I believe that would be covariant: `'home' | 'work'` is a subtype of `string`, and `Record<'home' | 'work', number>` is assignable to `Record<string, number>` so the subtype relationship is preserved.
I think you were originally correct and that `Record<string, number>` was not a good example. I would guess that union literals and primitives are handled differently by the compiler in this case, perhaps because a record with keys of every possible string is impossible it may have a special condition to skip some typing rules. In fact, `Record<number, number>` is assignable to `Record<string, number>`.