The Complex Legal Web of Remote Employees

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work remotely

It's no secret, the number of people working from home has increased tremendously

Between 2019 and 2021, the number of people primarily working from home tripled from 5.7% (roughly 9 million people) to 17.9% (27.6 million people).  The rise of remote employees has led to many employees primarily working in states other than the state where the employer is located.  Generally, employees working remotely are subject to the laws of the state where they work.

So what does this mean for you?

Employers utilizing out-of-state employees are thus liable for diverse state benefit programs or mandates, such as:

  • Minimum wage and overtime requirements
  • Wage statements requirements
  • Disclosures
  • Transportation taxes
  • Different tax treatment of employee benefits
  • Garnishment restrictions/limits
  • Paid and/or unpaid Family/Sick and COVID leave requirements
  • Will you be virtual, or will you require a physical space?
  • Are there licenses or certifications required for your business where you operate?
  • Will you need outside funding, such as investors or partners?
  • Worker classification (i.e., employees versus independent contractors)
  • Unemployment insurance
  • Disability insurance
  • Pay equity laws and reporting
  • Background screening restrictions
  • Privacy/Monitoring
  • Local/city taxes
  • Licensing requirements

Some examples of how this works

We could not write an exhaustive list otherwise this would become a novel, not a brief article. Here are a few examples of how these differences in the laws of where the employee works versus where the employer is located include:

 

  • California employees are paid overtime if they work more than eight hours in a day, and double time in excess of 12 hours in day.
  • New York and New Jersey require paid sick leave (including identification of the accrued paid sick leave on each pay statement)
  • New York and New Jersey require payment for state paid family leave insurance
  • Employers in New York must disclose any electronic monitoring, such as internet access and videoconferencing, to new hires
  • State licensing may be a consideration in industries that are subject to licensing (such as construction contractors, financial counseling, insurance sales, etc.). Employers and employees may need to seek licenses in any state in which employees are working

Another thing to consider

Even when employers are making the appropriate deductions/withholdings from pay, they are often making such payments to the state where the employer is located, not the state where the employee is based.  This would not only constitute a violation of the state law where the employee is located, but it could also deprive the employee of access to certain state benefits, such as disability/paid family leave insurance, unemployment compensation, etc.

Summary

If your business is employing remote workers based in other states, it is critical that you get legal counsel to ensure that you’re complying not only with the laws of the state where your business is located, but also the states where you’re remote employees are working.

Disclaimer:

Information contained in this post is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the with Michael H. Ansell, Esq., or other competent legal counsel.

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Picture of Michael Ansell, Esq.

Michael Ansell, Esq.

Michael Ansell is the founder and managing member of NextGen Counsel LLC. Throughout his years in practice, Michael focused on a variety of areas that impact small businesses, including contracts, employment, commercial leasing, corporate governance, construction, and general litigation.

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