We are ten months into this pandemic, and many employees continue to work remotely with no end in sight. Indeed, recent surveys show that a sizeable number of employees prefer remote work and hope to continue working remotely even after the pandemic ends. This reality is causing many employers to consider remote working arrangements never before considered– including the prospect of hiring completely remote employees who may live and work in cities and states differently than where the employer is located. Employees may be looking at this possibility for the first time because: If no one is physically going into the office, does it matter where your employee is located?
The short (and emphatic) answer is – yes. When hiring employees who live and work in states where the company has not previously had operations, there are many issues that employers will need to consider in advance of onboarding the remote employee.
States and even many cities or counties have different sick and family leave laws, including COVID-19 leave laws, that apply based on the employee’s work location. For instance, New York City has a paid sick leave law that requires that employers, even those not located within New York City, offer employees who work in New York City paid sick leave.
Employers should make sure that they comply with the state and local leave laws where the employee will be remotely working.
Wage & Hour Issues
Exempt/Non-Exempt Employees – Different states have different tests and salary thresholds for classifying employees as exempt from minimum wage requirements. Employers planning to hire remote-exempt employees should ensure that they will meet the exempt employee requirements in the jurisdiction where the employee will perform the work. For example, the white-collar exemptions’ minimum salary level is much higher under California and Washington state law than under federal law.
If you are hiring non-exempt remote employees, keep in mind that it will likely be more challenging for managers to control and monitor work hours to prevent off-the-clock work. Additionally, some jurisdictions have strict rules regarding when employers must provide unpaid meal and paid rest breaks to employees, including remote workers.
Minimum Wage & Overtime – Some states and cities have specific wage-and-hour laws that apply to remote workers in that jurisdiction, including higher minimum wage rates, daily overtime/split-shift pay laws, laws that prohibit last-minute schedule changes, or that require mandatory rest days.
Wage Statement Requirements – Many jurisdictions have specific requirements for detailed information that needs to be included in employee wage statements or pay stubs, as well as substantial penalties upon the employer for non-compliance.
Some jurisdictions have statutes that require employers to reimburse employees for workplace expenses, potentially including phone and internet for remote workers. For instance, in Illinois, employers must reimburse employees for necessary expenditures incurred in the employment scope and directly related to services performed for the employer, and a written policy explaining the procedures is a best practice for avoiding surprise litigation.
Training & Posting Requirements
Certain jurisdictions require that employees and/or managers working in that location receive mandatory training, including on safety considerations or sexual harassment prevention. For instance, Connecticut requires employers with three or more employees at any location (even outside of Connecticut) to provide sexual harassment training to any employees based in Connecticut (even if there is only one).
Employers must also be diligent about obtaining remote employees’ consent or acknowledgment for things like mandatory arbitration procedures, anti-harassment policies, and anything else the employer may later need to prove the remote employee understood, consented to, or acknowledged.
Reporting & Registration
Employers should include remote employees in their new hire reporting or registration requirements in any state where they employ remote workers. Details about new hire reporting obligations in each state can be found at the US Department of Health and Human Services Office of Child Support Enforcement website (among other resources).
Tax, Unemployment, and Workers Compensation Implications
Generally, an employee’s performance of work duties in a city and/or state – even if confined to the employee’s home — will constitute business operations by the employer and will require the employer to comply with that city and/or state’s withholding requirements applicable to employees. Similarly, employers must establish unemployment and worker compensation accounts in the state where the employee is located.
Companies need to take stock of these issues and others that may arise by employing workers who live and work in states beyond the company’s existing footprint. If a remote employment relationship seems appealing, remember that the employer will bear the brunt of the pain resulting from non-compliance with the myriad of state and local laws referenced above.