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Legalities Donald Elisburg The home workstation phenomenon has created the potential for dramatic changes in business opportunities. As with every great new opportunity, however, there are no free lunches. Specif- ically, there are legal issues that should be considered by anyone considering electronic homework. There are people and worker problems that must be considered when thinking about this ex- tended relationship between office and home. Most electronic homework experiments done in the last few years have involved the executive- or near-executive-level em- ployee, the professional who may qualify as an independent con- tractor (writers, editors), or the owner who likes the idea of work- ing at home. Some of the experiments have been with production workers and disabled employees. It is clear, however, that we do not have broad experience in this country with the use of large numbers of people doing traditional video display terminal (VDT) work on a production line basis. It is also clear that if this new form of office work is to provide an opportunity for more than a handful of people, it win be in the arena of production. Consequently, the legal relationships involved in this work ar- rangement are, for the most part, the same type of personnel and Donald Elisburg is a partner with the law firm of Connerton, Bernstein & Katz, Washington, D.C. ~9

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60 ISSUES AND PROBLEMS employee benefit problems that any executive faces in the regular course of running a company. Issues may involve labor standards and protective laws, labor relations and collective bargaining, fringe benefits and insurance, safety and health, and local zoning laws. Situations that present unique or unusual problems are not the norm. Most real problems develop when someone tries to bypass the existing legal protections either by taking a shortcut or by trying to avoid one of the labor standards that give American workers a measure of economic security and protection from ex- ploitation on the job. LABOR STANDARDS AND PROTECTIVE LAWS The principal legal problems will arise within the panoply of labor standards and protective laws such as the Fair Labor Stan- dards Act (FI~SA), federal, state, and local equal employment op- portunity (EEO) laws and regulations, the Occupational Safety and Health Act, the Service Contracts Act (for federal contrac- tors), workers' compensation statutes, and various federal and state child labor laws. There has been much litigation over the years on the standards for determining whether a worker is an employee or an indepen- dent contractor. While there may be slight differences in the anal- ysis between various agencies of the government, ~ believe that the standards set by the FI~SA apply to electronic homeworkers. The FI~SA protects a worker by requiring the payment of mini- mum wages and overtime, maintenance of records, and prohibi- tions against the use of oppressive child labor. It is also the stat- ute that has been traditionally used to protect against abuses of workers in the homework industries. Basically, the FESA defines an employee as one who is suffered or permitted to work. This is guided by a judicial policy of con- struing the term liberally, without adherence to common law defi- nitions. Employees are those persons who, as a matter of eco- nomic reality, are dependent upon the business to which they render service. Dependence seems to be the operative word, and the courts have defined five criteria for its evaluation: Control. Does an inclividual exert such a control over a meaningful part of his or her business life that he or she stands as

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LEGALITIES 61 an independent party? Neither the right to hire employees nor the right to set one's own hours necessarily indicates sufficient con- trol to render a worker an independent contractor. Opportunity forprofit orioss. Does the individual control major factors that determine profit, such as price, location, adver- tising, and volume? Does the individual stand to lose his or her capital investment, if any, in the business' operation? Ir~vestmer~t. I s risk capital involved? Is it the individual or the employer who assumes the cost of equipment, utilities, insur- ance, rent, and setting-up costs? Permanency. Can an individual be shown capable of termi- nating his or her relationship with the employer and taking his or her operation something more than labor elsewhere? (The per- manency of a long relationship with an employer is usually evi- dence of dependence on the employer. Subjective satisfaction of an individual does not preclude a finding of dependence.) SkiZi. Who contributes business acumen and initiative? Routine work that requires industry and efficiency is not indica- tive of independence and nonemployee status. Initiative is a key element of independence. This comprises control of such compo- nents as advertising, pricing, and choice of whom to deal with. Interestingly, there have been a number of homeworker cases in which the work was not knitting or sewing or making jewelry, but office and clerical production, such as typing of labels, ditto mas- ters, and other direct mail operations. In one case the defendant provided label-typing services to a mail advertising firm. Typists picked up work materials at the defendant's house and returned them when completed. The typists were supplied the labels and the names and addresses to be typed. The rate for and return of completed material were unilaterally set. Using the criteria de- scribed above, the court fount! the typists to be employees. Most electronic homework scenarios involve workers who should be defined as employees. They do not have the requisite skill, investment, or opportunity to be considered as independent contractors. Most are not able to invest in their own equipment or do anything but work at the particular job they have been given. Accordingly, these employees must be seen from the personnel point of view, and in that connection, some of the very significant requirements that must be considered in the homework context are hours, pay, and records.

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62 ISSUES AND PROBLEMS Homeworkers must receive the minimum wage and time-and-a- half for hours over 40 in a workweek. The key is controlling the time an employee works. If the worker is paid for piecework, that rate must be equivalent to the minimum wage. A major problem in homework is the maintenance of records. Employees must be given sufficient incentives to keep accurate records. They must not be asked to meet quotas that would lead them to work more hours than they record. If the electronic homework is done under a government service contract, the worker must be paid and records maintained as required under the appropriate wage determination. A major concern of any homework situation is how to avoid violating the child labor laws. Basically, anyone under age 14 is prohibited from working on goods in interstate commerce. There are also strict rules requiring special certificates for certain work by employees aged 14 to 16 and on employment involving the use of dangerous equipment for workers aged 16 to 18. Child labor laws relate to electronic homework in two signifi- cant ways. First, it is the natural inclination of children to want to emulate their parents. The idea of helping out on the "computer" could be very difficult to resist. The principal feature of child la- bor exploitation in other kinds of homework is the involvement of the entire family to increase the income. This becomes very rele- vant in situations where the worker is employed on a piecework basis, e.g., batch type work with a significant amount of data en- try. Second, exposure to some of the equipment may affect the child's health. ' it is not just federal law that may apply in these situations. Many states have child labor laws as well as minimum wage and overtime laws that must be considered. In addition to the problems that can develop in controlling the wages and hours of employees, there is also the need to consider the possible impact of EEO (equal employment opportunity) re- quirements. If a company creates home workstations or office clusters, how are they distributed? Are they made available to all eligible employees, or only to those in selected neighborhoods? Are they limited to employees of one sex, to younger or older employees? What provisions are made for employment of the disabled? This litany of issues suggests that today's employment prac- tices may become even more complicated when considering the

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LEGAI,ITIES 63 employment of workers in their homes in widely divergent eco- nomic and social areas. A company wishing to engage in such out- of-plant activities must be prepared to employ workers through- out their geographical area and in all kinds of housing situations as well as socioeconomic strata. LABOR RELATIONS AND COLLECTIVE BARGAINING Some employers may consider the use of office workstations at home to avoid the problems associated with collective bargain- ing. indeed, there is no question that the scattering of employees outside of the traditional office or plant environment could make union organizing more difficult. However, any idea that homeworkers are exempt from the col- lective bargaining protections is incorrect. Such employees have the same rights as any other worker to organize. To the extent that such employment is under exploited conditions, it is likely that unions will make every effort to sign up these workers for their own protection. Many unions may have contracting-out pro- visions in their collective bargaining agreements. As pressure for expanding home workstations grows, so will the pressure to ex- pand collective bargaining agreement protections to existing work forces. Some employers may use home workstations as a device to eliminate or reduce the union's relationship to their business. ~ do not know of any situations where home workstations have been used to get rid of a union, but for firms with that goal in mind, it will not be easy. Employers must also look at the downside of such activity and the vastly reduced control they will have over employees using home workstations. FRINGE BENEFITS AND INSURANCE A major consideration for employers is the impact of fringe ben- efits, insurance, and related issues for the workers at home. In short, if employers believe this work can be done cheaply, they are mistaken. Again, the issue of independent contractor v ersus employee has great relevance. These employees must pay social security and unemployment compensation. Employers may be obligated to

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64 ISSUES AND PROBLEMS pay for medical insurance if regular employees have such a plan, and there is very certainly the obligation to include these employ- ees in any bona fide pension plan. The latter is a very important consideration and the discrimination rules can be tough. One very important matter is the question of insurance, partic- ularly casualty and workers' compensation insurance. The possi- ble costs should be carefully reviewed. If there is an accident in the home, what will be the employer's responsibility? What if someone else is injured by the equipment, if there is an electrical short, or someone trips over the power cord? The problem of prop- erly supervising the workplace, as well as the worker, deserves serious consideration. Material provided by many home workstations will have to be sent to and from the office. Who is insured for delivery and pickup? Even if an independent contractor relationship is estab- lished, there may be potential liability through third party actions or product liability claims, particularly if the equipment is provided by the company. SAFETY AND HEALTH Matters of occupational health and safety inherent in the use of any equipment may be exacerbated in the home context. Is the machinery properly wired and installed? Is the ergonomics of the normal office replicated in the home? We have recently been ex- posed to numerous articles and at least one congressional hearing on the safety of the video display terminals that are at the heart of office workstation activity. These alleged hazards are as impor- tant in the home workplace as they are in an office setting. And the use of certain devices that are safe around adults may have to be reconsidered if they are used around children, the elderly, or pregnant women. ZONING Those of us who place our Apples, etc., in the office at home or in the recreation room are probably not in danger of violating local zoning ordinances. But if home workstations increase, consider- ation of local zoning laws and whether such installations are per- mitted at all will become important. Moreover, if we develop the cluster idea, i.e., people coming to "out-stations," zoning may be-

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LEGALITIES 65 come much more relevant. Indeed, there may even be the ques- tions of how far away from the residential area such a cluster of- fice is located and whether it serves the purposes of the home environment. Clearly, we may be at the frontier of new ways to work, particu- larly in the interaction of the home and the traditional workplace of office or factory. The potential pitfalls described here can be turned into a challenge- to examine home workstation projects for sound business reasons and not as a way of getting "cheap" employees. Unfortunately, the cottage industry sweatshop that stained our industrial history has not vanished. Exploitation of home- workers continues today. The task of high-technology business is to understand this and to avoid tarnishing its image. Otherwise, the public may reject the home workstation concept just as it has rejected virtually every situation in which exploitation of workers has been the basis for economic success.