Managing a California Remote Work Policy: Determining Which Laws Apply

Initially driven by the COVID-19 pandemic, more than two years after the start of the first lockdown, remote work arrangements remain prevalent in California. According to one nonpartisan think tank, 22 percent of Californians work remotely and 15 percent have a mix of working remotely and working outside the home. Given these statistics, an important consideration for California employers may be ensuring that their companies comply with state and local wage and hour laws that may apply to remote workers.

Generally, remote employees are subject to the employment laws of the state and locality where they are physically present and working. If an employer permits remote work outside the locality or state of operations, the employer may want to consider taking steps to ensure compliance with those state and local laws.

Within California, there are more than thirty-five local minimum wage ordinances. While the rules of applicability vary among the local ordinances, some require that remote employees working and residing in a locality be paid the local minimum wage. For example, if an employee’s dedicated company office is in Fresno, which does not have a unique minimum wage ordinance, and the employee moves to Hayward, which has a higher minimum wage for large businesses of $15.56 per hour, where the employee will work remotely, that higher minimum wage may apply to the time worked in Hayward. The City of Hayward’s ordinance requires that the employer pay the city’s higher minimum wage to an employee who works at least two hours in a calendar week within the geographic boundaries of Hayward. California employers that fail to record and comply with the local minimum wage ordinances applicable to their remote employees risk local and state agency enforcement actions and charges for wage shortfalls, interest, and liquidated damages.

If remote employees live and work outside the state, California employers may consider taking steps to ensure compliance with the laws that apply where their remote employees reside and work. For example, meal and rest break laws vary considerably among the states. Most California wage orders require a half hour of duty-free meal period time that must start within the first five hours of work. However, Kentucky law provides that a half-hour meal period must be provided between the third and fifth hours of work. If an employee’s company office is in San Francisco, but the employee has moved to Kentucky to work remotely, then Kentucky’s meal period laws may apply. If that employee’s manager is in California, the manager may need to note the three-hour time difference and plan not to schedule meetings or conference calls that may prevent the employee from taking his or her meal period opportunity as required under Kentucky law.

In addition to variations in their minimum wage and meal and rest break laws, states have varying overtime pay requirements. Alaska, California, and Nevada have daily overtime pay requirements. Kentucky does not. So, unless a California company decides to follow California’s daily overtime rules for its employees not working or residing in California, the company’s payroll department may need to modify its payroll system to exclude daily overtime pay for that remote employee in Kentucky.

Different posting requirements may also apply to remote employees. Many California localities require employers to provide employees with postings or bulletins about local minimum wage ordinances. California also requires wage- and hour-related postings, including the applicable wage order, the payday notice that specifies regular paydays and the time and place of payment, and Labor Code section 2810.5’s wage and employment notice to employees, which provides the rates of pay, including overtime, as well as whether pay is by the hour, shift, day, week, salary, or other manner. California employers may want to consider whether the laws of the states and localities of their remote workers require similar postings and bulletins.

Another layer of complexity may exist if the remote employee resides and works in one state or locality but reports to work at a company location in another state or locality. For example, consider a scenario in which a Palo Alto employer permits an employee to live and work in Reno, Nevada, three days per week, but it requires the employee to report to work at the company office in Palo Alto two days per week. The employer may need to consider compliance with the wage and hour laws of Nevada, California, and Palo Alto on any particular workday.

As such, before adopting a permanent remote work policy, a California employer may want to consider taking the following actions:

• Determining whether the administrative burdens of ensuring compliance with a myriad of state and local laws warrants a company policy that prohibits remote work away from the state and locality of the company’s workspace.
• Designating a management team to lead the company’s compliance efforts for the various laws that may apply to remote workers.
• Prohibiting employees from beginning remote work in any location different from a prior-approved home address.
• Requiring employees to request, in writing, and receive approval to move to a different state or city before beginning any remote work in that different location.
• Regularly reminding employees that the company has the ultimate discretion in its sole business judgment to make decisions approving or denying any requests by employees to move to different states or cities for remote work.
• Designating a gatekeeper or group of people to balance the preferences of employees who want to work remotely in different states and localities against the company’s policies to ensure compliance with the state and local laws that apply. The company may want to ensure that these gatekeepers are well trained to avoid miscommunications and inconsistencies, ensure that unauthorized company employees do not make decisions about remote work purportedly on behalf of the company, and ensure that company decisions in response to remote work requests are documented.

Failing to comply with the applicable state and local laws requiring minimum and overtime wages, meal periods and rest breaks, and postings for remote employees may subject companies to agency enforcement actions as well as lawsuits for unpaid wages, penalties, and attorneys’ fees. Because of these risks, California employers may want to carefully evaluate whether to permit employees to work remotely in states or localities other than the locations of their dedicated company workplaces.

A version of this article was previously published by Law360.