Remote Workforce Legal & Tax Issues for Health Care Employers Introduction

Amy Blaisdell Rachel Hirshberg [email protected] [email protected] The Virtual Workplace Strategy Considerations

1. Is your goal to make as many jobs remote as possible?

2. Is your goal to make remote work an optional benefit?

3. Is your goal to offer remote work only where it will result in cost savings to the organization? Employment Issues  Wage and Hour Laws  Discrimination/Harassment Laws  State Leave Laws  ADA Considerations  Workers’ Compensation  OSHA Compliance  Unemployment Insurance Corporate Issues

 State Taxation  Corporate registration Wage and Hour

1. Minimum wage and overtime requirements 2. Exemptions from overtime 3. Wage payment statutes 4. Business expense statutes 5. Working off the clock & auditing compliance Minimum Wage • Federal minimum wage is $7.25 per hour (and has been since 2009). • States: – 29 states have higher minimum wage than federal law and require their own postings. Overtime Calculation • Federal Example • Salary divided by the number of hours worked = regular rate, regular rate x .5 x hours over 40 = overtime due • Employee receives salary of $1000/week and works 50 hours. Employee’s regular rate is $20.00 ($1000/50 = $20). Employee is entitled to $10 for each of the 10 hours of overtime or total of $100 additional. Overtime Calculation

• Example used by some states: If the same employee worked in Illinois, you would calculate overtime this way. $1000 divided by 40 hours per week = regular rate ($1000/40 hrs = $25)

1.5x regular rate x 10 hours = overtime of $250 for the week Daily Overtime

Alaska, California, Nevada, Puerto Colorado (daily Rico, Virgin overtime for work Islands (daily in excess of 12 overtime for work Some states hours per day) in excess of 8 have their own hours per day) statutes requiring daily Oregon (daily California also overtime for work overtime requires double in excess of 10 time over 12 hours in certain hours in a day. industries) Overtime for Consecutive days

Examples: • California – Requires overtime at 2x the Some states regular rate on the 7th workday day in a require overtime workweek. for hours worked on consecutive • Kentucky – Requires overtime at 1.5x days. the regular rate for time worked on 7th workday in a workweek (with a few exceptions). Exempt Status Differences

• Exempt status is 2-part test: – Minimum Guaranteed Salary and – Duties • Some states require a higher minimum guaranteed salary in order to be exempt. • Some states require a more elaborate duties test than federal law. • Some states provide different exemptions Wage Payment Laws

How soon after an employee works his or her wages must be paid?

What deductions from wages are permitted?

How soon after an employee is fired or quits must final wages be paid?

What are the penalties for failure to comply?

When can you be held personally liable? State Business Expense Laws

Business California – Cal. Labor Code §2802 expense D.C. (Washington) – D.C. Law § 29-1123 statutes Illinois – 820 ILCS 115/9.5 / laws Iowa – Iowa Code §91A.3(6) Montana – Mont. Code Ann. §39-2-701 New Jersey – Case law New Hampshire – NH Rev. Stat. Ann. §275:57 North Dakota – N.D. Codified Laws §34-02-01 South Dakota - S. D. Codified Laws §60-2-1 The Role of the Expense Policy

Illinois law • Employee is not entitled to reimbursement if: – the employer has an established written expense reimbursement policy and – the employee failed to comply with the written expense reimbursement policy.

• Also if the written expense reimbursement policy sets specifications for necessary expenditures, the employer is not liable for any expenditure that exceeds the guidelines. Working off the Clock

Log On and Off Times

Calls and texts

Emails

Electronic Uploads

Remote connections Tax Nexus Considerations

• Employees working remotely from their homes during the pandemic can lead to: – Tax impacts – Corporate registration requirements – Corporate filing requirements

• Impacts vary from state to state What is Nexus?

• The threshold contact that must exist between a taxpayer and a state before the state has jurisdiction to tax the taxpayer

3 Types: • Physical Presence Standard: Presence of employees or property within the state’s borders (6 states) • Economic Nexus Standard: making sales into a state (32 states) • Factor Presence Nexus Standard: taxpayers exceeding a specified threshold of physical or economic presence in the state (13 states) 2 Types of Nexus

State Corporate Business Income Tax Nexus Registration Nexus

“Doing Business” “Transacting Rule Business” Rule Secretary of State

Department What are the of Revenue corporate registration Department requirements? of Labor

State tax- exemption application Nexus & Employment Tax Withholding General Rule – The state where an employee lives generally has primary taxation authority over the employee’s income. – However, for state taxes, withholding from employment income is typically based on where employees actually work (i.e., the employer’s location) – If an employee lives in one state but principally works in another, the employee is generally subject to withholding rules of the employer’s state. Telecommuting & Employment Taxes 2 Tests – Physical Presence Test (majority approach) • Employee income is allocated to t he employee’s location at the time that the services are performed – Convenience/Necessity Test (minority approach) • Employee income is allocated to the employer’s physical location, unless the employee shows that all work is performed away from employers location due to employer necessity, and not employee convenience. • NY, NJ, NE, DE & PA Telecommuting & Nexus During COVID • Does COVID-related telecommuting create nexus? • It depends • Guidance from the states varies widely • Some states provide that COVID-related telecommuting will not create nexus, but only for the period of the state’s emergency/work from home order • Other states provide much broader guidance • In the absence of clear guidance, businesses should assume an unchanged nexus standard Employer’s Home State Nexus Employee Income Tax

• Alabama • Arkansas • Connecticut • Delaware • Georgia • Maine • Massachusetts • Mississippi • Nebraska • New Jersey • New York • Ohio • Pennsylvania • Rhode Island • South Carolina Employee’s Home State Nexus Employee Income Tax

• California • Colorado • Illinois* • Iowa • Kentucky • Maryland • Minnesota • Missouri • Oregon • Vermont No State Income Tax Employee Income Tax

• Alaska • Florida • Nevada • New Hampshire • South Dakota • Tennessee • Texas • Washington • Wyoming States waiving penalties and interest

• Illinois • Kansas • Louisiana • Mississippi • New Mexico • North Carolina (penalties only) Corporate Income Tax Nexus

Nexus Waived (20 + D.C.): • Alabama • Louisiana • North Dakota • Arizona • Maine • Oklahoma • California • Maryland • Oregon • D.C. • Massachusetts • Pennsylvania • Georgia • Minnesota • Rhode Island • Indiana • Mississippi • South Carolina • Iowa • New Jersey • Wisconsin

Nexus NOT Waived (9): • Alaska • Michigan • Ohio • Colorado • Montana • Utah • Idaho • Nebraska • Virginia

Case by Case Analysis: South Dakota

No Guidance: All other states What are the taxes that need to be paid and returns filed?

• Income tax withholding and payment – 7 states have no personal income tax (AK, FL, NV, SD, TX, WA, WY) – 2 states do not tax wages (NH and TN – tax interest and dividends only) – 41 states have personal income tax – Reciprocity Agreements • Employment taxes (Social Security and Medicare) • Unemployment insurance contributions • Corporate income tax and Unrelated Business Income Tax If Nexus Does Exist

What issues do employers need to think about? Accountants will need to be consulted State employment taxes Local employment taxes Unemployment taxes State registration and corporate filings Discrimination and Harassment Considerations

• State discrimination prohibitions • Training requirements • Posting requirements • ADA accommodation requests State Discrimination Laws & City Ordinances

Some human rights Protections of states often statutes (IL) apply if you expand beyond federal law have 1 employee working (sexual orientation, arrest in the state. records). Training Requirements

•California States •Connecticut requiring •Delaware sexual •Illinois harassment training: •Maine •New York and NYC Posting Requirements

Two Issues:

•States have different requirements about what information must be provided to employees. •How to provide required postings for remote workers. ADA Considerations

Pre-pandemic: Employers won 70% of rulings on telework as an accommodation for disability

EEOC’s current position: Remote work likely to be a routine accommodation State FML and Sick Leave Considerations • Many states require paid family leave for certain conditions. • Other state laws cover conditions or employees not covered by FMLA. • Many states also have paid sick leave laws. • Some have a threshold number of employees that must be hit like the FMLA, others only require 1 employee in the state. States with paid family leave laws

California (state and local) Colorado Connecticut District of Columbia Massachusetts New Jersey (also has COVID leave) New York (also covers COVID) Oregon Rhode Island Washington State paid sick leave laws

• Arizona • Maine • Oregon • California • Maryland • Pennsylvania • Colorado • Massachusetts • Puerto Rico • Connecticut • Michigan • Rhode Island • District of • Minnesota • Texas Columbia • Nevada • Vermont • Georgia • New Jersey • Washington • Illinois • New Mexico • Louisiana • New York Workers’ Compensation

- Be sure you have workers compensation coverage for all states in which you have remote workers. - WC covers injuries if arise in course and scope of employment; describe activities that are work related. - Communicate expectations for maintaining healthy and safe workspaces. OSHA Considerations

A conflicting stance:

Says it will not conduct at Has also said that home workplace employers are inspections and will responsible for generally not hold maintaining safe employers liable for at worksites regardless of home safety issues. location. Unemployment Insurance

• Where should the claim be filed? • What regulations will apply? • Do I need to register as an employer in the states where I have remote workers? • What if I have an employee working in two states? Drafting Your Remote Work Policy • Define to whom the policy applies • Document employees’ roles and locations • Determine whether temporary or long term • Describe various approvals required by your Organization • Describe Compliance Obligations • Mandate Reporting • Describe Business Expense Reimbursement More Resources

For updates, visit: • Greensfelder COVID-19 Resources page: https://www.greensfelder.com/ covid-19-resources.html

• SimplyHR Blog: https://www.greensfelder.com/ employment-and-labor-blog THANK YOU!

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Legal Disclaimer: This document is not intended to give legal advice. It is comprised of general information. Employers facing specific issues should seek the assistance of an attorney.