Since the beginning of the COVID-19 pandemic, the remote workforce revolution has exploded, leading to many employers hiring remote workers for the first time. As the economy recently has taken a nosedive, employers are increasingly considering layoffs, which may affect many remote workers. Laying off remote workers can present unprecedented legal hazards for employers, including wage and hour issues, severance agreement restrictions, unemployment claims, and other logistical matters.
Wage and Hour Issues
Remote employees must follow the wage and hour laws of the jurisdictions where they are physically present and working. As a result, there may be contradictions between the payroll practices of an employer located in one state and the payroll practices in the state in which the employee is working.
For example, this issue can arise when issuing a laid-off employee’s final paycheck, as state laws on this issue can differ substantially. In Washington, employers must pay final wages to an employee no later than the next regular payday after separation from employment. In Oregon, employers must issue a final paycheck to an employee by the end of the next business day following separation from employment. Noncompliance can result in significant penalties and, in some cases, legal actions, so employers must be aware of and comply with the laws that apply to out-of-state employees whom they lay off.
A similar issue exists concerning employees’ ability to access certain employment documents. For example, some states allow employees specific legal rights to access some documents, and these laws can differ widely from one state to another. Therefore, when laid-off remote employees request access to their personnel files, employers must closely review applicable laws that govern those employees and respond accordingly to avoid any sanctions for noncompliance.
Restrictions on Severance Agreements
In many situations, an employer may offer a laid-off employee a severance agreement containing additional compensation in exchange for a release of all claims against the employer. Many states, including all states on the West Coast, have passed laws that restrict severance agreements. For instance, in some states, laws prohibit employers from including terms in severance agreements that would prevent them from disclosing discriminatory, harassing conduct, or seeking employment with the employer in the future. As a result of the restrictions posed by different states’ laws, employers may want to use state-specific severance agreements when laying off remote workers to avoid running afoul of these laws.
Unemployment Claims
Layoffs inevitably can increase unemployment claims against an employer. Of course, remote employees would file for unemployment in the states where they work instead of the states where an employer is located. When remote workers file unemployment claims, employers’ payroll practices concerning those workers can come under closer scrutiny. This situation can lead to substantial penalties. As a result, employers must ensure that they properly report wages and pay unemployment taxes for remote workers in the appropriate states.
Other Logistical Matters
Finally, compassionately informing remote workers of layoffs is inherently more difficult, as communications typically do not occur in person. Employers should consider making these announcements through videoconferences, telephone calls, or written communications.
Remote work can also make it more logistically challenging to retrieve company property, which is often far away from company headquarters or a branch office. Employers should develop policies for the return of company property and safeguards to protect confidential employer information upon layoff.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
Hall Benefits Law, LLC
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