VANNOY:

Hi, everyone. Mike Vannoy, vice President of Marketing with Asure Software. Got an interesting topic today. So during the pandemic, so many lawyers had to send their workforce home, right? And clearly there’s been a continuum to work from home, flex work that’s been going on for a couple decades, right? But the pandemic not only did it just simply accelerate a trend, there was a, it was an overnight shift where, okay, we ha we legally had to work from home in many cases. What’s happened since, however the, that is catching some employers a little flatfooted, is not realizing the compliance impacts of those employees working from home. So if, if I in my hometown of St. Louis, if there’s an employer downtown I got people coming from the Missouri side. I’ve got workers coming across the river to from the Illinois side, but the work is being performed in an office downtown.

 No big deal, right? But when those people go home what are the differences in, in, in, in, what are the legal requirements for, say, overtime? What are the legal requirements for taxation if employees are actually performing the work in Illinois on my behalf instead of performing the work in my office in Missouri? So there’s all kinds of compliance and tax impacts of employees working remotely. It, it, it, and I think there’s a lot of employers just haven’t really thought about this before, because they didn’t have to, right? Maybe, maybe the majority of their workforce worked from one location and the pandemic changed that. Maybe it’s just the tight labor market that I’m, I’m open now to hiring employees who work flexibly. Maybe I have an employee who says, Hey, I’m gonna spend the summer in my rv.

I promise I’m gonna have our have good wifi. Is that okay, boss? And we think, huh, what the heck? As long as they do the work, but where they perform work actually matters in the eyes of the law. So we’re not giving guidance to say no to those things, but we are saying eyes wide open. Some of these decisions have probably some unforeseen unintended consequences. So, to help me unpack this really complex topic Brian Shenker from Jackson Lewis. Brian’s a regular guest on the show. He practices law for Jackson Lewis. He’s got an extensive experience defending class action and collective action lawsuits under federal and state wage and our laws. He successfully defended wage and our audits conducted by the US and New York State Departments of Labor, and he regularly handles cases before courts and administrative agencies involving claims of discrimination, sexual harassment, and retaliation. So, very well qualified. Always enjoy talking to you, Brian. Welcome. Thanks

SHENKER:

For having me. And you know, wage and hour compliance is really an area employers can’t avoid and should really be proactive. And so I, I think a lot of the stuff we’re gonna talk about today, you know, maybe things that have been overlooked, but certainly if they have, you know, time to take a look at these things.

VANNOY:

Yeah. Very good. All right. So normally when you and I are kind of unpacking a complex topic, we’ll talk about the, the legalities of it all. We kind of then end with maybe the stick saying, Hey, this is why you need to pay attention. We’re kind of reversing the order today. The, the, the stick is really important here because the, the potential consequences of doing it wrong, even if by accident, are pretty stiff. Can can you speak into that, please?

SHENKER:

Yeah, exactly. So, you know, employers that, you know, don’t set and enforce policies you know, including, you know, where and when non-exempt employees might work may be able to work. You know, this can lead to, you know, substantial exposure, even, you know, class action exposure. So, you know, this is one area, the wage and hour context that, you know, substantial compliance is, is not a defense. You know small or technical violations in this area can lead to, you know, massive exposures. So something that, again, you know, companies need to be aware of these issues. And, you know, look, when we’re talking about you know, minimum wage, you know, under, under the F L S A you know, right now, minimum wage is 7 25 an hour as we’ll get to, you know, many states are above that.

 But, you know, failure to pay minimum wage, you know, that’s gonna be for instance, the difference between the rate that was paid and, and the full minimum wage. And, you know, that’ll add up especially if they’re, you know, multiple employees subject to those violations. You know, same thing with overtime. The general rule is that all employees are entitled to you know, time and a half for hours worked over 40, and failure to pay that rate, or maybe not to pay for all hours. That work, such as, you know, issues with off the clockwork, you know, will result in a substantial overtime you know, money’s being owed. So in these types of cases, right, you know, they can recover their unpaid wages, you know, that, that’s the simple part, right? That you know, and, and again, we’ll talk about, there might be even, you know higher burdens under state law that that could increase damages.

 But, you know, one of the things here is, you know, that I often see in litigation is a dispute over hours. And so, you know, one of the things we talk about for damages is that if an employer doesn’t have records an employee can come in and say, you know, they worked 70, 80 hours a week. It might not be reasonable. It might be far from reality. But without contemporaneous time records you know, the d o l, the courts will likely accept what the employee is saying unless there’s specific evidence to the contrary. So, you know, in combating these, you know, potential penalties and wages owed, you know, time records are key. And, and that brings you to liquidated damages. This is one of the things that really <laugh>, I guess we could say, hits employers over the head, right?

 In addition to unpaid wages, under the fair Labor Standards Act, employees will recover a hundred percent of those unpaid wages as liquidated damages. So, you know, $10,000 in in unpaid wages becomes 20,000. And, you know, liquidated damages are the norm. They are not the exception. You know, the rationale for this is that you know wages alone, you know, back wages alone are, are insufficient to make that employee whole for having to wait so long to, to get paid. You know, they’re, they’re lawfully the lawful wages. And so, you know, I can give you an example from my practice. You know, there’s a very, very limited exception to liquidated damages when there is a violation. And that’s essentially a good faith defense. And it’s not good faith, as in, Hey, I thought I was complying with the law.

 You know, any, anyone can can say that, but this is where, you know, a company has gone out and sought guidance and you know, maybe it’s legal guidance as to, you know, an exemption or how to pay people or, you know, HR professionals. And then there’s subsequent reliance on, on that. So, you know, that may be a defense. I’ve had that before, where, you know, in a case where, you know, there was a dispute over an exemption you know, in the end, we had a, I think it was a 10 year old fax from you know, from a council to the company saying, you know, here’s this decision. It looks like based on this, you know, you can pay according to this exemption. In the end, that might not have been the case, but that was a great defense to liquidated damages. So it just goes to show being proactive. It doesn’t just assist in, you know, compliance, but also on the backend, if you’re ever sued for, for these wages.

VANNOY:

And, and Brian, I I just wanna point out maybe for, for small employers. So, so many times you got a, you got a small growing business that you know, it, it’s maybe an overused term, but you know, the, the, the employees that they’re like, they’re like family, right? We’ve worked together for a long time. We all know each other really well. And all this, all this record keeping, all this precision sounds very legalistic and doesn’t sound like it’s part of our culture, and hey, I’m not worried about it. But it, but then in the, in the face of a pandemic, or there’s, or there’s major changes that employee who works in your place of business, maybe it’s an office, maybe it’s a warehouse, maybe it’s a retail facility, but you’re face to face, you’re talking through things. It’s kind of just generally known when the person shows up and when they leave and when they work.

But if that person all of a sudden is working from home just think about the, the, the life pressures that have happened to people during the pandemic, whether it’s childcare, whether it’s elder care, whether it’s being sick in medical bills and inflation and, and you lack that face-to-face connection with people. They may be working more hours than you even know. They may be thinking they work more hours than they actually are. But they have this feeling of resentment or frustration that can build up in, in, in relationships that you think are, are solid. And you don’t have to really worry about this stuff. All of a sudden all it takes is one, and maybe it’s the frustrated spouse of your employee who’s saying, Hey, you need to get paid for these extra hours you’re working, and maybe it’s the spouse who, who notifies the State Department of Labor. And, and now you’re not just dealing with an employee, you’re, you’re dealing with an audit that goes back for five years to where you have to prove all your records. And, and this isn’t just a, a, a one employee thing. This, this could be a really big, really expensive consequence. Am I, am I overstating that?

SHENKER:

N not at all. If, if anything, that that’s an understatement, because a absolutely. What, what you said, it just takes one so, right. The, the two main enforcement you know, you know, mechanisms here are through private lawsuits where an employee hires an attorney or through, you know, department of Labor enforcement. So, like you mentioned you know, this can be through the US D O L, they oversee the the FFLs a or through a, a state, you know, labor agency, which would oversee, you know, the, the state regulations and Right. You know, those can be initiated by, you know, one employee complaint. You know, what we typically see is they’re not just investigating that one employee’s claim. The DOL is gonna come in, ask you for all your employees, or maybe all everyone in that classification. Right? So it’s going to be, you know, expansive.

They’re going to want records, they’re gonna wanna see it right away. And so, right, you know, d l the D o l, I think, you know, the, the, the US D D O L alone, not, not even talking about state, state ones, they close about, you know, which means they settle essentially about over 20,000 cases a year. You know, in the last five, six years I believe they’ve recovered over a billion dollars for employees. And, and that’s not even including liquidated damages. That’s just the unpaid wage component. So the dol coming into your workplace, you know, I have clients all the time they call me. I have a D O L investigator who just walked in, they’re interviewing my employees, and they’ve said, I have a week to give them, you know, all these records and tax records.

And they’re entitled to do that. They, they can walk in and, you know start looking around and talk to your employees. So you know, that, that’s a big risk area. And then, you know, private enforcement the plaintiff’s bar in this field is, seems like it’s ever growing and ever more active. And these range from, you know, one employee lawsuit just on behalf of themselves through, you know, nationwide or statewide class action. So one employee can file a lawsuit on behalf of all similarly situated employees. So that’s why we say, when, when you have a small compliance issue in the wage and hour context for, you know, one employee, understand that however many people you have in that classification, you know that that exposure grows exponentially. And all it takes is that one employee who’s interested.

And, and just to note, you know, in, in the private enforcement context, in courts, these employees can recover their attorney’s fees, which means if they prove that they have not been paid correctly, the company, you know, is going to be paying their attorney’s fees, that’s a huge amount of leverage that, you know, leads often to settlements where there’s you know, issues with compliance. So you know, what we’re gonna get into to today, I would say pay attention. Look into it yourself. Seek out guidance, seek, you know, from, you know, HR consultants like Asure or counsel, if you need because, you know, these, these are not isolated issues. These can, these can become,

VANNOY:

Hey, hey, Brian, I, I know we wanna spend most of the time today talking about the actual things that employers need to be aware of. But there, there’s another bucket here, right? So there’s there’s class action, department of labor, what I’d say, wage and hour kind of stuff, but there’s a separate bucket around taxation, right? I mean I’m assuming it’s all, but maybe it’s most states. Yeah. So federal tax is kind of blankets no matter where you’re located, as long as you work in the us. But if I work half the time on the Missouri side of St. Louis, and half the time in the Illinois side of St. Louis, presumably state of Illinois and state of Missouri are gonna want their taxes, right? So, can you speak into the tax impact when, when it comes to penalties and consequences of doing this wrong?

SHENKER:

Sure. Absolutely. So, and when you talked about taxes, you know, you know, we probably need to even break it down from there, there, you know, there are different tests for where an employer might be subject to taxes, whether you’re talking about, you know, unemployment insurance,

VANNOY:

And I’m, and let’s reserve getting into the details of what people need to know, but just speak to the con consequence. Cause Department of Labor is the, is the, is the defense mechanism and enforcement it’s who enforces wage and hour, and then you have the court system for class action or personal lawsuits, right? But the IRS has their own enforcement independent. Am I saying that right?

SHENKER:

Yeah, absolutely. So you’re looking at the I r s and often with these types of issues with remote employees and issues of where taxes should be paid. You’re talking about their, their state taxation departments, and yeah. You know, companies who turn a blind eye to, you know, where their employees are actually working could very well be subject to you know, penalties for failure to pay taxes you know, late fee, you know, late fee assessments for, you know late filings or not having paid things correctly. So you know, a as we’ll discuss it, just ignoring these issues doesn’t make them go away, and Right, even outside of the wage and hour context, you know, taxes, you know, will very likely be owed to different states or withholdings will need to be made you know, for different states depending on where employees are. So, you know, there are certainly penalties in, in that realm that, that you’d be subject to for you know, for not filing, for instance, in, in a state where you have employees performing

VANNOY:

Work. So we kinda have I’m, I’m gonna, I’m gonna advance the conversation, but we’re kind of talking about things today in two different buckets then, right? Bucket number one is wage and hour stuff around Department of Labor fed department of Labor state. It’s around overtime laws, it’s around minimum minimum wage. Maybe there’s different classification issues for exempt versus non-exempt. There’s all that wage in our stuff, and then there’s taxation. So, so I think that’s what we’re gonna try to unpack in our conversation today. Let, let’s do touch on some of the examples. Now, we can never talk about every example that exists even if we had it current yesterday, it be changed today. But what are some of the big things that employers need to understand about the differences between federal and state regulations here?

SHENKER:

Right. So when we look at it, you know, we’re talking about, you know, the federal, you know, the F L S A sets the floor, and then we have some states that simply follow that, and we have others that, you know, set higher standards. And that can be, you know, minimum wage salary levels for exempt employees, a number of things. So you know, I’ll start with, you know, exemptions, right? So as I said before, all employees should be paid, you know, an hourly rate and overtime, unless they fall into an exemption from overtime. Now, you know, the salary threshold, which is the, the amount, you know, the level of the salary, whether it’s, you know, 50,000, 60,000, you know, that depends on the state. And you know, federally there is a the F L S A says that exempt employees need to be paid at least you know, a little over 35,000 per year on a salary basis.

 And there’s some states that follow that, like Alabama. So let’s say you’re employer in Alabama and you’ve got an exempt employee, you’re paying them, you know, 37,000, you’re, you’re meeting the the FSA requirements, and then, you know, that employee wants to work remotely back from, you know, where they come. And that’s out in California. And now you’re you’re an employer in California with, you know, in the one to 25 employee category. And, you know exempt employees there need to be paid at least 58,000 in change per year. So, you know, you have an issue, if you keep that person exempt, you’d like have to raise their salary up to, you know, up by, you know, 20,000 or more. So you know, there are issues with the salary threshold, and depending on where an employee is working, you may have to change their exempt or non-exempt status or, you know, raise their salary to comply.

VANNOY:

I think that’s a, I think Brian, that’s an area where people just don’t think, I, I, so like common knowledge, say New York state, New York City, California, they have their own overtime laws, right? That are more favorable to employees than the, than the F L S A, than the federal. But a lot of people don’t realize the, the minimum pay requirements of being an exempt employee in these states. And so to understand if, if, if you have a remote employee working in one of these states, it’s not just whether you do or don’t have overtime and maybe they’re exempt, you see them as an exempt employee, and now they’re working from home in one of these more employer employee-friendly states it could literally mean as much as like a 20 plus thousand dollars raise that you might have to give if you don’t understand the impact of exempt versus non-exempt, not just whether you’re paying overtime or not.

SHENKER:

Right? Right. And, and similarly, along with, you know, that there, there might be different rules for, you know, the duties test under certain exemptions that that states apply. So, you know, you really need to look closely, you know, usually we say, right, your exempt employees, you’re generally safer in terms of compliance, you know, as long as you’ve classified them correctly. There, there aren’t as many pitfalls as with non-exempt employees. But right. Threshold question is, when my, you know, not when my exempt employee goes to, you know, a different state, are they still exempt? You know, and, and the parallel is for non-exempt employees, you know, many states have higher minimum wages than the 7 25 you know, federal minimum wage, you know, minimum wage. Again, you know, California, New York would be great, are great examples for that. Both are you know, over double that amount you know, so you need to be aware even for your non exempt employees when they, when they’re, you know, working in a new location, what, you know, what are, what’s the minimum wage requirement there?

 So, you know, certainly, you know something like that, you know, you might even have issues with, you know, places, you know, different locations within a state. You know, not, not, not all states do that, but <laugh>, you know, we’re picking on New York and California, I think. But you know, they, they are to the very employee friendly states. And depending on where an employee is working within those states, you know a move from, you know upstate New York, you know, to, you know, New York City can trigger a higher minimum wage level, you know, the same way in California, you know, moving from you know, say San Diego where the minimum wage is around, I think $14 to, you know, San Francisco where it’s, you know above $16. You know, you need to recognize, you know, how you might need to, you know, pay someone differently just by moving even within a state.

VANNOY:

Brian, let’s, I, I, I think I, I, I alluded to it at the top of the discussion, and if you could kind of make it more clear for people, I so I, I think there’s a spectrum, right? So like, I’ve got an employee who has, we’ve had a, a, a rather formal conversation, Hey, can I work from home? I want to work from home or I’m gonna spend Monday, Tuesdays in Thursdays in my home, and that’s a different state, or, or, or whatnot. And that’s kind of a pseudo permanent setup. I can research the local laws, I can understand the tax ramifications. That’s probably more black and white here, but what about the employee who just is a little bit flexible? It’s maybe not super rigorous. Maybe the employee says, Hey I was gonna take ptl. I know this is a really crunch, crunch time for us. I’m gonna work on what was gonna be my vacation. The kids will be at the beach, but I’m gonna be online all day doing conference calls, but I’m gonna be at the beach in a different state. What, how, how, how tight do employers need to really study this for work being performed in a different location you know, for much smaller periods of time?

SHENKER:

Yeah. So I think, you know, the, you know, generally I think, you know, if it’s a vacation or some very, you know short period of time there’s much less concern, you know, about these issues. That’s likely, you know, if there’s, you know, not an intention to, you know, stay there, and it’s really, like you said a vacation, then, you know, we’re likely, you know, not triggering those states, right? You, you have an employee who’s, you know, on a call, you know, a conference call, and they’re driving across country, you know, we’re, we’re not triggering different minimum wages as we we go through each state. You know, I think what we’re talking about today is more, you know, someone relocating, right? That, you know, for the, you know, foreseeable future or for, you know, months, they’re going to be in a location. So, you know, we’re not so much concerned with very short term issues. It’s, you know, much more, you know, something that’s, you know, indefinite or, or going to be for a substantial period of time. And, and, and then, you know,

VANNOY:

Absolute, I wanna give us concrete guidance as we can on this topic, even though I think by definition it’s not super concrete. I, I, I’m just thinking back to a few years back, I had had some experience doing payrolls for major league baseball teams. And there’s a case where the states, they want their money, they want the tax money, right? And so you got a baseball player who’s making 10, $20 million a year and their contracts are spelled out on a per pay per game basis. You can bet that a St. Louis Cardinal who might reside in, in St. Louis Illinois wants their taxes when they go play the Cubs, right? And, and that’s on a per game, which is really a per day basis. So in most extreme cases, only because there’s a lot of money to be had there, states will pursue this on the more micro time level. But is there any guidance we can give for the, the average business that we sh we should just be the, the, that we could give more concrete guidance here?

SHENKER:

Yeah, I, I mean, look, I, I think the, the safe route is really, you know, anything beyond a, you know, vacation time, right? When someone’s on vacation, you know, there, there might be some work, but I think anything beyond that, you know, you need to start looking into this. There might be, you know, then, you know, state guidance, you know, as to, you know, your state and where the potential work state is in terms of, you know, how much time or, you know, what is sufficient to trigger it. But yeah, I would say anything where someone is, you know, going somewhere specifically, and that is going to be, you know, their place of work, you know, we’re we’re talking about the, these issues vacation. And

VANNOY:

Brian, the last thing maybe again, alluded to it at the top of the hour I believe in all cases, and I think it’s safe to say all the litmus test here is the location where work is performed, right? So the fact that my employer Asure is headquartered in Austin, Texas, I don’t, I reside and I work virtually in St. Louis therefore I’m taxed. I have Missouri taxes, I have Missouri laws I must comply with that my employer must comply with. So our guidance here is don’t think of where your quote unquote headquarters is, or your main office that, that maybe a satellite office that an employee is kind of attached to. It’s literally where the work is performed when we think about virtual work. Am I, am I correct there?

SHENKER:

Absolutely, absolutely. It’s about that location where, where the work the services are, are being provided. So again, that, you know, may or may may not be that person’s house, that that might be, you know, somewhere else, you know a rental house where, wherever it might be, but Right. We’re not saying, you know, you know, I’m assu, you know, Asure we’re located in Texas, in Texas, we’re gonna pay everyone, you know, according to Texas law. No, it’s dependent on where that employee is located when performing the work.

VANNOY:

Okay. And maybe my last question to this, and this might sound just kinda nitty gritty, but so vacation doesn’t count. What if it’s gonna be ongoing working relationship, this is what we care about. What if an ongoing relationship is a traveling salesperson? And by definition, their job takes them on the road, would they, would they be subject to be taxed in the states in which they are selling? Or is it gonna be just the state in which they say reside and work from, is their home office?

SHENKER:

E excellent question. And I think there are some, you know, particular issues for, you know, those outside sales, those outside commission salespeople, so, right. I mean, if they are performing sales and, you know, getting business in other states, yes, that, then we might be looking at those states for both wage and hour purposes, as well as tax issues, including maybe, you know, it could possibly be, you know, income, you know, tax but also, you know, maybe even sales tax, right? It might even be subject to, you know, file filing you know corporately there and, you know, get authorized to do business in that state if you’re you know, having sales done in these various states. But, and, and I think, you know, bringing it back to wage and hour, one thing that I’ve seen arise during the pandemic with commissioned salespeople, is that right?

These are typically, you know, your individuals that are exempt because they’re doing outside sales, they’re traveling they’re going to different customers, customers. And, you know, during the pandemic, a lot of that changed where that commission salesperson may be working from home and they’re doing, you know, zoom calls or, you know, you know, making you know, conference calls all day instead of actually visiting customers. And, you know, if we recall, one of the main elements to that exemption is that they are customarily away from the employer’s place of business now when they’re working from home, that that may become the employer’s place of business. And so if they’re just, you know, taking all their calls from home and not going out in the field anymore, you know, there could be you know, a possibility of the commission salesperson exemption, you know, no longer applying something to take a look at

VANNOY:

Topic for another day. I think it’s gonna be interesting, though, over this next three to five years probably where quote unquote, inside sales reps are non-exempt outside sales reps are exempt. The lines between the diff the difference between an inside and outside sales rep and world of video conferencing in pandemics and post pandemic I mean, people are doing million sales reps are doing million dollar deals all the time without ever going on site. These, these two worlds are gonna, are gonna collide, are already colliding. It’ll be interesting to see how this pans out over the next few years.

SHENKER:

Yeah, definitely.

VANNOY:

All right. Let’s, let’s move on to some practical guidance. So how can employers reduce their risk in these areas?

SHENKER:

Sure. So, you know, it, it sounds so simple, but you know, the first thing I, I’d suggest is you need to know where your employees are working. You know, it’s it, it, it’s not enough to just understand this concept of remote work, but you know, when you have employees who are not working at an office you need, you know, the company needs to understand where they are working from. You know, I’ve seen various studies that basically show that companies in HR overestimate that employees are telling them and keeping them apprised of where they’re working from, and that employees are much less often actually telling their employers where they’re working from. So you know, with that, you know, there should be policies, whether it’s, you know, in the handbook or other separate policies that, you know, require employees to inform the employer you know, where they are working from, and, you know, not just that, but you know, in advance of, you know, changing their work location.

 They might need to get permission from the company. So putting something in a handbook like that and enforcing that policy is probably, you know, the, the first and most minimal step that a a company can take. Because, you know, none of this, we, you can’t ensure compliance with another states with wage and hour laws if you don’t know that your employee is actually working there. It, it’s, it’s, you know, such a basic thing. You know, so there should be, you know, documentation of that we should know where people are working. And then again, you know, once the company knows where the employees are working and has, you know, approved that, you know, that that work location, you know, then it’s on the company to, you know, study up on compliance in a new state. You know, whether that’s, you know, the tax issues or the wage and hour requirements.

And again, a lot of what we’re talking about today is, you know, minimum wage overtime, but there are so many other wage and hour issues you know, that that may vary from state to state, such as, you know, record keeping priors. Yeah. Give, give a couple examples if you could. Yeah. So for instance, you know, here in New York when an employee is hired there’s a notice of wage rate and payday, a very simple form to provide, and it needs to be provided with 10 days of the start of employment, or, you know, the start of working in New York State. We’d say and, you know, failure to provide that can, you know, lead to penalties of up to $5,000 per employee, you know, that, that’s massive exposure. You know, so there, there’s certain notice requirements like that.

 There are also other, you know, other pay requirements. You know, while overtime is generally, you know a thing that’s, you know, 40 hours in a week, you know, after that it’s time and a half their, their regular rate. But there are other states, again, we’ll pick on California, where, you know, there can even be a daily trigger for premium pay. You know, so, you know, you employers need to be aware of those, you know, unexpected you know, pay requirements. And, and so, you know, e and even outside of the wage and hour context, you know, I won’t go into these things, but you know, there could be harassment, you know, sexual harassment and training requirements for employees in certain states. There are going to, you know, we have the F M L A, which, funny enough, if you ever get audited by the U S D O L for wage and hour issues, they will actually ask you about your F M L A policies and, and such as, well, so we have, you know, the federal F M L A Family Medical Leave Act, but states have their own leave laws.

So having one employee might, you know, telecommuting from a a certain state might be enough to trigger leave requirements. Another thing I can think of are, you know, non-compete and non-solicit agreements you know, enforcement there, you know, based on, you know, state, you know laws or, you know court precedent as to, you know, what might be reasonable. So, you know a non-competition agreement that you entered into, you know, that was you know, kosher in your state may run afoul of the law in another states. So, you know, we could go on and on. But there, there are lots of issues to be aware of. And, and that’s why you know, employers can, you know, reject or, you know, deny an employee’s request to work remotely. You know, I,

VANNOY:

I can think of an example, Brian, where an employee they had to work remotely during the pandemic. They, I mean, pretty innocently assumed that that meant they could work virtually anywhere. They literally relocated without telling the employer, they moved to a state that would’ve then required that employer, that company to file sales tax bec in, in the state, because the state law there read that if you have employees here, you must pay sales tax on revenues generated from customers who ha you have in this state. So this C company had customers in that state, but not employees. And the tax bill that resulted literally was about as much as they were paying that employee. So, so there are really good business reasons to say no, it doesn’t mean you’re just not with it. And with the modern times and, and say no to virtual work there’s real, you know, meaty consequences to, to some of these decisions. And it may be reasonable to say no, right?

SHENKER:

Yeah, absolutely. And look, there’s a difference between, you know, permitting remote work versus permitting remote work from anywhere. And, and that’s what an employer needs to consider. Cuz you know, a lot of small and mid-sized companies are not equipped to, you know have, you know, multi-state, you know, compliance, you know, they’re, they’re set in one location. Maybe they have services and sales in a couple states, so they know how to deal with, you know, tax and possibly wage and hour implications in those other states. But, you know, remote employees going outside of, you know, that that zone can present problems. So you know, there should be a process. You know, I, I think this is a, you know, something five years ago, we would’ve never, you know, considered this in a handbook. But, you know, there should be a process for you know, both requesting to work, you know, remotely outside of the jurisdiction and the procedure for how the company handles it, right?

You know, this isn’t something that we want, you know, managers making decisions on and approving requests without, you know, talking to HR or, you know, going higher up the line because you know that, that risk know inconsistent decisions. And, you know, when we have, you know, pol, you know, when we have the granting or denial of remote work requests happening, you know, an inconsistent basis, then, you know, that could risk even a discrimination claim, right? That, you know, my request for you know, remote work in a different state was denied when, you know, someone else who’s not in my protected category was granted that. So you know, companies need to keep that in mind too, that, you know, while they’re making all these decisions and setting these policies that, you know, it needs to also be applied consistently. And again, as, as we always say in discrimination you know issues, right? You’re relying on, you know, business related legitimate factors in approving or denying, you know, these remote work requests.

VANNOY:

So no surprise, the number one solution to almost all problems is communication, right? It’s communication. Then the recruiting process and sharing your policies. It’s communication in the onboarding process. It’s communication of having an employee handbook and having the right policies in the first place. Communication is, is at, is at the center, and then it’s doing your homework in these geographies. You choose to do businesses. And I say geographies, not just states, because laws are different in New York City than they are in New York state, right? There are school district taxation issues all over Pennsylvania that <laugh> one, one township from the next may be different, right? So Brian, maybe one last topic here before we we move on to, to compensated time is this kind of trend for RV workers, RV employees?

Like I know in personal experience, I had a 10 99 employee in a company I owned several years ago. That was kind of at the early days of, of this world in, he, he, he was awesome. He did his work literally from rv, he went from National Park to National Park and in never missed a beat on deliverables, but it was a 10 99 relationship. I didn’t had an eyelash. I actually had to decline a great marketing candidate. I loved her super talented but she wanted to live the RV life and couldn’t commit to amount of time in certain locations. It would make her employment predictable. But it wa it wa it was gonna be a W2 relationship cuz we were gonna dictate the work to her. And, and, and so it wasn’t a fit. Th this is an o this is a real trend that’s, that’s growing. Can you speak to that, please?

SHENKER:

Yeah. So absolutely, and, and this can present even, you know, more compliance headaches than, you know, a remote employee who’s, you know, in a different state and may be employee friendly but you know, in one set location, because here with, with someone, you know, traveling around going from you know, state to state and, you know, city to city ju, you know, jurisdictions, even within those, right? They, they could be triggering all sorts of you know, compliance requirements that, you know, an employer might very well, you know, most employers would not be equipped to keep up with. And so, you know, in this circumstance you know, it, it’s absolutely fine to say, to say no. And I think, like you said, a lot of this starts with, you know, an offer, right? You know, that these issues, you know, should be addressed.

The expectations of where employees should be working, you know, should start from the, the very beginning that, you know, an offer letter should say, you know, you are expected to work from, you know, like you said, St. Louis, and, you know, that’s, that’s where your job will be. And you know, you’re not, you know, maybe there, you put in explicit language nowadays because of, you know, th this risk that you’re not authorized to work anywhere else. And then, you know, if they accept that offer, you know, they’re subject to those terms and, you know, you likely have a handbook that would, you know, let them make a request. But again it’s, it’s absolutely fine to tell these employees, no, you can’t do this. You know, I I think a lot of employers wanna, you know, accommodate their employees. I’m not talking about a disability accommodation, just, you know, in general, you know, keep them happy. But you know, there, there are, you know, repercussions to that, you know, from, you know, wage and hour through tax, through, you know, all sorts of other aspects of the employment relationship. And as an employer, you don’t want to be taking on you know, these unknown risks just so that, you know, the the employee can have this freedom to travel the country. You know, that might right, might not be something that’s, that’s gonna work for your company.

VANNOY:

Brian, let’s talk a little bit about compensated time. What, what, what, what, what is, what does the topic even mean and what should employers understand here?

SHENKER:

Sure. So when we’re talking about, you know, compensated time, it’s really look, you know, employees should be paid for all hours. They’re permitted to, they, they work and, you know, that might, that can even include hours that, you know, they’re not instructed to work, but that they work anyway. So, you know, even under normal conditions, you know, for non-exempt employees who are working at the business location, you know, there are enough you know, pitfalls in this area, but for you know, employees working remotely it just exacerbates these issues, right? There’s really a heightened risk here that employees will perform what we call off the clock work which means they’re working and they’re not reporting that time, or it’s not being captured by the company’s, you know, timekeeping systems, and they’re not getting paid for that.

It might be time worked under 40 hours so they need to be paid at least minimum wage for that, or it might be, you know, overtime hours and you really have you know, an overtime compliance issue. You know, so, you know, and there, there are really all sorts of ways, you know, this can this can arise. I, I see, I mean, I would tell you in, in my litigation experience, I do a lot of wage and hour defense work off the clock claims are by far the most common claim I see. And so, you know, sometimes this might be caused by just a complete failure to track time. Hopefully no one listening to this is inaccurate category. You at least have some procedure for you know, contemporaneously tracking employee time. But then even when, when there is a tracking of time, it’s like we also have issues of you know, an employee clocks out and they continue to work or you know, they’re, they’re, you know, not reporting that time because, you know, they know it won’t look good because their manager said, you know, we need you to get this done in X number of hours, or, you know, you can’t work overtime.

So, you know, there are many ways that it, with the company’s knowledge, or even without it, that employees might work you know, time that is not being captured and not being paid. So again, the, the first step here is to have a policy, a written policy requiring employees to track their time, and obviously having that, that way to track. And, you know, just as a quick aside, you know, there’s no set way under, you know, federal or state laws as to how to track time. It can be, you know, the old fashioned, you know, punch card. It can be, you know, a fingerprint scanner, you know, or anything in between. But it needs to be contemporaneous and accurate. So, you know, employee, you know, and it should be the employee’s involvement, right? I, you know, I often have, you know, clients where, you know, we have a manager who’s tracking everyone’s time. Well, that might not even, that’s probably not even realistic in the remote world. So we want employees to have involvement in, you know, entering that time. And look, you know, companies, especially with remote workers should audit this, you know, if you’re paying an employee for, you know, a nine to five job, but they are sending out emails before nine or after five, you as a company, you have constructive knowledge that they are performing work that they’re not getting paid for. So, you know, what about the,

VANNOY:

What about the flip side of that? Brian? I, I mean, I’m I’m, I’m, I’m outing myself here. I, I, I mean, I know I’ve got non-exempt employees probably pretty guilty of sending some emails or some teams chat messages before <laugh> 8:00 AM and after 5:00 PM try really hard not to do it on the weekends, but there, there’s, this isn’t just employees sending email if you, what, what’s, what’s the burden on the employer for sending messages? Cause I would think there’s this implied pressure from the employee, like they need to respond to their boss.

SHENKER:

Yeah. and, and that’s where I think training managers and, you know, other, and, you know, higher ups within the company about, you know, how, how we treat non-exempt employees and what their schedules are. I mean, for instance, it’s very easy if you want to send, you know, if it’s, you know, and I do this too, it might be midnight and I’m sending an email and I might just hit the delayed delivery until 9:00 AM the next morning so that they’re not getting that email in off a, you know, in outside of normal work hours and feeling compelled to respond. Look, there there’re even more ways to handle that. You, you could even cut off, you know, non-exempt employees access to certain things, you know, outside of their normal work schedule that that might not always be feasible, but that’s probably something that can be considered. But yeah, you know, from the employer,

VANNOY:

But you thing about guidance, even for myself, what, what would it be reasonable to say, Hey, as long as you have good documentation that you trained your employees, that hey, you might occasionally get some email that you’re a member of a group thread, like all sales, this might go to a hundred people and you might be in that group, you are not obligated to read or consume, act upon, or respond to the, those emails outside of business hours, even if you do receive it. Is that, is that a reasonable, I don’t know if it’s a workaround, but just way, way to address something like that as long as you’re documenting it and training on that?

SHENKER:

Yeah, e exactly. You wanna document that and then look, you know, we’re going to, you’re going to have employees that don’t file that guidance and might read those and might, you know, send things. And then what you need, what companies need to do is, number one, even if an employee works, you know, some, you know, unauthorized time or unauthorized overtime, you’re paying them for that time, but you can discipline them, right? You can bring them in and say, look, why is this happening? You know, we can’t have this happening. You’re getting a warning. You can, you know employers often don’t understand that, you know, this puts them at risk, you know, th this type of off the clock work, and therefore you can discipline, you can terminate employees who are, you know, refusing to follow company guidelines because in the end, you know, they could intentionally do this.

They could be creating a claim, and then they can sue you for that. And you can say, I told them a hundred times they couldn’t do this yet, they still, you know, continue to after hours that that won’t matter if they worked it, they’re getting paid. So sometimes if you have employees who just, you know, refuse to file a policy, you know, progressive discipline, you know, is, is the way to go to ensure that, you know, your company is not at risk of, you know, a, a, a lawsuit or a D O L audit in, in this regard.

VANNOY:

Yeah. And I, and I would just go back, I, I, I want to give specific guidance, Brian, to, to employers here. This is so hard because you, you, if you’re trying to create a culture of achievement and excellence in, in high standards, high performance man, you hate to, you hate to pull back the reins on an employee who’s trying to go above and beyond and work harder and do more, right? Not in a, not in an unhealthy way, but just to be a high performer. But to me, the, the key guidance here is you’ve gotta understand the law, and you can’t have policies that you serve the law in, in the more transparent you can be with good documentation and training and conversations and communication with your employees so that they understand the reasons why you have to do the things you do. You’re likely to not undermine that culture you’re trying to create. But if you’re trying to create that culture, and then you come at if you didn’t do the training, didn’t do the communication upfront just for the reasons why then it can feel counterculture if you come kind of, kind of nip that in the bud and have to take disciplinary action at any, any other guidance you would give to growing companies.

SHENKER:

Yeah, I, I, I think the only thing in following up on what you said is that, right? And, and sometimes it will be okay for them to work outside of the normal workday, and we might acknowledge that even when not given permission, they might do that anyway. So you also wanna make sure there’s a written policy and procedure for these non-exempt employees to report any time where, whether it’s putting it on their time sheets or, you know, emailing hr, that there should be some procedure so that, you know, in the event you’re defending a lawsuit, you know, on this area, you know, you would at least be able to establish the company did everything it could to try to, you know, capture all the hours that, that were worked, and it couldn’t, it had no constructive or actual knowledge that, you know, this employee was, you know, violating its policy.

VANNOY:

Yeah. Brian, let’s take our last topic around tax compliance. How, how should be, how, aside from just simply doing the research and knowing what, what the local tax laws are, and I say local, not state it could be one of the same, but local tax laws are what, what, what’s your guidance for employees here?

SHENKER:

Sure, sure. So when we talk about, you know I, we kind of have to break it down between different types of taxes. So I guess, you know, when we’re talking about, you know, state unemployment taxes there’s actually federal law in this area that created a standardized test applicable to all states to determine, you know, which should receive unemployment, insurance, taxes, and, you know, those associated wage reports. You know, the what essentially here when it comes to unemployment these wage and tax reports and, and taxes are going to go to just one state, even if the employee splits their time between two or more states. So the, the test here is really a higher hierarchy. There, there’s a first question, if you get an answer there that ends it, and, you know, you keep going down until you get an answer.

So you know, the first question is, you know, whether the services provided by this employee are localized within a certain state and if there are services outside of that state, are they just, you know, incidental to those to those other services? If this gives you your answer as to, you know, the, which state that is where you know, the services are localized, the, the inquiry ends there with respect to unemployment taxes but if the service is not really localized in just one state then we go down to, you know, the next three factors, which the first one that, that we’d ask is, you know, where’s the, the base of operations? If that doesn’t give us our answer, then we’re talking about, you know, the place from which the services are directed or controlled. And if that doesn’t give us our answer, then it’s simply the employee’s state of residence.

 So again, that’s gonna be the test that you look at for unemployment, insurance, taxes, and reports. No matter what, what state you’re in, it’s federal, federally mandated, and it’s standardized. Then, then we get into other types of taxes, like such as, you know, withholding, you know, state and local payroll taxes. You know, I, I’m sure you know sure is probably know well equipped to you know answer questions on this. But you know, I’ll, I’ll, I’ll give it my my, my best shot and, and give some overview. But you know, certainly employees who are telecommuting in different states can create a what we call a nexus in, in a different state which would then potentially obligate the the employer that will say resides in another state to withhold state and payroll taxes in, in that new state.

 So there are many states that have said, I, I think there’re actually you know, 36 or maybe even 37 states that have said that having just one employee telecommuting from that state will create a sufficient nexus between the employer and that state. And that may be, you know, again that, that might be for payroll taxes, but that could be for a whole other, you know, set of issues such as exposing the company to you know, sales tax, you know, corporate, corporate income tax, franchise taxes in those other states where, you know, that one employee can give them a nexus to

VANNOY:

Yeah. I’ll, I’ll toot our horn for two seconds. That this is a strength for us, Brian, that a lot of times one of the very common reasons customers come to Asure is because they’ve outgrown their small business payroll platform in multi-state taxation is one of the top reasons that that those, some of those other platforms can’t handle. So and, and I love that you’re going to, to beyond just, this is beyond just state employee income tax. This is beyond state employer payroll tax, right? There are, there are franchising filings. There are this nexus which might require you to pay state sales tax that could be as much or more than you actually pay the employee in some cases, depending on your, on your customer makeup and the, and the taxable revenue of, of, of that mix. So really, really, really big potential unforeseen consequences of not getting the tax thing right. Any anything else you’d want to add before we wrap?

SHENKER:

Yeah, no, absolutely. And that’s why I, I mean, you know, this is something that, you know, again, right? Your, your payroll, your local payroll company, that, that just operates in one state, likely unequipped to, to handle this because, you know, every state has their own provisions for handling that, you know, tax nexus you know, whether it’s for remote employees or otherwise. And so, right. You know, having someone that understands the, you know, what those rules are, the implications. And again, right, this could even go so far as now you now your company needs to register to do business in another state. You know, there’s, there’s a lot of stuff going on here that, you know, even an employer just researching this on their own is likely going to, you know, leave some you know, some, some holes some gaps in, in compliance. So real important to get guidance on this area.

VANNOY:

Yeah. All right. I’m, I’m, I’m gonna close this there. So thank everybody for joining. This is exactly what Asure does. So clearly we are a payroll processing, tax filing company, but also provide HR services. So most small and mid-sized companies can’t afford the 90, 110, $115,000 SHRM certified HR professional that knows all of this stuff, just like Brian knows off the top of his head to keep you in compliance. And so most entrepreneurs are white knuckling it. As the HR legislation gets more and more complex as the tax laws in ju changing jurisdictions become more and more complex, it’s almost impossible to keep up with. So Asure provides HR services compliance as a service on a fractional basis. So, whether you want just help producing the handbooks that we’ve discussed in today’s call to make sure that you have compliant policies and support your managers, or you want more proactive strategic help for your managers in developing a culture in recruiting and developing and retaining talent, or you need HR support for your entire team, we, we can help you at whatever level that that your business needs.

Brian, you wanna just take 20 seconds here and talk about Jackson Lewis and how you guys help customers?

SHENKER:

Yeah, absolutely. So again, you know, Jackson Lewis, we’re an employ labor employment management side firm. We represent companies. And look, I think just like as Asure you know, Jackson Lewis has a, you know, a national footprint, right? We have offices 60 offices throughout the us. So with issues like this you know, issues in various jurisdictions, you know, we’re, we’re certainly, you know, well equipped equipped to assist employers just like Asure,

VANNOY:

Right? Well, Brian, as as always enjoy our conversations and to everyone else, if there’s any way we can help with HR compliance as a service, or software and services around payroll, tax filing, human resources, time and tenants to track all these wage and wage and hour issues let us know and we, we’d love to help. Until next week, Brian, thanks for our conversation and thanks to everyone for joining us today.

SHENKER:

Thanks again.