Court ruling deals a blow to telework movement

Technology advances in the mid-1990s led to an explosion in the number of people who telecommute.  With the cost of office space soaring and the proliferation of broadband communications in the home, many managers were willing to allow employees to work from home all or some of the time.  According to the International Telework Association and Council, about 28 million Americans telecommute today. But, a recent ruling by the New York State Court of Appeals has struck a blow to the telework movement, and may have broader ramifications as each state addresses the issue of unemployment compensation for telecommuters. 

Maxine Allen was a teleworker who lives and did her work in Florida.  Her former employer, Reuters America, is headquartered in the Long Island area of New York state.  Ms. Allen initially worked in the Reuters New York office, until she moved to Florida in 1997 when her husband took a job there.  Reuters provided her with a laptop computer and remote access software, and paid for a second phone line in her Florida house so she could continue her job.  She was able to do essentially the same job she did when physically present in the New York office.

In March 1999, Reuters ended the telecommuting arrangement for Ms. Allen, offering her work in New York once again.  She declined to return to New York to keep her job.

Ms. Allen sought unemployment compensation in the state of Florida.  She withdrew the application for benefits when Florida officials advised her to seek compensation in New York instead, which she did.

The New York Department of Labor ruled that Ms. Allen was not eligible for benefits from New York, as she did not physically work there.  She appealed the ruling, and an administrative law judge overturned the decision, claiming that the telecommunication links allowed her to do the same job in Florida as she did when residing in New York.  This judge ruled she was eligible for benefits because “the place from which the claimant’s employment was directed and controlled was New York.”

Determined not to leave it alone at that, the New York Unemployment Insurance Appeal Board reversed the administrative law judge’s ruling, allowing that Ms. Allen’s services for the employer “were entirely performed in Florida where she was physically present and maintained an office.”  The Appellate Division affirmed the Board’s decision, stating “claimant’s work was sent to New York over the telephone and the Internet, but only after she performed it in Florida.”

Ms. Allen took her case to the state’s highest level Court of Appeals, which upheld the decision, saying that eligibility for unemployment benefits are dependent upon where the worker is, not where the employer is.

Although unemployment benefits and eligibility requirements differ from state to state, and there is no nationwide standard or legislation, this ruling could have ramifications all across the country as employers and telecommuting employees consider the consequences.  Information technology makes it possible for many types of office workers to do their jobs from virtually anywhere.  Before taking a telecommuting position, however, an employee may now need to worry about what happens if his position is eliminated.  Can he collect unemployment benefits or not?  As this case indicates, it depends on the state laws.  Employers, too, may suffer, as employees show a reluctance to work from home, negating the savings companies achieve when employees telecommute.

Linda Musthaler is vice president of Currid & Company.  You can write to her at mailto:Linda.Musthaler@currid.com