.

The most successful leaders making these decisions will
remain true to their core business, honor established values, and respect the
culture of people and their work.

______________________________________________________________________

Michael Droke is a Seattle-based Partner in the law firm of
Dorsey and Whitney; Andrea Mallorino is an attorney in the Minneapolis office
of Dorsey and Whitney; Mark Englizian is a former HR leader at three Fortune 50
companies and now a senior strategy adviser at The Institute for Corporate
Productivity.

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