New hires and current employees alike are asking for more flexibility in where they perform their work—not just at home versus the office but also working remotely from out of state or even out of the country. These requests may be permanent or temporary in nature (for example, temporarily working at a vacation destination for the summer or permanently splitting the workweek or month between states where one works and lives), but they all amount to state employment and tax law compliance issues the employer should be aware of when providing this benefit.
In general, the state in which the work is physically being performed is the governing state for employment laws, including wage and hour laws and required leave laws. Some states won't consider short, temporary stays by employees to be covered work, but others do. Employers will need to abide by each state's requirements to be in compliance.
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What must employers consider when offering a work-from-anywhere policy?
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Labor Law and Compliance Considerations
Employers with remote and multistate workers must navigate a complex web of federal, state, and local labor laws.
- Understand Federal, State, and Local Laws: Familiarize yourself with employment laws at all levels, including wage and hour regulations, tax requirements, and anti-discrimination laws. Each state may have unique rules that often differ from federal standards.
- Register in Each State: Ensure your business is registered to operate in every state where you have employees. This may include obtaining necessary permits and tax registrations.
- Payroll and Tax Compliance: Set up payroll systems that account for state-specific tax withholdings, unemployment insurance, and workers' compensation requirements.
- Review Employment Policies: Update employee handbooks and policies to reflect the laws of each state where employees are located. This includes leave policies, overtime rules, expense reimbursement, and workplace safety standards.
- Monitor Remote Work Agreements: For remote employees, ensure compliance with home-state laws, including those related to telecommuting and data privacy.
- Stay updated on Legal Changes: Employment laws frequently change. Regularly review updates and consult legal experts to ensure ongoing compliance.
- Provide Training: Train HR and management teams on multistate compliance requirements to avoid unintentional violations.
- Audit Regularly: Conduct periodic audits of your compliance practices to identify and address any gaps.
The resources provided below can serve as a starting point for researching and auditing compliance processes.
With the increased reliance on digital tools, protecting data and intellectual property has become a critical concern in remote work arrangements. To safeguard sensitive information, employers must implement robust security measures, such as encryption and access controls. Regular training on data protection best practices can empower employees to recognize potential threats and adhere to company protocols. Additionally, clearly defined policies regarding intellectual property ownership and confidentiality are essential to prevent disputes over work product created remotely.
Navigating the Legal Landscape of Remote Work: Compliance and Best Practices
Stagg Wabnik | Nov 2024
Most states have minimum paydays that dictate when employees must be paid. Make sure that your employees who work in different states receive their paychecks no later than the state-assigned time frame.
Payroll Compliance for the Multistate Employer
Payroll Partners | Aug 2024
If at least one of your employees conducts business in a state, then you are generally required to pay premiums for state unemployment insurance. So, if your workplace is situated in State A but an employee or employees work from home in State B, you must generally register with the state unemployment office of State B. A failure to do so may bring penalties for non-compliance.
10 employer compliance considerations for businesses with remote employees
Wolters Kluwer | Jul 2024
At least six states (and certain municipalities) maintain a "convenience of the employer" rule, which deem employees working from out-of-state for an in-state employer to owe state income tax primarily to the state in which the employer is located, unless working outside the state is required by the employer. Employers must withhold accordingly, and affected employees often need to file income tax returns in two states. Connecticut, Delaware, Nebraska, New Jersey, New York and Pennsylvania maintain this "Convenience of Employer" rule. In these states, such employees are taxed in the state in which the employer is located, again unless the employer requires such services to be performed out-of-state. There are several variations on rules and enforcement.
Implications of "Work from Anywhere" - When Remote Workers Cross State Lines
ADP | Nov 2023
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