Telecommuting: Overview of Challenges Facing Federal Agencies	 
(06-SEP-01, GAO-01-1116T).					 
								 
Telecommuting refers to work that is done at an employee's home  
or at a job site other than a traditional business office.	 
Perhaps the biggest challenge to establishing and expanding	 
telecommuting programs in both the public and private sectors is 
management's concerns about having the types of positions and	 
employees suitable for telecommuting, protecting proprietary and 
sensitive data, and establishing cost-effective telecommuting	 
programs. Some federal and state laws and regulations, including 
those governing taxes, workplace safety, workforce recordkeeping,
and liability for home workplace injuries, are also potential	 
obstacles to telecommuting. Overall, the application of state tax
laws to telecommuting arrangements, as well as other laws and	 
regulations enacted before the transition to a more technological
and information based economy, is evolving and their ultimate	 
impact remains unclear. 					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-1116T					        
    ACCNO:   A01726						        
  TITLE:     Telecommuting: Overview of Challenges Facing Federal     
             Agencies                                                         
     DATE:   09/06/2001 
  SUBJECT:   Computer security					 
	     Cost effectiveness analysis			 
	     Information systems				 
	     Legislation					 
	     Personnel management				 
	     Telecommuting					 

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GAO-01-1116T
     
TELECOMMUTING Overview of Challenges Facing Federal Agencies Statement of
Robert E. Robertson Director, Education, Workforce, and Income Security
Issues

United States General Accounting Office

GAO Testimony Before the Subcommittee on Technology and Procurement

Policy, Committee on Government Reform, House of Representatives

For Release on Delivery Expected at 9: 30 a. m. EDT Thursday, September 6,
2001

GAO/ 01- 1116T

1 Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss telecommuting and our recent work
in this area. Telecommuting refers to work that is performed at an
employee?s home or at a work location other than a traditional business
office or facility. Over the past decade, telecommuting has gained
widespread attention as a business approach that may offer a variety of
potential benefits to employers, employees, and society.

Last spring, the House Majority Leader asked us to identify potential
regulatory, tax, and liability barriers that concern private sector
employers considering telecommuting programs for their employees. In July,
we briefed the Majority Leader and several other Members of Congress on the
results of our research. 1 As you requested, our statement today is based
largely on this work and includes our observations on telecommuting?s
applicability to the public sector.

In summary, perhaps the biggest challenge to establishing and expanding
telecommuting programs in both the private and public sectors is
management's concerns regarding the effect of telecommuting on the operation
of their particular organization. These concerns relate to assessing whether
the employer has the types of positions and employees suitable for
telecommuting; protecting proprietary and sensitive data; and establishing
cost- effective telecommuting programs. As we have said in the past, and as
the Office of Personnel Management (OPM) has recently reported, a
significant factor in management's decision to establish or expand
telecommuting practices is the view that their organization's operation will
fundamentally benefit from such practices.

Apart from the above management concerns, certain federal and state laws and
regulations, including those governing taxes, workplace safety, workforce
recordkeeping, and liability for home workplace injuries can also act as
potential barriers to telecommuting for both the public and private sectors.
For example, our work shows that the applicability of multiple state tax
laws to telecommuting arrangements may be a key emerging issue. Here, the
basic question for the private sector involves possible increased state tax
liabilities for the employer and employee when an employee telecommutes from
a state other than the one in which the employer is located. Similarly, from
the public sector perspective, interstate telecommuting arrangements could
open up the possibility of some states ?double taxing? the income of federal
employee telecommuters. Overall, the application of state tax laws to
telecommuting arrangements, as well as other laws and regulations enacted
before the transition to a more technological and information based economy,
is evolving and their ultimate impact remains somewhat unclear at this time.

Background

Telecommuting in the public sector began about 10 years ago as a federal
pilot project. Its goals were to save energy, improve air quality, reduce
congestion and stress on our highways, and help employees better balance the
competing demands of work and family

1 Telecommuting: Overview of Potential Barriers Facing Employers (GAO- 01-
926, July 11, 2001).

2 obligations. Typically, formal telecommuting arrangements establish
specific times,

generally ranging from 1 to 5 days per week, in which employees work at
their homes or other remote locations. However, employers may also allow
telecommuting on an informal basis, where arrangements are more episodic,
shorter term, and designed to meet special employer or employee needs.

Although estimates vary depending on the definition of telecommuting that is
used, recent data indicate that the number of employers and employees
involved in telecommuting arrangements has grown over the past 10 years. In
1992, the U. S. Department of Transportation estimated that there were 2
million telecommuters (1.6 percent of the labor force) working from their
homes 1 or 2 days per week. Last year, a private association that promotes
the concept of telecommuting, estimated that 9.3 million employees
telecommuted at least 1 day per week and 16.5 million telecommuted at least
1 day per month. These estimates show that out of 138 million wage and
salary workers in the United States, about 7 to 12 percent telecommute
periodically. For the federal workforce, a recent OPM survey of 97 federal
agencies showed that 45,298 workers or 2.6 percent of their total workforce,
telecommuted at least 52 days per year. 2

Management Concerns Include Suitability, Security, and Costs of
Telecommuting

In our examination of barriers to telecommuting in the private sector, we
found that decisions on whether an organization ultimately adopted
telecommuting programs or expanded them over time was heavily dependent on
the resolution of three concerns: identifying the positions and employees
suitable for telecommuting; protecting data; and controlling the costs
associated with telecommuting. The concerns held by private sector
management were similar to those of managers in federal agencies.

Of those management concerns that pose a potential barrier to telecommuting,
the first involved identifying those positions and employees best suited for
telecommuting. Our analysis and interviews with employers, proponents of
telecommuting, and other experts, showed that telecommuting is not a viable
option for every position or employee. For example, site- specific positions
involving manufacturing, warehousing, or face- to- face interaction with
customers are usually not suitable for telecommuting. Conversely, positions
involving information handling and professional knowledge- related tasks,
such as administrative activities and report writing, can often be performed
from a remote location. Beyond having jobs suitable for telecommuting, an
organization must also have employees that are able to perform in a
telecommuting environment. The current literature showed that telecommuting
is best suited for high- performing and selfmotivated employees with a
proven record of working independently and with limited supervision. If an
organization determines that it lacks the positions or employees that are
suitable for telecommuting, it may choose not to establish or expand such
arrangements.

2 OPM, Interim Report on Telework in the Federal Government (June 2001).

3 A second management concern pertained to an employer?s ability to protect
proprietary

and sensitive data and monitor employee access to such data without invading
individual privacy rights. Our analysis of current literature and studies on
this subject, as well as interviews with employers, showed that security
concerns generally centered on potential vulnerabilities associated with
providing employees with remote access to internal record systems. Access
involving the Internet and employers? ability to prevent unauthorized
copying, manipulation, and modification of company information was of
particular concern. We also identified uncertainties among employers
regarding the extent to which electronic monitoring of employee activities
is permissible or considered an infringement on individual privacy. Left
unresolved, these data security issues could potentially cause employers to
choose not to adopt telecommuting arrangements.

The third management concern involved assessing the costs associated with
starting a telecommuting program and its potential impact on productivity
and profits. Telecommuting programs often involve some employer investment
related to upgrading systems and software to permit remote access, providing
employees with hardware and software to work from their homes, or incurring
additional costs to rent space and equipment available at telecenters. These
costs may adversely affect profits if productivity does not increase or at
least remain the same.

The potential barriers to private sector telecommuting discussed today are
similar in many ways to those confronting telecommuting in the federal
government, as noted in prior GAO work and OPM?s June 2001 report. In 1997,
we reported on the implementation of telecommuting (then referred to as
flexiplace) in federal agencies. 3 Among the topics discussed in our report
were barriers affecting the growth of telecommuting programs. The most
frequently cited obstacle to increased use of telecommuting related to
management concerns. Interviews with agency and union officials disclosed
that managers and supervisors were hesitant to pursue telecommuting
arrangements because of fears that employee productivity would diminish if
they worked at home. Other related concerns cited in our report included

management views that agencies did not have sufficient numbers of suitable
employees and positions for telecommuting arrangements; concerns regarding
the treatment of sensitive data, especially the additional cost of ensuring
the security of data accessed from remote locations; and lack of resources
necessary to provide additional computers, modems, and phone lines for the
homes of telecommuters.

OPM?s June 2001 report on federal agency efforts to establish telecommuting
policies identified similar potential barriers. OPM reported that its survey
of 97 federal agencies showed that management reluctance was the most
frequently cited barrier to increased telecommuting among federal employees.
Basic concerns centered on the ability to manage workers at remote sites and
the associated loss of control over telecommuters. OPM also noted that
security concerns about allowing remote access to sensitive and

3 Federal Workforce: Agencies? Policies and Views on Flexiplace in the
Federal Government (GAO/ GGD- 97- 116, July 3, 1997).

4 classified data remained high, as did questions about funding the purchase
of additional

computer hardware and software for equipment that would be deployed at
telecommuters? homes.

Current Laws and Regulations Have Implications for Federal Telecommuting
Programs

While management concerns are often cited as a potential barrier to private
and federal telecommuting programs, our work identified a number of laws and
regulations that could also impact these arrangements. These laws and
regulations include those covering taxes, workplace safety, recordkeeping,
and liability for injuries. Because several of these laws and regulations
predate the shift toward a more technological and information- based economy
in which telecommuting has developed, their application to telecommuting is
still evolving and unclear at this time.

Of those laws and regulations that could impact an employer?s provisions of
telecommuting arrangements, increased state tax liability for employers and
employees involved in interstate telecommuting arrangements may have the
greatest potential to undermine further growth. At issue for employers is
whether having telecommuters work from their residence in a state where a
company has no other physical presence can expose the company to additional
tax liabilities and burdens. For the employees, the tax issue has taken on
increasing importance, most notably in the Northeastern United States, where
a number of states have tax rules that allow them to deem all wages of
nonresident telecommuters working for companies located in their states as
taxable whenever working at home is for the employee?s convenience rather
than an employer necessity. At the same time, the state where the
telecommuter resides and works via telecommuting may be taxing some of the
same income because it was earned while they worked at home, which in effect
?double taxes? that income.

Our discussions and other information we received during our review, brought
to our attention at least 13 tax cases related to telecommuting and taxing
issues. One such case showing the long reach of a tax authority involves New
York State?s taxing the wages of a telecommuting Tennessee resident who was
employed by a company located in New York, but worked 75 percent of the time
from home. 4 A number of telecommuting experts and employers we interviewed
believed that the uncertainties surrounding the application of individual
state tax laws to telecommuting situations was a significant emerging issue
that, if left unresolved, could ultimately impact the willingness of
employers and individuals (including federal employees) to participate in
telecommuting programs.

Beyond the issue of state taxation, our work identified a number of other
barriers to private- sector telecommuting programs that are also applicable
to federal agencies. First, in regard to workplace safety, one concern was
that employers would have to conduct potentially costly inspections of
workers' home offices. The federal Occupational Safety

4 N. Y. Division of Tax Appeals In the Matter of the Petition of Thomas L.
Huckaby, Docket No. 817284, Income Taxes, Feb. 8, 2001.

5 and Health Act requires private employers to provide a place of employment
that is free

from recognized, serious hazards. 5 A February 2000 OSHA policy directive
stated that it would not inspect home offices, hold employers liable for
their safety, or require employers to inspect these workplaces. Some
employers and telecommuting proponents, however, remained concerned that
this internal policy could be reversed in the future, exposing employers to
workplace safety violations and ultimately requiring them to complete costly
home office inspections. A number of employers told us they were attempting
to eliminate potential workplace safety issues by offering employees
guidance on home office safety and design or providing them with ergonomic
furniture. Other experts have suggested that a training program on safety be
part of an employer?s program. Under the Occupational Safety and Health Act,
federal agencies must also establish and maintain safety and health programs
consistent with OSHA standards. To the extent that they attempt to meet OSHA
safety standards for their telecommuters? home offices, the potential
financial and administrative costs of initiatives similar to those taken in
the private sector may serve as a barrier to implementation.

Second, federal wage and hour law and regulations may also pose a barrier to
telecommuting programs in both the private and public sectors. The Fair
Labor Standards Act (FLSA) requires, among other things, that employers
maintain sufficient records to document all hours worked, including
overtime. Concerns voiced by telecommuting experts in this area centered on
the increased documentation burden this may pose, as well as the
uncertainties regarding an employer?s ability to sufficiently monitor hours
worked and control labor costs. However, our review and interviews with
employers showed that most telecommuters fall under employee classifications
(i. e., executive, administrative, or professional) that are exempt from
FLSA requirements. In addition, to comply with the law and control labor
costs for the few employees to whom the FLSA did apply, some employers
developed ad hoc procedures to preauthorize and record hours and overtime
worked. As a result, monitoring the hours of telecommuting workers was not
viewed as a substantial barrier. However, to the extent that federal
agencies have a workforce covered by the FLSA, concerns about the ability to
sufficiently control and track telecommuter hours worked may serve as a
barrier to implementation.

A final issue I will discuss relates to the potential for increased employer
liability for home workplace injuries and the rising worker compensation
costs this could bring. Generally, work- related injuries are covered under
state workers? compensation programs. Numerous telecommuting experts are
concerned that, because injuries at home are not usually witnessed,
determining whether they are truly work- related is problematic. Our
analysis and interviews showed that this is an area that could be vulnerable
to increased fraud and abuse. The employers we interviewed and other experts
have said that they were not yet experiencing significant problems with home
workplace injuries or workers? compensation claims. However, some experts
noted that this could become a larger issue as more individuals telecommute.

5 The Occupational Safety and Health Administration (OSHA) administers the
act.

6

Concluding Observations

Telecommuting offers a new set of opportunities that could benefit
employers, employees, and society as a whole. Whether these opportunities
are realized, however, will depend on resolving fundamental questions about
how telecommuting affects an employer?s ability to manage employees and
other resources, specifically about its suitability as a work arrangement as
well as questions about data security and overall costs. Knowing the extent
to which these questions apply to federal agencies would provide important
information for making decisions about telecommuting by federal workers.
Realizing the full potential of telecommuting also requires looking beyond
internal management concerns to the laws that govern an organization?s
operating environment. Some of these laws were put in place before we could
imagine a world in which employees lived in one state, but through
technology, worked in another distant state, and as a result, they may
unintentionally discourage telecommuting. Further examining how current laws
and regulations could potentially impact telecommuters and their employers
would provide the opportunity to mitigate their effects. In conclusion,
pursuing the question of how to promote telecommuting is really a question
of how to adapt current management practices, and laws and regulations to
changing work arrangements that are, and will be, part of the information
age in which we now live.

This concludes my prepared statement. I will be happy to respond to any
questions you or other Members of the Subcommittee may have.

GAO Contacts and Staff Acknowledgments

For information regarding this testimony, please contact Robert E. Robertson
or Dan Bertoni on (202) 512- 7215. Individuals who made key contributions to
this testimony include Gerard V. Grant and William Staab.

(130077)
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