Homeward Bound

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.

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This article was originally published in the January 1999 print edition of Entrepreneur with the headline: Homeward Bound.

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