If you telecommute, or work somewhere that employs telecommuters, you will want to be familiar with a recent decision from the New York Court of Appeals, New York State’s highest court, involving an employee based in Florida but working for a New York employer. The case, Allen v. Comm’r of Labor, is said to be the first case of its kind, and as a result, will have a far-reaching impact on other telecommuters throughout the country. (See New York Law Journal story.)
Maxine Allen had worked for Reuters America, a financial information services provider, in New York (in Reuters Hauppage, Long Island office) for several months, before choosing to move to Florida when her husband changed jobs. (See New York Times article.) When Allen moved to Florida, Reuters allowed her to continue working for the company from a home office that Reuters paid to set up and maintain, covering the cost of a laptop computer and the additional phone line necessary for Allen’s work. (See Newsday article.) Reuters required Allen to be available during regular business hours, during which she would log into the Reuters computer system and perform the same computer troubleshooting work she did while previously employeed in New York. She would stay in touch with her supervisor daily via phone and e-mail, submit weekly status reports electronically, and only very rarely travel to New York for work-related reasons.
This long-distance arrangement continued for nearly two years, from July 1997 to March 1999, until Reuters decided to end the telecommuting relationship. Reuters offered Allen a job in New York, which she declined to accept. (See Associated Press article.) Following the termination of her employment, Allen applied in Florida for unemployment benefits. After Allen was initially found eligible for benefits of $275 per week, Reuters challenged the award, stating that Allen had voluntarily quit the company after Reuters had offered her employment (never mind that it was in another state!). After Allen’s case was appealed, the Florida system ultimately ruled that she was ineligible for benefits.
In the meantime, however, Allen was told by someone who worked for the Florida unemployment insurance office that given her situation, she might be eligible for benefits in New York, which were paid at a rate of $365 per week. Allen applied for and received benefits from the New York unemployment system for several months in 1999, stating that she had worked at her employer’s New York address. In October 1999, however, the New York Commissioner of Labor ruled that Allen was ineligible for benefits, and ordered her to return the benefits she had already received. She appealed this ruling and later had it overturned, as an administrative law judge found that Allen was eligible for benefits, as her work had been directed and controlled from New York. The employer and the state appealed this determination to the next highest level, the Unemployment Insurance Appeal Board, which overruled the judge and again denied Allen her benefits. Allen then appealed this decision, without legal representation, as far as she could–the New York Court of Appeals.
This court ruled that Allen was ineligible for benefits, and that she would have to repay all of the benefits that she had previously received. The basis for the ruling was the court’s determination that under the New York law’s “localization” test, Allen’s work was performed where she was physically present, Florida, rather than New York, where the company’s computer system that recognized her work was located. On this basis, Allen’s work was allocated to Florida’s unemployment system, and she was not eligible for benefits in New York. Part of the purpose behind the localization test is so that claimants seek benefits in the location that is most likely to be affected by their unemployment–the area where they live and are seeking new work.
The case put Allen, and other telecommuters who lose their jobs and/or the ability to telecommute, in a catch-22. Allen is not eligible for unemployment benefits in Florida because she is considered to still be employed in New York, and is not eligible in New York because she is considered to have lost her job in Florida. Granted, Allen could have kept her job if she had moved to New York, so in that case she is no worse off than any other employee who must move to keep his or her job; however, most employees who are unable to move are still eligible for benefits due to the elimination of their job locally.
One issue not addressed by the case, that may make a difference for future claimants, is where Allen’s employment taxes were paid. As her employer, Reuters was required to pay payroll taxes on Allen’s behalf, and must also pay into a state unemployment insurance fund. If Reuters continued to pay New York taxes on Allen’s behalf, and considered her an employee under the New York unemployment system, then the money it paid on her behalf for several years was wasted, as she was unable to collect. If the employer had paid into the Florida fund, then Allen should have been able to collect, as her ability to continue working in Florida for that employer was eliminated when her telecommuting arrangement was discontinued. At any rate, one of the two states should have been deemed responsible for her unemployment insurance coverage, and it is most unfair that Allen is required to repay the benefits she was originally awarded, even though there was no previous legal guidance on the subject.
This problem is only destined to continue, as more employees (including this one (Paula Brantner), who telecommutes for the San Francisco-based Workplace Fairness from a Kansas City office) enter into telecommuting arrangements. The problem may require changing unemployment law to recognize evolving workplace relationships, but a solution may be as simple as clarifying with your employer to which state your payroll and unemployment taxes are paid, and what will happen in the event the telecommuting arrangement is discontinued at some future point. One also wonders what would have happened to Maxine Allen had Reuters never contested her Florida claim, but I suspect her situation would have gone much more smoothly.