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An ever-increasing percentage of the work force spends some time working in a location outside of a traditional office, connected to employers via the Internet or e-mail. Because the virtual office offers employers significant cost savings in terms of reduced overhead, support staff, equipment and decreased absenteeism, its prevalence is expected to only increase during an economic downturn. And with this comes an increase in the number and scope of employment law issues that employers need to be aware of. Recent surveys show that 32 million workers in the United States telecommute in 2001, which, despite the slowing economy, is an increase from approximately 19 million in 2000. Some 8 million American workers now telecommute full time. In the 21st century, work is something you do, not somewhere you go. The virtual work force works anytime and anywhere, from home to vacation to children’s soccer games. Unfortunately, the law governing the workplace has not kept pace with the technology enabling the creation of a new work environment. As a result, the virtual work force raises a host of concerns under federal and state employment law statutes, each of which was drafted under the presumption of a traditional workplace. An inherent conflict exists between the virtual work force, which works anywhere and at anytime, and the federal Fair Labor Standards Act, which requires employers to pay nonexempt employees one and one half times their regular hourly rate for all hours worked in excess of 40 each workweek, and to keep accurate records reflecting their employees’ hours of work. OVERTIME AND MINIMUM WAGE EXEMPTIONS In 1992, the U.S. Department of Labor, after much lobbying by business interest groups, issued regulations defining when employees in computer-related occupations are exempt from overtime requirements as professional employees, and also noting that such employees may qualify for exemption as executive and administrative employees. 29 C.F.R. 541.303 (professional exemption); 29 C.F.R. 205(c)(7), 207(c)(7) (administrative exemption). U.S. Department of Labor regulations provide that a “professional” employee exempt from the FLSA’s minimum wage and overtime requirements can be an employee whose primary duty consists of work that requires theoretical and practical application of highly specialized knowledge in computer systems analysis, programming and software engineering, and who is employed and engaged in these activities as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer software field. For employees in computer-related professions to qualify for the professional exemption, they must be highly skilled in computer systems analysis, programming or related work in software functions. Their primary duties must consist of either the application of systems analysis techniques and procedures; the design, development, documentation, analysis, creation, testing or modification of computer programs; the design, documentation, testing, creation or modification or computer programs related to machine operating systems; or a combination of these duties, the performance of which requires the same level of skills. The professional exemption does not include trainees or persons in entry-level jobs learning the computer specialties of programming, engineering and analysis. Nor does it include employees engaged in the operation of computers or in the manufacture, repair or maintenance of computer hardware or related equipment. Furthermore, those employees whose work relies heavily on the use of computers and computer software programs, but who are not engaged in computer systems analysis and programming work, are excluded from this exemption. Employees who fulfill these requirements but are not paid on a salary basis can qualify for the exemption if their hourly rate of pay is $27.63 or higher. Employees in computer-related occupations who customarily and regularly direct the day-to-day activities of a single group of two or more programmers, and who perform the more complex or responsible jobs in programming, are considered to have management as their primary responsibility. Such employees qualify as exempt executive employees if they meet the compensation requirement for exemption under federal and New Jersey law. Employees are exempt as administrative employees if they meet the weekly compensation minimum and when they perform “work directly related to management policies or general business operations” and they “exercise discretion and independent judgment.” 29 C.F.R. 541.2. The DOL considers systems analysts and computer programmers to be doing work directly related to management policies or general business operations when they are concerned with the planning, scheduling and coordination of activities that are required to develop systems for processing data to obtain solutions to complex business, scientific or engineering problems of the employer or its customers. Data processing employees who are closely supervised such as tape librarians, keypunch operators, computer operators, junior programmers and programmer trainees generally do not exercise the required discretion and independent judgment necessary to be exempt as administrative employees. An employer faces both criminal and civil penalties for misclassifying employees as exempt. The fact that an employee works in a remote location on a computer does not necessarily mean that the duties that employee performs are the type of skilled programmer and systems analyst functions described by the regulations. RECORD-KEEPING REQUIREMENTS In the traditional office workplace employers monitor their employees’ hours of work through sign-in sheets or paper or electronic time cards. The virtual workplace presents e-commerce with the challenge of monitoring the hours of work of employees who are not within the employer’s direct supervision or control, and who do not work in a fixed location or for fixed or regular hours. The FLSA requires employers to “make, keep and preserve” accurate records of the hours of work and wages, as well as certain other information, of their nonexempt employees. Certain information relating to an employee’s workweek and the basis for calculating remuneration is required to be maintained for exempt employees. There are software programs that will effectively monitor the hours of work of a virtual work force. EMPLOYEES OR INDEPENDENT CONTRACTORS? Hiring independent contractors rather than conventional employees is an attractive and practical alternative for e-commerce. Independent contractors are particularly well-suited to the concept of the virtual work force. Employers have substantially fewer pecuniary obligations to independent contractors, who rarely receive employment benefits from the hiring party. They can be hired in proportion to seasonal or fluctuating workloads, often use their own equipment and already possess all the technical skills needed to perform the job. Independent contractors work largely unsupervised by the employer. Independent contractors are also outside the coverage of most employment law statutes. This fact represents an enormous potential cost savings to employers. The unusual challenge of keeping and maintaining accurate records of remote employees’ wages and hours to comply with the FLSA is avoided by a virtual work force of individual contractors. Faced with all such advantages, businesses run a serious risk of misclassifying virtual workers as independent contractors when they are actually “employees” within the meaning of federal and state tax, labor and employment statutes. The penalties can be severe. In addition to penalties for failure to pay required minimum wages and overtime pay, the employer may find itself liable for back taxes and contributions that should have been withheld or workers’ compensation benefits if the misclassified employee is injured on the job and was not covered under the company’s workers’ compensation policy. Complicating the issue further is the fact that the standard for determining what is an “employee” varies by statute. Two basic standards are commonly used in determining whether an individual is an independent contractor or an employee, depending on the statutory or regulatory scheme at issue: the “right to control” test and the “economic reality” test. The right to control test applies several common-law agency principles, with the operative factor being whether the employer exercises control over the worker. Put another way, the question is whether the employer retains the right to determine not only what will be done, but how it will be done. The economic reality test is broader than the right to control test, and courts applying it look beyond technical and isolated control factors, but instead focus on the circumstances of the whole working activity. Businesses must therefore exercise due caution to withstand judicial and administrative scrutiny before classifying members of its virtual work force as independent contractors. INJURIES Is an employer liable if the employee is injured in his or her home or other remote office, or causes injury to a third party in the course of his or her employment? The Occupational Safety and Health Administration’s policy on home-based worksites was formalized in a Feb. 25, 2000, directive. OSHA stated that it strongly encourages teleworking and telecommuting. It made clear that it will not conduct home office inspections, that it will not hold employers liable for their employee’s home offices and that it does not expect employers to inspect the home offices of their employees. Also, if OSHA receives a complaint regarding a home office, the complainant will be advised of OSHA’s policy. OSHA will continue to hold employers responsible only for work activities in home workplaces other than home offices, for example, where hazardous materials, equipment or work processes are provided or required to be used in an employee’s home. This directive may seem, at first blush, to leave businesses using a virtual work force free and clear of interference by OSHA. However, on July 12, 2000, OSHA issued an advisory letter that reiterated these principles but also stressed that employers who are required to keep OSHA injury and illness records should record those injuries and illnesses that occur in home-based work sites, as long as they are work-related and meet the OSH Act’s recording criteria. Additionally, it should be noted that the OSHA policy is limited to “home-based worksites,” and as such does not cover a virtual work force working out of cars, airports, hotel rooms or anywhere else. These factors leave open the possibility of future directives contemplating OSHA audits of remote work sites and increased reporting requirements. Businesses should take reasonable preventive measures with respect to safety in their virtual offices, by urging remote employees to maintain safe and healthy workplaces and work habits. Within the past two years much attention has been paid, both by state and local legislatures and in the media, to accidents caused by individuals using their cellular phones while driving. Several New Jersey and New York municipalities as well as Suffolk County, N.Y., have already passed ordinances prohibiting the use of handheld cellular phones while driving, and New York recently passed a statewide ban on the use of handheld cellular telephones while driving, which became effective Dec. 1, 2001. Remote or mobile employees may not only use cellular phones while driving but also may have cars equipped with faxes, navigation systems, video entertainment systems, cd-rom, e-mail and Internet capabilities, as well as pagers and handheld wireless computers capable of receiving e-mail and accessing the Internet. Use of these any of these devices during a safety-sensitive activity such as driving will distract the worker and increase the possibility of an accident. The implications of this issue on the virtual work force are twofold. First, if the employee is injured, the issue will be whether the injury is covered by the employer’s workers’ compensation policy. The focus of such an inquiry will be whether the injury occurred while the employee was performing work-related services or whether it occurred while the employee was pursuing personal activities. Businesses need to ask, does our workers’ compensation policy provide coverage for work-related injuries occurring at remote locations? Second, if a third party is injured because the remote or mobile employee is performing work-related duties with a remote communications device, the third party may bring a claim directly against the employer. For example, in one currently pending case, Yoon v. Wagner, Docket No CL 24892, (Va. Circ. Ct., Loudoun Cty., June 14, 2001), a teenage girl was struck and killed by a car driven by an attorney who was allegedly not only making business calls at the time of the accident, but billing clients for those calls. The girl’s family sued the attorney’s firm for $30 million. As the variety and accessibility of remote technology enable virtual workers to continue working or responding to messages in nearly any situation, the potential for such incidents can only increase. Businesses should minimize their exposure by implementing clear policies that prohibit the use of handheld devices while driving. Employees should be instructed that if they need to use such a device while in the car, they should park in a safe parking space (not on the side of the road, which would only create a different safety hazard and traffic violation) before doing so. Such policies should strongly discourage the use of even hands-free devices while driving or performing any other safety-sensitive activities. The author is counsel with Grotta, Glassman & Hoffman of Roseland, N.J.

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