The Importance of Compliance for a Remote Workforce

– Christopher Butler, Esq.

In recent times, we’ve come to appreciate that incorporating a remote working environment can yield many benefits, including a generally happier workforce and the opportunity to hire from a larger pool of talented candidates. Remote work often proves conducive to an enhanced work-life balance. In fact, many employees find that working remotely (whether from home or just across state lines) allows them to better seek out and work for companies where they feel better aligned and engaged with their own culture and values. Whereas not all jobs or work environments are well-suited for remote work (e.g., commercial airline pilot, security guard, or factory worker), in cases where remote work is practical, it can ultimately achieve a win-win for both the employer and employee. 

However, remote work can pose many challenges that might not otherwise exist in a traditional on-site work environment. Those challenges include, among others, limitations on effective employee communication, collaboration, and engagement; connectivity issues; barriers to management accessibility and oversight; and mentoring/training obstacles. And, remote work doesn’t eliminate, but in some cases, may even facilitate, employee misconduct, harassment, discrimination, horseplay, and lackadaisical performance, largely due to the lack of on-site presence and supervision. But, aside from these obvious risk factors, a remote work environment can also present legal challenges, including those pertaining to workplace safety/workers’ compensation, leave management/FMLA, and wage and hour/compensation/payroll, among many others.

Awareness of Regulatory Differences Between States

While remote work is not a new concept, the scale of the remote workforce has grown exponentially ever since the COVID-19 pandemic forced hordes of workers to stay home for weeks and months on end. What most employers did not anticipate was the extent to which remote work would evolve into cross-state employment. It’s now quite common for employees to reside and thus work from one state while reporting directly to employers located in an entirely different state (and perhaps a state or office the employee has never even visited). Toward that concern, the general rule of thumb for hiring employees outside of the company’s home state is to follow the regulatory requirements established by the state in which the employee currently lives or works. For instance, employers should be aware of state regulations concerning:

● Workplace Safety/Workers’ Compensation – Most states share a basic set of occupational health and safety requirements that employers should abide by regardless of the state that where the company or its employees are located. For example, employers are legally obligated to provide a safe and healthy work environment, which includes proper equipment, training, and support. And this obligation would in many cases extend to a remote working environment, perhaps even to a worker’s home office. Let that sink in a moment.

And while most states require an employer to maintain workers’ compensation insurance (except for Texas), remote workers who are injured on the job in one state (even while at home) may qualify for workers’ compensation in their own state of residence, the employer’s home state, or even both. That’s something else to think about.

● Leave management/FMLA – Many states (and even some cities and counties) maintain employee leave laws and regulations, which may obligate a company to provide a remote employee with a paid or unpaid leave of absence in certain circumstances. Some of the states that presently impose employee leave obligations include California, Colorado, Connecticut, Delaware, Massachusetts, Maryland, New Jersey, New York, Oregon, Rhode Island, and even Washington, D.C.

And, while it’s a blackletter provision that the Family Medical and Leave Act (FMLA) only applies to employers with 50 or more employees within a 75-miles radius of the “work location,” that equation becomes more complex when contemplating remote workers (particularly those who work in other states). However, the U.S. Department of Labor has clarified that with respect to remote workers, an employee’s work location is “the office to which they report or from which their assignments are made.” Thus, in many scenarios, a worker who telecommutes across state lines but works within the defined radius of where they report to, may still be eligible for FMLA leave.

● Wage and Hour/Compensation/Payroll – Although it’s a given under the Fair Labor Standards Act (FLSA) that employees must be paid for all hours worked, many states also have their own “payday laws,” which require employers to pay workers on specific days and/or on specific intervals. For example, in Arizona, employees must be paid on two or more days out of the month, with paychecks to be issued no further than 16 days apart.

Moreover, in addition to federal requirements, most states have specific, and often different, income tax withholding guidelines (or none, like Alaska, Florida, Nevada, and Tennessee). And, in some cases, the employer may be required to register as a tax entity within the employee’s state of residence, rather than the company’s state of location, in order to appropriately withhold and pay state income taxes.

And, yet another thorny legal issue that has recently emerged across several states is “wage transparency” – which is the practice of openly advertising or displaying employee salary information to job candidates and current employees alike. Traditionally, salary information has been a closely guarded secret on the front end, but several states have recently enacted legislation requiring employers to openly disclose salary information for new job postings. Given the proliferation of cross-state remote employment, wage transparency laws can impact recruiting efforts and lead to complications when job postings unintentionally reach candidates in states from which the employer has purposefully sought not to recruit. 

Along that line of thought, to demonstrate the complexity, California’s new wage transparency law in particular is ambiguous about its application to remote job postings issued by companies outside of the state. Although California-based companies are required to adhere to the law, there isn’t clarity as to whether companies situated outside of the state are also required to disclose salary information (when they presently have no actual employees in California). Moreover, in the event that an out-of-state company is required to abide by California’s wage transparency law, there’s no regulatory entity or enforcement infrastructure in place to hold companies outside of California accountable. 

Indeed, due to cross-state regulatory quagmires, many businesses simply avoid hiring remote employees who are based in states with variable income tax, payroll, wage payment/transparency laws, or other onerous regulations simply due to the administrative burdens and bureaucratic chutes and ladders they’ll have to circumnavigate before the onboarding process. But, when a company is determined to hire a certain candidate, these obstacles can be overcome with careful planning and strategizing.

The Takeaway
As a business owner or HR professional, it’s in your company’s best interest to hire the best possible candidates from whichever state they may reside. But, an employer must sometimes ask whether the benefits of hiring a remote employee outweigh the administrative burdens? And, oftentimes they are. Working with an experienced employment attorney can help guide your business through the process of understanding and complying with state regulations. If your company seeks guidance on the legal implications of maintaining a remote working environment or hiring an out-of-state worker – or simply wants to discuss the applicability and scope of certain employment laws concerning your existing remote workforce – we have tremendous experience helping business-owners and HR professionals understand and comply with multi-state and federal employment laws, and perhaps we can help you too – contact Chris Butler with Agenzia.