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The Hidden Costs of a Remote Workforce

The coronavirus pandemic has forced many employers to embrace the concept of remote work where they might not otherwise have done so before.  Many of those employers are now converts, abandoning or downsizing their brick-and-mortar office space in exchange for more remote workers.

The appeal is not surprising.  Remote work provides a means by which employers can attract and retain better talent from a larger talent pool across a wider geographic area in exchange for an offset in overhead expenses like office space and compensation.   However, to the extent that cost is a compelling factor in an employer’s decision to utilize remote workers, I caution those employers to think again, particularly if an employer is hiring remote workers who live and work outside the state where the employer principally conducts business.

One practical problem for an employer based in one state is that it can’t entirely prevent a remote worker from suing the employer in the state where the employee is working.  Most laws permit employees to file claims where the work is performed.  And, while an employer can try to limit where suits are filed by including a venue provision in a contract, there’s no guarantee the choice-of-venue provision will be enforced.  Being hauled into court outside the employer’s jurisdiction will add to the fees and costs of defending the suit, such as additional attorneys’ fees and costs of travel.

Similarly, choice-of-law clauses in contracts, which specify that the law of the state of the employer’s principal place of business will apply, may not always be enforced either.  This is especially true when remote workers are involved.  This means that employers have to understand the law in all the states where remote employees are working for them, even if just to confirm that a particular law will or will not apply to the employment relationship.

The best advice for employers looking to “save” with a remote workforce is to understand the law of each jurisdiction and conduct appropriate due diligence before hiring remote workers to work from those states.  Knowing if your business will be subject to the laws of another state will allow you to undertake a more meaningful cost-benefit analysis of a possible remote work arrangement.  Ultimately, employers may find that once they factor in costs like ensuring that their wage-and-hour and other human resources policies comply with the laws of multiple states that the perceived savings of a remote workforce is actually little or non-existent.

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