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						 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
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

The first copy of each GAO report is free. Additional copies of reports are
$2 each. A check or money order should be made out to the Superintendent of
Documents. VISA and MasterCard credit cards are also accepted.

Orders for 100 or more copies to be mailed to a single address are
discounted 25 percent.

Orders by mail:

U. S. General Accounting Office P. O. Box 37050 Washington, DC 20013

Orders by visiting:

Room 1100 700 4 th St., NW (corner of 4 th and G Sts. NW) Washington, DC
20013

Orders by phone:

(202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

Each day, GAO issues a list of newly available reports and testimony. To
receive facsimile copies of the daily list or any list from the past 30
days, please call (202) 512- 6000 using a touchtone phone. A recorded menu
will provide information on how to obtain these lists.

Orders by Internet

For information on how to access GAO reports on the Internet, send an email
message with ?info? in the body to:

Info@ www. gao. gov or visit GAO?s World Wide Web home page at: http:// www.
gao. gov

Contact one:

 Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm

 E- mail: fraudnet@ gao. gov

 1- 800- 424- 5454 (automated answering system) Ordering Information

To Report Fraud, Waste, and Abuse in Federal Programs
*** End of document. ***