Fraud Considerations for Telecommuting Programs

Telecommuting programs present obvious questions for both salaried and hourly workers: are the employees actually working when they claim they are, and are they as productive as they would be in the office environment?

June 2012

By Jacob Parks, J.D., CFE

 

Working from home has traditionally appealed to employees more than it has to their employers. Overall, the numbers still support this — a 2011 study by the Telework Research Network found that while an estimated 50 million people in the U.S. want to work from home (and have jobs that are compatible with telecommuting), only 2.9 million of them consider themselves to work from home full-time.  However, this trend appears to be shifting. The same study predicted that the number of regular telecommuters in the United States would increase by 69 percent by 2016.

 

There are many reasons why telecommuting might start drawing more employers, especially organizations that are just starting up or are experiencing significant changes. Many employees like the idea of telecommuting, and such a policy could give employers the edge for hiring elite job candidates. Additionally, overhead costs like office space and parking fees can be reduced by a telecommuting option. For a company with high startup expenses or many new hires, these benefits might be very attractive. 

 

There are even broader environmental and economic benefits, such as reduced air pollution and traffic congestion due to fewer people traveling at peak hours or during major events. For example, many organizations in London are setting up telecommuting plans to save their employees’ time during the traffic chaos that will be caused by the 2012 Summer Olympic Games.

 

The decision to implement a telecommuting system for employees requires considerable planning, however. Many of the popular reasons that employers give for holding back on telecommuting programs are related to decreased productivity or discomfort with employees working without a supervisor physically present. Moreover, there are fraud-related implications that need to be taken into account for this issue. The following are some concerns for employers who are beginning (or potentially revising) their telecommuting program, as well as some suggestions to help prevent fraud in this area.

 

Compensation and Productivity
Telecommuting programs present obvious questions for both salaried and hourly workers: are the employees actually working when they claim they are, and are they as productive as they would be in the office environment? Employees who submit false reports for the amount of time worked are committing a form of payroll fraud. Additionally, a disparity in productivity between employees who telecommute and those who do not hurts a business’s bottom line and can cause resentment among employees.

 

Another fraud concern for telecommuting is workers’ compensation fraud. In many jurisdictions, employees who are injured while working from home are entitled to file workers’ compensation claims in a similar manner as if they were injured at an on-site location. While false claims are not unique to employees in telecommuting programs, there is a perceived increased risk because there are typically fewer witnesses to accidents and the company has less control over safety.

 

Solutions are less obvious than the problems, but the following guidance might help employers with their programs:

 

Make employees’ tasks goal-oriented, and set deadlines for those goals.

  

Encourage off-site employees to participate in organizational activities—office parties, happy hours, and so forth—to prevent them from feeling left out.

  

Make sure employees receive feedback on their work to reinforce the mindset that they are a necessary part of the team.

  

Involve telecommuting employees in meetings. Make use of conference calls or free online video conferencing.

  

Gauge the amount of work expected to be performed. For instance, if there are both telecommuters and on-site employees with similar job functions, the average amount of work completed per time period should be similar. If it is not, seek an explanation.

  

If necessary, establish a monitoring process. This can range from something simple, such as using email to “clock in,” to something more advanced, such as setting up software that monitors activity on the person’s home-office computer or company laptop. Employees should be informed of monitoring and should sign a written statement acknowledging the policy. Consult an attorney to ensure that employees’ privacy rights are respected.

  

Instruct employees to report any injuries while working from home, and have a process ready to promptly record the details of these claims.

  

Ensure that employees have ergonomically sound furniture and equipment in their home offices.

  

Require telecommuters to keep specific hours (e.g., 8:00 a.m. to 5:00 p.m. with a few short breaks). Workers’ compensation covers accidents that occur while a person is working. Some jurisdictions have taken a liberal interpretation of that time period, holding that a person’s work day includes the moment the first work-related task begins and ends when the person stops the last work-related task of the day. This interpretation could leave gaps of time where the person is doing activities that are not work related (e.g., taking a two-hour exercise break), but the person is still legally “on the job.”

 
Data Security 

Virtually every organization has sensitive information that should be protected, whether it is customer account information, credit card numbers, confidential communications, personal data, personnel files, trade secrets, and so on. It can be difficult to secure a central work site, much less each employee’s home office. The following tips will help employers protect their data from being used for fraud or other nefarious purposes.
 

When employees will be working with sensitive information, the program needs to be set up in consultation with the organization’s IT department (if available) or an outside IT consultant.

  

Home-office computers should have all the common protections. Anti-virus software and firewalls should be updated regularly and virtual private networks (VPNs) should be used if linking to the employer’s network.

  

Password precautions should be treated just like they would on-site. Computers used for work should have strong passwords (those requiring combinations of letters, numbers, and capitalization) that are changed periodically. Likewise, Internet connections should be secured — no wireless devices without password protection.

  

Data monitoring software should be used to make sure employees are not (accidentally or intentionally) sending, accessing, or exposing unauthorized data. Again, this requires compliance with relevant privacy laws.

  

The employee should also have a means for securing physical documents in a locked file container. Depending on the degree of sensitivity, it may be reasonable to request the employee install and use a security alarm for the location. 

  

Make sure employees have paper shredders (and use them) for confidential discarded documents. Also, instruct them on how to properly dispose of digital storage devices.

  

Communicate a defined policy and procedure to employees who might occasionally take work home. Many security experts find that employees who work from home full-time are less of a risk than employees who only occasionally bring work home because the latter usually have less guidance and training in maintaining data security.

 

Search and Seizure 

Another issue with work-from-home programs—one that management often runs into after it is too late—is the employer’s ability to investigate misconduct by searching for evidence at the employee’s home office. At on-site workplaces, employers have general access to most areas. They can lockdown a workspace, escort employees off the premises, and protect potential evidence.

A person’s home, however, is subject to much broader protection from privacy and trespass laws. Below are some ways to prepare for a potential situation in which retrieving evidence from an employee’s home is necessary for a fraud examination.

 

Generally, a person does not have the right to search the home of another without a court order, but some jurisdictions allow employers and employees to enter into contractual agreements where the employer can access a work-related property, files, and data. Have an attorney draft a privacy agreement with these provisions. The policy should make clear that the employee should not expect to have privacy in regard to work-related equipment, devices, documents, and other data.

  

Employees typically have a lowered expectation of privacy on electronic devices (computers, mobile phones, etc.) issued by the company. Some employees might be willing to use their own personal computer to work on, thereby saving the employer the expense. However, employer-issued devices will more likely be searchable by the employer if the need arises in an investigation.

  

A private investigation of a suspect’s home office is not always feasible, due to the lack of consent or a prior agreement, the potential for the suspect to be alerted and tamper with evidence, or other reasons. In situations where there is already enough evidence to likely establish probable cause that a crime was committed, employers might benefit from involving law enforcement. A search warrant executed by officers usually gives a suspect less warning to prepare for the search.

 

While it does not appear that telecommuting is going to be the norm in the near future, there are several benefits to reap by organizations where the process is possible. That being said, telecommuting presents various fraud issues, and employers should first make sure that they are legally and technologically ready to make the jump.