As remote work reshapes the modern workplace, companies employing remote workers across multiple states face unique compliance challenges. However, by staying informed about the various laws that may apply to their remote workforce, employers can navigate these challenges with confidence. Below are several legal areas where state laws often differ and that companies should pay particular attention to when managing a multistate remote team.
Wage and Hour Laws
Wage and hour requirements, including minimum wage rates and overtime provisions, often differ by state and can even vary by city. Employers must comply with the laws where remote employees are physically working, not necessarily where the company is headquartered. For example, states like California have strict overtime laws and daily overtime rules that differ from federal guidelines under the Fair Labor Standards Act (FLSA). Employers must also be mindful of state-specific minimum wage rates, which may be higher than the federal minimum wage.
Paid Leave Requirements
Paid sick leave, family leave, and other forms of leave are governed by state and local laws, many of which have implemented more generous provisions than those mandated by federal law. For instance, states like New York, California, and Washington have comprehensive paid family and medical leave programs. Employers with remote workers must ensure compliance with the paid leave laws in each state where their employees reside.
Employee Classification
Misclassification of employees as independent contractors remains a common pitfall, especially in the context of remote work. States such as California have strict classification standards under laws like AB5, which uses the ABC Test to determine whether a worker is an employee or independent contractor. Other states, however, may follow different classification criteria. Employers should review the classification rules in each state where they have remote workers to avoid costly penalties.
Workers' Compensation Insurance
Remote employees are entitled to workers' compensation coverage in the state where they perform their work. However, the rules and requirements regarding workers' compensation vary significantly across states, including coverage thresholds and premium rates. Employers must ensure they have the proper coverage in place, even for employees working out of state.
State Tax Obligations
Both employees and employers may face state income tax obligations in states where remote work is performed. Several states have reciprocal tax agreements that prevent employees from being double-taxed, but not all states offer this. Additionally, some states, such as New York, have unique rules regarding remote work and taxation, such as the "convenience of the employer" rule, which could impose tax liability even if the employee works remotely outside the state.
Non-Compete Agreements and Restrictive Covenants
The enforceability of non-compete agreements and other restrictive covenants varies significantly by state. While some states, like California, largely ban non-competes, others may allow them under specific conditions. Companies should ensure that any restrictive covenants in employment agreements comply with the state's laws where each remote worker resides.
Employers with remote workers in multiple states face a web of legal complexities, from wage and hour laws to tax obligations and workers' compensation requirements. To navigate this ever-evolving landscape, a proactive approach, including regular legal reviews and policy updates, is crucial. Equally important is engaging legal counsel to stay on top of state-specific regulations, providing employers with the support and guidance they need.
Elizabeth Arnold | Measuring Control and Direction under Dynamex 'ABC' Test | Insights | Berkeley Research Group. https://www.thinkbrg.com/insights/publications/measuring-control-and-direction-under-dynamex-abc-test/