Telecommuting: Overview of Potential Barriers Facing Employers
(11-JUL-01, GAO-01-926).
There are potential tax, regulatory, and liability barriers that
employers face when they establish telecommuting programs for
their employees. Telecommuting refers to working from remote
locations rather than an employer-provided location. Even though
telecommuting has grown, some proponents are concerned that
various laws and regulations discourage employers from
establishing these programs. Many telecommuting proponents
believe that significant obstacles to increased use of
telecommuting involve internal management concerns related to (1)
assessing whether the employer has the types of positions and
employees suitable for a telecommuting program, (2) maintaining
security over sensitive company data while monitoring the actions
of remote workers, and (3) ensuring that telecommuting activities
do not adversely affect profits. A number of state and federal
laws and regulations were also cited as potential barriers to
telecommuting by those GAO interviewed. However, several of those
laws and regulations cited as potential barriers predate the move
toward the more technological and information-based economy in
which telecommuting has developed. Thus their application to
telecommuting is evolving and is somewhat unclear at this time.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-926
ACCNO: A01313
TITLE: Telecommuting: Overview of Potential Barriers Facing
Employers
DATE: 07/11/2001
SUBJECT: Telecommuting
Personnel management
Federal regulations
State law
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GAO-01-926
Report to the Honorable Dick Armey, Majority Leader, House of
Representatives
United States General Accounting Office
GAO
July 2001 TELECOMMUTING Overview of Potential Barriers Facing Employers
GAO- 01- 926
Page 1 GAO- 01- 926 Telecommuting: Barriers Facing Employers
July 11, 2001 The Honorable Dick Armey Majority Leader House of
Representatives
Dear Mr. Armey: This report addresses your request for information on
potential tax, regulatory, and liability barriers that employers face when
they establish telecommuting programs for their employees. Telecommuting
refers to employees who routinely work (typically several days each week)
from remote locations (often their residences) rather than exclusively at an
employer- provided location. Even though telecommuting has grown over the
past decade, some proponents are concerned that various laws and regulations
discourage employers from establishing these programs.
To address your request, we first searched the literature to identify
industry sectors and employers that support telecommuting programs,
organizations that promote telecommuting policies, and laws and regulations
cited as potential barriers to telecommuting. To further explore potential
barriers identified in the literature, we interviewed representatives from
two organizations that promote telecommuting programs, two industry trade
organizations that represent employers who have telecommuting programs, four
employers with telecommuting programs in place, several union officials, and
an attorney from a law firm that provides assistance to employers who may
want to establish telecommuting programs. We also interviewed Internal
Revenue Service officials to discuss several aspects of the federal tax code
that are often cited as barriers to telecommuting. We conducted our work
from March through May 2001 in accordance with generally accepted government
auditing standards. On May 24, 2001, we briefed your staff on the results of
our work. This report formally conveys the document used at that briefing.
In summary, many telecommuting proponents believe that significant obstacles
to increased use of telecommuting involve internal management concerns
related to (1) assessing whether the employer has the types of positions and
employees suitable for a telecommuting program, (2) maintaining security
over sensitive company data while monitoring the actions of remote workers,
and (3) ensuring that telecommuting activities do not adversely affect
profits.
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 01- 926 Telecommuting: Barriers Facing Employers
A number of state and federal laws and regulations were also cited as
potential barriers to telecommuting by those interviewed. Specifically,
concerns involved individual state tax laws that could expose employers and
employees to additional state taxes, and the applicability of federal
workplace health and safety laws and regulations to telecommuters? home
offices. Several of the laws and regulations cited as potential barriers
predate the move toward the more technological and information- based
economy in which telecommuting has developed. Thus, their application to
telecommuting is evolving and is somewhat unclear at this time. In
combination with the management concerns noted above, these laws and
regulations may affect employer decisions to establish telecommuting
programs.
We are sending copies of this report to all Members of Congress who attended
the briefing and will make copies available to others upon request. If you
or your staff have any questions about this report, please contact me on
(202) 512- 7215 or Dan Bertoni on (202) 512- 5988. Bill Staab and Gerry
Grant also made key contributions to this report.
Sincerely yours, Robert E. Robertson Director, Education, Workforce,
and Income Security Issues
Appendix I Page 3 GAO- 01- 926 Telecommuting: Barriers Facing Employers
Appendix I
1
Potential Barriers Employers May Face When Establishing
Telecommuting Programs Briefing for Representative Dick Armey
Majority Leader House of Representatives
Appendix I Page 4 GAO- 01- 926 Telecommuting: Barriers Facing Employers
2
Overview
* Objective Scope and Methodology Summary of Results Background
Potential Barriers to Telecommuting Concluding Observations
Appendix I Page 5 GAO- 01- 926 Telecommuting: Barriers Facing Employers
3
Objective
Identify major potential barriers to employers? increased use of
telecommuting.
Appendix I Page 6 GAO- 01- 926 Telecommuting: Barriers Facing Employers
4
Scope and Methodology
Analyzed current literature to identify
specific employers with telecommuting programs,
industry sectors (for example, communications) where telecommuting was
widely practiced, and
potential barriers to telecommuting.
Interviewed
organizations promoting telecommuting,
trade organizations for major telecommuting industry sectors,
four employers who have telecommuting programs,
IRS officials regarding relevant tax issues, and
union officials about views on telecommuting.
Appendix I Page 7 GAO- 01- 926 Telecommuting: Barriers Facing Employers
5
Summary of Results: Barriers to Employers? Use of Telecommuting
Employer concerns: management views about supervising remote work,
security/ privacy, and impact on profits.
Uncertainties about how state tax laws may apply to interstate
telecommuting (could increase corporate and individual taxes and sales tax
collection duties).
Concerns over application of workplace health and safety rules to home
offices.
Other issues (federal tax matters, wage and hour laws, and workers?
compensation).
Appendix I Page 8 GAO- 01- 926 Telecommuting: Barriers Facing Employers
6
Background
Definition of telecommuting varies: generally defined as work at a remote
location or home office rather than working at a fixed employer- provided
site or office.
Not all jobs are suited to telecommuting. Telecommuting occupations
typically involve information handling and professional/ knowledge- related
tasks.
Proponents estimate that telecommuting has grown about 20 percent a year
over a 10- year period.
16.5 million employees telecommute at least once a month.
9.3 million employees telecommute at least once a week.
Appendix I Page 9 GAO- 01- 926 Telecommuting: Barriers Facing Employers
7
Potential Barriers to Telecommuting- Employer Concerns
Identifying job types and employees suitable for telecommuting.
Security/ privacy concerns
protecting proprietary and sensitive data used at remote locations, and
monitoring employee use and access to company data without invading a
person?s privacy.
Impact on profits: Will savings and benefits exceed additional costs
related to telecommuting?
Appendix I Page 10 GAO- 01- 926 Telecommuting: Barriers Facing Employers
8
Potential Barriers to Telecommuting- State Taxes
Uncertainties exist about the application of state tax laws and what
constitutes interstate business.
Telecommuting may establish a physical business presence in a state where
none previously existed and
expose employers to additional corporate taxes,
expose employees to additional income taxes,
require employers to collect sales taxes in states where telecommuters
reside, and
result in litigation for employers over tax issues.
Limited impact to date; however, this is a key emerging issue according to
experts and literature.
Appendix I Page 11 GAO- 01- 926 Telecommuting: Barriers Facing Employers
9
Potential Barriers to Telecommuting- Health and Safety Rules
Current OSHA directive states that employers are not liable
Employers fear that the current OSHA policy may be reversed.
Employers are addressing concerns by offering guidance about home office
safety and design and/ or providing ergonomic furniture for telecommuters.
for the safety of an employee?s home office.
Appendix I Page 12 GAO- 01- 926 Telecommuting: Barriers Facing Employers
employers interviewed. employers interviewed.
10
Potential Barriers to Telecommuting- Other Issues (Federal Tax Matters)
Providing equipment may create taxable fringe benefits.
Home office equipment/ services given to telecommuters are a taxable
fringe benefit.
Equipment is not taxable if employers retain title to it and maintain
substantiating records.
Impact on telecommuting is limited according to
Employees face complicated home office deduction rules.
Restrictive rules for deducting expenses.
Recapture rules related to home sales are complex.
Tax benefits to telecommuters are limited.
Impact on telecommuting is limited according to
Appendix I Page 13 GAO- 01- 926 Telecommuting: Barriers Facing Employers
11
Potential Barriers to Telecommuting- Other Issues (Federal Tax Matters)
Several employers and experts believe additional/ expanded government
incentives may increase telecommuting.
Suggestions include accelerated depreciation for technology investments
(for example, high- speed Internet technology) and employer/ employee tax
credits for home office equipment/ services purchased.
Prior GAO reports have raised questions about the effectiveness of tax
credits.
Appendix I Page 14 GAO- 01- 926 Telecommuting: Barriers Facing Employers
12
Potential Barriers to Telecommuting- Other Issues (Labor Matters)
Employer costs for overtime and record- keeping requirements for
telecommuters may increase.
The Fair Labor Standards Act establishes overtime and record- keeping
requirements for the vast majority of workers.
Some categories of workers are exempt from the law (for example,
executive, administrative, or professional positions).
Most telecommuters may be exempt employees.
For the few nonexempt employees, employers had procedures to preauthorize
and record overtime.
Appendix I Page 15 GAO- 01- 926 Telecommuting: Barriers Facing Employers
13
Potential Barriers to Telecommuting- Other Issues (Labor Matters)
Telecommuting may disrupt collective bargaining process and agreements.
Unions have been generally wary of telecommuting because work at home is
difficult to regulate and could lead to compulsory overtime and interfere
with employee rights to communicate, organize, and bargain collectively.
Some unions, however, favor the flexibility telecommuting offers
employees.
Telecommuting does not appear to be widely available to union members
(many union jobs are not suitable for telecommuting).
Appendix I Page 16 GAO- 01- 926 Telecommuting: Barriers Facing Employers
14
Potential Barriers to Telecommuting- Other Issues (Labor Matters)
The reasonable accommodation provision of the Americans With Disabilities
Act may require employers to pay for modifications to home offices or
equipment.
Disabled employees have increasingly sought to telecommute as a reasonable
accommodation.
Employers must not discriminate against nondisabled employees in
establishing telecommuting programs.
Appendix I Page 17 GAO- 01- 926 Telecommuting: Barriers Facing Employers
15
Potential Barriers to Telecommuting- Other Issues (Liability)
Workers? compensation costs might increase.
Injuries at work, regardless of location, are covered under workers?
compensation.
Injuries at a home office are not usually witnessed, raising concerns
about whether they are work- related.
Employers do not indicate any significant problems yet.
Appendix I Page 18 GAO- 01- 926 Telecommuting: Barriers Facing Employers
(130058)
16
Concluding Observations
and regulations, often enacted before telecommuting was widely practiced,
create challenges for the new workplace.
Some barriers do not appear to affect significant numbers of employers or
can be addressed when planning telecommuting programs.
Two areas in which existing rules do not fit the new workplace deserve
further attention:
potential state tax effects and related administrative burdens arising
from interstate telecommuters, and
uncertainty surrounding employer responsibility to provide safe workplaces
when it involves home offices. Beyond obstacles associated with employer
concerns, laws
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