Remote or Home Workers -- Does the Service Contract Act Wage Rate Change?
I hear her voice in the mornin' hour, she calls me
The radio reminds me of my home far away
Drivin' down the road, I get a feelin'
That I should've been home yesterday, yesterday
Country roads, take me home
To the place I belong
West Virginia, mountain mama
Take me home, country roads
— By Bill Danoff / John Denver / Taffy Nivert Danoff
Clients and other practitioners periodically inquire as to whether they need to obtain a new Service Contract Act (“SCA”) wage determination (“WD” ) for a remote work site like the employee’s own home. This issue has been pushed to the forefront by the pandemic and the work at home movement. Of course, this issue of home workers has come up periodically even before the pandemic. My general advice has always been that if the home workplace or other locale is temporary in nature, the employer should just stay the course, treat the remote workers as temporarily engaged, and continue to pay the wage determination (“WD”) rate for the main work locale found in the contract. But if the employer decides to go to a permanent remote staffing plan, then you should request WDs for each locale where workers are engaged. And there are other state law labor issues to consider.
Unfortunately, there isn’t much in the way of guidance from the U.S. Department of labor (“DOL”) on this subject. Long ago, my friend Bill Gross, who was then the Assistant Administrator for the Wage and Hour Division (“WHD”), told me that if the workers were at a temporary site for just a few months, there was no need to get a new wage determination. But a conversation maybe 20 plus years ago is not a very strong precedent for doing the same today.
DOL missed a golden opportunity to clarify the situation with remote teleworkers in late 2020 when on December 29, 2020, it issued Field Assistance Bulletin No. 2020-7, which laid out some guidance for the electronic posting of notices required by the Fair Labor Standards Act (“FLSA”), SCA, the Family and Medical Leave Act (“FMLA”), and the Employee Polygraph Protection Act. While breaking little new ground, this guidance was precipitated by the increased frequency of remote working arrangements during the pandemic. The DOL Bureau of Labor Statistics had reported that, in October 2020, 21.8% of employed persons teleworked because of the coronavirus, a number that had reached 35% of employed persons in the previous May 2020 period. See https://www.dol.gov/newsroom/releases/osha/osha20201215.
In terms of wage-hour issues, DOL’s WHD issued the following questions and answers regarding telework (https://www.dol.gov/agencies/whd/flsa/pandemic):
“Q. May an employer encourage or require employees to telework (i.e., work from an alternative location such as home) as an infection control strategy?
Yes. An employer may encourage or require employees to telework as an infection-control or prevention strategy, including based on timely information from public health authorities about pandemics, public health emergencies, or other similar conditions. Telework also may be a reasonable accommodation.
Of course, employers must not single out employees either to telework or to continue reporting to the workplace on a basis prohibited by any of the EEO laws. (See the U.S. Equal Employment Opportunity Commission’s publication, Work at Home/Telework as a Reasonable Accommodation, for additional information.)
Q. Do employers have to pay employees their same hourly rate or salary if they work at home?
If telework is being provided as a reasonable accommodation for a qualified individual with a disability, or if required by a union or employment contract, then you must pay the same hourly rate or salary.
If this is not the case and you do not have a union contract or other employment contracts, under the FLSA employers generally have to pay employees only for the hours they actually work, whether at home or at the employer’s office. However, the FLSA requires employers to pay non-exempt workers at least the minimum wage for all hours worked, and at least time and one half the regular rate of pay for hours worked in excess of 40 in a workweek. Salaried exempt employees generally must receive their full salary in any week in which they perform any work, subject to certain very limited exceptions.
If the Service Contract Act (SCA) or state or local laws regulating the payment of wages also apply, nothing in the FLSA or its regulations or interpretations overrides or nullifies any higher standards provided by such other laws or authority. . . .
Q. In the event an organization bars employees from working from their current place of business and requires them to work at home, will employers have to pay those employees who are unable to work from home?
Under the FLSA, employers generally only have to pay employees for the hours they actually work, whether at home or at the employer’s office. However, employers must pay at least the minimum wage for all hours worked, and at least time and one half the regular rate of pay for hours worked in excess of 40 in a workweek. Salaried exempt employees must receive their full salary in any week in which they perform any work, subject to certain very limited exceptions. . . .
When not all employees can work from home, we encourage you to consider additional options to promote social distancing, such as staggered work shifts.
Q. Are businesses and other employers required to cover any additional costs that employees may incur if they work from home (internet access, computer, additional phone line, increased use of electricity, etc.)?
Employers may not require employees who are covered by the FLSA to pay or reimburse the employer for such items that are business expenses of the employer if doing so reduces the employee's earnings below the required minimum wage or overtime compensation. . . .
Employers may not require employees to pay or reimburse the employer for such items if telework is being provided to a qualified individual with a disability as a reasonable accommodation under the Americans with Disabilities Act. (See the U.S. Equal Employment Opportunity Commission’s publication, Work at Home/Telework as a Reasonable Accommodation, for additional information.)
Q. Do OSHA’s regulations and standards apply to the home office? Are there any other Federal laws employers need to worry about if employees work from home?
The Department of Labor’s Occupational Safety and Health Administration (OSHA) does not have any regulations regarding telework in home offices…. “
As you can see DOL failed to address the SCA wage rate issue posed by remote workers. This was probably on purpose, since it preserved the flexibility to require that employers get new WDs in circumstances where DOL thinks it would be appropriate (and probably only when those wages are higher than the existing WD).
Nonetheless, I have given consistent advice to clients to just to stay the course and continue to use their existing contractual SCA wage determinations for the business offices/work sites for workers engaged to work remotely during the pandemic, regardless of actual work location. I am still relying on what DOL told me long ago — a temporary (i.e., short-term) alternate work site isn’t significant enough to warrant a new WD. I have told clients that if the pandemic induced office closures and work at home option are still “temporary” (i.e., uncertain) in duration, meaning that the employer’s intention is to call folks back to the office come widespread immunity and decrease in infection rates, then the home office wage determination still likely applies. I am not letting the indefinite but ever lengthening duration of this pandemic change my opinion, but it is a complicating factor. I am focused on the employer’s intent – and if the intent is just indefinite in duration to allow homework, then my view is that the locale for the wage determination can remain the business office/work site.
But if you are one of those employers who has gone to permanent remote work staffing arrangements, and if you are performing SCA covered contracts, it is probably time for you to bite the bullet and request wage determinations for each of the home office of nonexempt employees who are laboring on the contract. Many contracts contain the FAR Place of Performance Unknown clause, which provides “That the contracting officer will request wage determinations for additional possible places of performance if asked to do so in writing.” See FAR 22.1009-4 and 52-222-49. That clause allows a new WD for a new locale for the work to be added after award with no equitable adjustment of the price. The bad news is that if the worker has migrated to a higher wage locale, that will eat into the profit of the fixed-priced contractor. But if the worker has migrated to a lower wage locale, the reverse is true – the lower wage may be paid and no downward equitable adjustment is due the government, at least on fixed-price contracts. Of course, on cost reimbursement contract, the contractor just passes on his labor costs.
At least as I write this blog, it is my understanding that DOL has largely deferred any investigations of remote worker wage issues under the SCA. At least I haven’t seen any aggressive enforcement. I have heard of one-off investigations from another lawyer, but the fact is that if this was official policy it would come up now in many SCA investigations, and it hasn’t been the case. Probably the reason is that the ability to work remotely is considered employee friendly, and if DOL cracks down on the practice and requires higher wages be paid the remote workers, the predictable result is that the employer will call the workers back to the office and end the remote worker flexibility to work from home. DOL doesn’t want to pull that string.