Vistra Insights

What global employers need to know about employee monitoring tools and laws

Work is no longer confined to the four walls of an office.

Currently, 16 percent of all companies globally are fully remote, and experts estimate remote jobs will account for 25 percent of all jobs in North America by the end of this year.

It's clear remote and hybrid work are here to stay. However, this shift has also led to a rise in employee monitoring, new questions around the legality of this practice and its potential pitfalls for employers. 

If your company is weighing whether to monitor employees, or if you are already monitoring them, it's essential to be aware of evolving workplace privacy regulations and the effects monitoring may have on your employee experience and overall culture.

Why more employers are monitoring employees

As more employees work outside the office, more employers are using digital surveillance tools to monitor them.

In one 2021 survey conducted by the International Association of Privacy Professionals (IAPP), 78 percent of employers reported monitoring their employees' performance and online activity. Sixty-six percent track employees’ web history, while 53 percent monitor employees’ computer screens in real-time. Some employers track employees’ email activity or use geofencing technology to track the locations of field workers and remote employees to ensure they're working when they say they are. Some companies use key cards to track employees' location and when they clock in or out.

Businesses are monitoring their workforces for several reasons. With an increasingly distributed organisation, managers and senior leaders contend they need new ways to maintain employee productivity. Employee monitoring also allows companies to protect proprietary data better and track how employees use and share that data. 

Aside from minimising business risks, employee monitoring can help companies better assess their own employee experience. Monitoring tools provide valuable data points about how long employees are working and what tasks are consuming most of their time. This information can help employers pinpoint inefficiencies and determine ways to streamline operations and reallocate resources to relieve employee stress.

The information also allows managers to better assess employee performance as work practices evolve. For example, monitoring tools may show that most of the company's hybrid employees have higher productivity levels when they work remotely than when they work in the office.

Some drawbacks

Employee monitoring tools, however, come with serious drawbacks. The IAPP survey found — not unexpectedly — that employees don't want their employers looking over their shoulders. Fifty-nine percent of employees surveyed said they felt stress or anxiety about their employers monitoring their online activity. They also felt pressured to work longer hours (41 percent) and took breaks less frequently (32 percent). Perhaps most significantly, 43 percent of employees said monitoring violated their trust.

In some cases, employee monitoring can create a culture of distrust within an organisation. Employees may feel their employer chooses to watch them to ensure they do their work. More than half the employees IAPP surveyed also said they would quit if their companies implemented the practice. 

Employees may also have privacy concerns about how their companies collect, share and analyse their data. Employees may worry that an employer is collecting their data when they open their personal email or a consumer app on a company-issued device. Monitoring is of particular concern to employees when employers aren't transparent about the process. Providing more information about what data employers are collecting — and for what purposes — can help alleviate this worry. 

A changing regulatory environment for employee privacy

Employee sentiment is just one consideration if your company wants to implement monitoring technologies. You must also consider privacy laws and regulations. These can vary widely by country and in some cases by region within a single country.

Many jurisdictions have passed legislation to address workplace privacy. Here are a few examples.

The United States: Recent developments

In May, a new law went into effect in the state of New York requiring employers that electronically monitor their employees to provide written notice to new employees and receive their written consent before they begin monitoring. They also must post a notice about electronic monitoring in a visible area of the workplace. In California, employers can’t install GPS devices to track employees’ locations. In Minnesota, this type of monitoring requires a court order. In Connecticut, employers can install GPS tracking on company-owned vehicles without informing employees. Other states, including Delaware and Tennessee, require companies to have email monitoring policies and notify employees of the activity. 

Europe and the UK: More examples and some consequences

The EU’s General Data Protection Regulation has transformed how companies collect consumer data, and some companies may be surprised to learn that the GDPR has implications for employers that monitor their workforces. The GDPR does allow companies to monitor employees, but there are clear parameters on when an employer can survey employees and the types of information they can collect. For example, companies must create monitoring policies and share those policies with employees. The regulation also requires employees to narrow the scope of their monitoring to areas where the employer has a legitimate interest and to monitor employees in an unobtrusive way.

No matter what their jurisdictions of operation, employers that don’t comply with all applicable laws related to employee monitoring are likely to face serious consequences. A German subsidiary of the clothing retailer H&M, for example, was fined more than €35 million in 2020 for data protection violations related to employee monitoring. The company had conducted exhaustive employee surveillance, collecting and recording information as personal as employees’ family issues and religious beliefs. The sensitive information was accessible to up to 50 managers.

The UK’s Data Protection Act 2018 (DPA) is that country’s implementation of the GDPR. The government has proposed changes to the DPA now that the UK is no longer part of the EU, but any significant changes could jeopardise the European Commission’s adequacy decisions. In the meantime, any company operating in the UK must understand and follow the existing DPA or risk significant penalties. The UK bank Barclays faces a $1.1 billion fine for anonymously monitoring employees' computer activity for 18 months. While the case is ongoing, the probe is more evidence that employers must be transparent — and locally compliant — when monitoring employees.

Should you monitor your employees?

Employee monitoring comes with advantages and disadvantages. It can give your HR and leadership teams more insight into where employees are spending their time and where you can address bottlenecks to drive productivity. But monitoring can also lead to reduced employee engagement and trust. As employee monitoring and related laws and fines become more common, it’s possible or even likely that some employers will develop worker-friendly monitoring policies to attract and retain employees.

If your company wants to implement monitoring tools — or if it already has — you should be transparent with employees and clearly define the scope of your activities. You should also ensure compliance with privacy regulations in all your countries of operation. (As our US examples make clear, this may mean complying with multiple state- or other regional-level regulations within a single country.)

For multinational organisations in particular, understanding local requirements and keeping abreast of related changes, and then developing flexible policies and procedures to comply across all jurisdictions, will require significant administrative expenditures and probably third-party assistance. But given the financial and reputational risks involved, the importance of attracting and retaining talent in our competitive global marketplace, and the general increase in remote and hybrid work, these investments will be critical to protecting your organisation and positioning it for sustained growth.

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