Who Will Tax The Watchers?

Last Updated Aug 1, 2008 6:27 PM EDT

Noa, secret spy catMany employers are apparently monitoring home-based workers, because who wouldn't want to know whether the minions were working hard or hardly working? And if something technical is going on in general, you know it's happening in high tech. But there are some big dangers that the employers may not be aware of, which could land them in sticky situations whether the worker is an employee or independent contractor.
[Employers are] taking photos of workers' computer screens at random, counting keystrokes and mouse clicks and snapping photos of them at their computers. They're plying sophisticated technology to instantaneously detect anger, raised voices or children crying in the background on workers' home-office calls. Others are using Darwinian routing systems that keep calls coming so fast workers have no time to go to the bathroom.
That bathroom one has gotta hurt. But even with straight monitoring, employers could be the ones who end up bruised. If you want to monitor an employee's activities to catch slackers, even informed consent may not be enough to avoid a problem, according to David Walton, a member at international law firm Cozen O'Connor. Consent might not cover other family members using the same computer if it is a family PC. And what if there is personal and business use of the machine?
[Y]ou're getting into a sketchy area. There isn't a national privacy law. All your states treat personal privacy and computers somewhat differently. If employers are monitoring [employees] and they have people in all different states, are they going to ensure that they're compliant in each state? Seems to me it would be a nightmare trying to manage all their issues.
The employer might inadvertently have access to such private information as social security and credit card numbers. What is to prevent someone at the office from using the information for identity theft? That could put the employer into a sticky position of liability. Having a third party doesn't help, because then you have to ensure that the third party does nothing wrong.

There are a few possible solutions in this case. One is for the business to buy a machine for the employee's home and to indicate that it is not for any personal use at all. Another would be to set up a web service or portal that requires the employee to log in. But the future isn't rosy, according to Walton:

Eventually you're going to see even more people working at home, you're going to see some nightmare lawsuits where employers have gone too far to see what the employees are doing, and then you're going to see legislation that will impair what the employers can do.
If the worker is an independent contractor, the business has other worries. According to Stephen Fox, principal in the labor and employment practice of Fish & Richardson, monitoring a contractor is the beginning of a slippery slope.
To the extent that somebody is using computers to access their working, that poses probably for the employer who's trying to maintain that separation. Under the traditional and well-accepted distinction between employer and independent contractor, you have the independent contractor saying I'll decide how much time it takes to do what I say I'll do. What you're paying for is the completion of a product. You shouldn't care how I spend my time, where I spend my time, and on what I spend my time. You should be concerned about the ultimate output. They've called the guy an independent contractor because he's not coming into the office, but his output of work is being monitored by the employer, and that guy starts looking like an employee, despite what you call him.
If the IRS or a state revenue agency decides that such people are employees, they will go after the employer for back taxes, interest, and penalties. At least now we have an answer to the famous question. Who will watch the watchers? Trial attorneys and the tax man.

Noa, secret spy cat image via Flickr user artslyx, CC 2.0

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.