One of the biggest trends I’ve seen arising from the pandemic has undoubtedly been the “work from anywhere” mindset. Once both employers and employees realized that work could be performed effectively without sitting in a traditional office, things started to change. Some employers chose to close their brick-and-mortar worksites for good, while some workers decided to relocate to be closer to family or to live in a region with a lower cost of living.
As a SHRM HR Knowledge Advisor, I regularly receive questions from members regarding remote employees. Members often wonder whether there are legal implications for allowing employees to work temporarily or permanently from a state in which their organization has no business presence. It comes as a surprise to many that allowing an employee to work remotely from a new state is not as simple as they originally thought.
When employers allow an employee to work remotely from a different state, the employer must register to do business in that state and comply with its labor laws. This includes employer payroll and income tax withholding obligations, as well as wage and hour laws and statutory benefits, just to name a few.
I’ll expand on some of these obligations below.
Because income tax requirements are based on where income is sourced, rather than where an employer is headquartered, employers must determine their tax obligations based on the state in which their remote employee is performing work. This generally includes registering with the state as a new employer, withholding employee state income tax, and remitting employer state payroll and unemployment taxes.
Wage and Hour Laws
The Fair Labor Standards Act (FLSA) governs wage and hour requirements at the federal level. However, many states have enacted their own laws that are more generous to workers than the FLSA, and employers must comply with these policies, as well. For instance, some states require that meal and rest breaks be provided, where federal law does not. Minimum wage rates and overtime pay laws differ by state, as do final pay requirements. A handful of states also have minimum salary thresholds for exemption that exceed the federal requirements.
Paid Leave Laws
While not required at the federal level, many states and localities have passed laws mandating paid sick leave for employees. The laws vary by jurisdiction with respect to employer size and the amount of leave required, and they often include notice requirements.
Similarly, numerous states have laws regulating vacation leave when voluntarily offered by employers. These laws might require employers to pay out accrued vacation leave upon separation, prohibit use-it-or-lose-it provisions or impose other limitations on employer leave policies.
Additional state leave laws might also entitle employees to time off from work for other reasons, such as absences related to domestic violence, voting or jury duty, or family and medical leave.
The nuances of state laws do not end there. Worker anti-discrimination protections vary at the state level, as do pay equity laws and sexual harassment training requirements. Some states require employers to reimburse employees’ business expenses; others have statutory disability benefits. The list goes on. Employers will need to examine their obligations under various state laws when determining how to manage their remote workforce.
If you want to know more about employing remote workers, want to learn where to access SHRM’s Multi-state Law Comparison Tool, or have other HR questions, we’d love to help! Give us a call or send an e-mail. We’re also available by chat. It’s one of the most valued benefits of SHRM membership!
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