From the January 1999 issue of Entrepreneur

One of your best employees moves to her dream house on the lake but isn't excited about commuting downtown to your office. Is it possible to have her work from home? And while you're at it, could this arrangement work for your out-of-state tech specialist? How about those sales team members who are gone so much that their desks are a waste of space?

A growing number of companies are turning to telecommuting in hopes of retaining key employees, increasing productivity and improving efficiency. According to the Kensington Technology Group, a San Mateo, California, manufacturer of computer accessories, 8.2 million Americans telecommute regularly. And in a survey of employers released last April, Kensington found that employees report being 30 percent more productive when working from home.

Whether experimenting with a single telecommuter or launching an entire program, it's important to plan for liability issues. Many companies begin with a telecommuting agreement that addresses office arrangements, hours, responsibilities and who pays for what. This agreement should also address questions of security for company property and proprietary information; safety; and property, casualty, liability, and workers' compensation insurance. The arrangements you set up can make the difference between being liable for workers' comp on injuries in a given room during stated hours and being held responsible for anything that happens to an employee throughout his or her house 24 hours a day.


Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

Liability Concerns

No matter the size of their companies, employers interested in telecommuting need to understand and address the legal implications. Most legal issues involved with telecommuting have to do with liability and insurance. One preliminary issue, though, concerns employee status. It's tempting to reclassify employees working from home as independent contractors in order to avoid workers' comp liability and avoid having to pay benefits or comply with employment laws. "This is a huge legal minefield," warns Gil Gordon, founder and president of Gil Gordon Associates, a Monmouth Junction, New Jersey, business consulting firm that specializes in telemarketing. "A change in work location alone isn't enough to justify the independent contractor designation, and there are serious financial liabilities [involved] when this status is used incorrectly."

That said, consider the added risks of employing telecommuters:

*Liability. Your standard business insurance policy covers normal business risks on your property, but does it extend to the homes of employees? Suppose a client visiting a homebased sales rep falls and severely injures his or her back. What if the telecommuter begins sexually harassing co-workers via e-mail? "These are the same questions [you have to address] in the workplace, but with a new twist," says employment attorney Andrew Reidy of McKenna & Cuneo LLP in Washington, DC. Reidy notes that anything employees might do wrong at the office can also occur at home. For example, telecommuters might damage a client's company by releasing confidential information, misrepresenting its products, or committing libel or slander.

"The question is whether they're doing these activities on their own time or [during working hours]," Reidy says. "That's a gray area."

  • Property. Many businesses set telecommuters up with a computer, fax machine and other necessities. But who's responsible if they're damaged or stolen? Have telecommuters check their homeowners' policies to determine whether company property kept at home is covered. If it isn't, take out additional coverage on your company's business policy.
  • Security. In your telecommuting agreement, require the employee to keep any company materials in the designated work area and not take confidential materials home without your or a manager's approval. Consider restricting the computer use to business purposes only so children don't breach company security while downloading Internet games.
  • Workers' compensation. "Telecommuting introduces new risks to [businesses'] responsibility for employee injury," says Robert Persico, vice president for workers' compensation product management at CIGNA Property & Casualty, a risk-management service provider in Philadelphia. For instance, an employee who hurts his or her back in a break room fall would be covered by workers' comp. But what if a homebased employee falls while making lunch? Is the company responsible if they get in an accident while driving to the post office to mail a work-related package? The answers depend on the terms of the telecommuting agreement.

Then there's the fact that according to New York Internet research firm Cyber Dialogue, 49 percent of telecommuters have children under 18, some of whom might be at home during work hours. "If condoned by the employer, we're now talking about the presence of children in the workplace," Persico says. "This is totally uncharted territory in workers' compensation."

Persico advises employers to establish official hours for telecommuters, with a set lunch break. Also consider having them inform their supervisor before handling personal errands, just as they would in the office. Otherwise, your company could be liable 24 hours a day. Don't forget to check the established work area for safety and ergonomics so people don't trip over electrical cords or develop carpal tunnel syndrome while working from a tableside armchair.

In addition to addressing these issues in your agreement, be sure to select responsible telecommuters. Choose people who've demonstrated company loyalty so they're not tempted to defraud your business from the privacy of their home.

Next Step

For more information on establishing a telecommuting program, visit http://www.gilgordon.com This is the Web site for Gil Gordon Associates, a business consulting firm that specializes in telecommuting. The site includes numerous articles and a sample telecommuting agreement that may be downloaded free of charge, plus links to other telecommuting resources.

Contact Sources

CIGNA Property & Casualty , (215) 761-2665

McKenna & Cuneo LLP , (202) 496-7741, andrew_reidy@mckennacuneo.com