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How To Navigate Pay Changes For Workers Who Move

By Mike LaSusa · Mar 10, 2021, 4:16 PM EST

Many U.S. workers are considering permanent relocations in light of adaptations to the pandemic, and some employers seem more willing to allow it if the jobs can be done remotely. But companies should be mindful of legal pitfalls when considering compensation changes for workers who move, employment attorneys told Law360.

More than half of workers would consider moving to a different city if their company let them work remotely, and 1 in 25 has already relocated, according to the results of a survey published in January by staffing firm Robert Half.

The survey found that roughly 4 in 10 employers would allow workers to permanently relocate. But that might lead to changes to workers' pay. About a quarter of respondents said pay for employees who move should be determined by the employees' new location, while the other three-quarters said it should be based on the location of the company's office.

Employers generally have broad leeway to change workers' compensation when they move, as long as the workers aren't subject to a collective bargaining agreement or an employment contract that specifies their pay, attorneys said. But changes to workers' pay could nevertheless raise a variety of legal issues.

Here, Law360 looks at some best practices for navigating compensation changes for workers who relocate.

Be Consistent

Any changes to pay should be consistent across the workforce and based on reliable, quantifiable metrics, said Dan McCoy, the chair of the employment practices group at management-side firm Fenwick & West LLP.

"If you're relying upon bad data and bad metrics such that the adjustments are not consistent, that's where you can have pay discrimination," he said.

Calling in outside help could be a good idea, McCoy said. A skilled compensation consultant and payroll firm can help businesses adjust workers' pay based on analyses of market conditions in specific economic sectors and geographic areas.

Cutting pay can be a difficult decision, but the Fenwick partner cautioned against trying to "soften the blow" by giving additional benefits to employees who relocate to make up for cuts to base pay. Employers could run into legal trouble if some workers get benefits that others don't.

"That's the kind of seemingly innocuous change that can also trigger a discrimination claim," McCoy said.

Mind the Patchwork

Workers who move to a new jurisdiction could be covered by a new and different set of employment laws and regulations, which may impose additional compensation obligations on the employer, like a higher minimum wage or different leave and overtime requirements.

"The concern that I see is employers not being aware of state-specific laws," said worker advocate Richard Swartz of Swartz Swidler LLC.

Attorneys who spoke with Law360 said it's typically best for employers to follow the rules of the jurisdiction where the worker is located, or to follow those of the jurisdiction where the headquarters is located, if they're more worker-friendly. But some still see gray areas in the law.

"I see that as a legal question to be reckoned with," Swartz said. "It could work both ways."

Additionally, employers who plan to change workers' pay should make sure they comply with laws requiring companies to give workers advance notice of compensation adjustments, said Chuck McDonald, a shareholder at management-side firm Ogletree Deakins Nash Smoak & Stewart PC.

"Most states are just prior written notice, but some require seven days [and] some require one pay period notice," McDonald said.

Keep an Eye on Travel Expense Obligations

Employees working remotely may occasionally need to travel to their employer's physical office, raising questions about whether the worker or the business is responsible for covering the cost of the trip.

The answer hinges largely on the specific circumstances of the remote work relationship, attorneys said.

If an employee is working from home on a temporary basis, or if time in the company office is part of their typical work schedule, trips to the office would likely be considered part of that worker's normal commute and therefore not compensable. But workers who are totally remote may need to be paid for travel to the office, McDonald said.

"You don't have a normal commute because your work location is your residence," he said.

Determining a worker's "principal place of business" is key, according to Fenwick partner McCoy.

"Sometimes it's blurry as to where your principal place of business is, especially during the pandemic," he said. "But if the employer makes that commitment and says, 'Fine, you're no longer required to report to the home office' … then any travel from that point beyond is on the employer."

--Editing by Haylee Pearl.

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