When the pandemic first hit and we saw multiple employers across numerous industries switch to remote work capability this was sometimes a challenge. In many instances, it involved a lot of back end work for the Company/Employer and their IT dept. or team. Companies were often tasked with providing equipment, adding to the cost of set up, ensuring additional layers of security for data base, servers and other access employees required. Then there was the challenge of maintaining a professional atmosphere, for some businesses this was easy, others not so easy.
While many employees were out and time away from the office and the more formal atmosphere was extended, we continued to see change in our employee population. Including at times, employees who completely relocated and did not notify the employer! Some employers were not aware the employees had relocated until a formal recall notice of intent to return to the office was sent out. Such situations provide many legal and compliance hurdles for employers.
Remote employees are typically subject to the laws of the state where they are Physically located and performing the work from. What this means for the employer is that the employer has an obligation to set up all state reporting for Unemployment accounts and insurance, worker’s compensation coverage, other liability insurance if the state requires it, tax filings, etc. etc.
It may also be necessary for the company to register to do business in the state (a foreign qualification to do business filing) with the local Secretary of State Office that the remote worker is working in. If so, the company will have annual filing obligations in the state the remote worker is in and the company may need to hire a registered agent. Further, there are some cities and/or counties that require workers who work at home obtain a home occupation permit (CA, NV are examples of this). If the Employer has multiple remote workers working out of their home in multiple states, the company likely needs to go through the full registration with the multiple state agencies, depending on local laws in each.
Companies absolutely have to comply with the employment laws of the state that the remote worker is working in. Employment laws differ state by state and include, but are not limited to, minimum wage, PTO and leave entitlements, labor posting requirements, payday requirements, paycheck delivery, state unemployment insurance, overtime, and breaks. If a company fails to comply with state employment laws the company can end up being liable for lost wages, penalties, non-economic damages, and potentially attorneys’ fees. An employer should examine the state’s (and possibly county and/or city) employment laws where the remote worker wants to work to determine the specific laws that would apply in each instance. Also keep in mind that should an employee file a labor or other discrimination charge, the Employer now has to respond to this in the state in which it was filed.
Another important consideration to keep in mind with remote workers is workers’ compensation. Generally, most states require employers to provide workers’ compensation insurance with some limited exceptions. Due to the situs rule, the workers’ compensation laws of the state where the remote worker is actually working apply.
Just like employment laws, workers’ compensation coverage obligations vary by state law. Certain states have reciprocal agreements with other states about when and how they accept out-of-state workers’ compensation insurance. Under these reciprocal agreements, employers are allowed to bring employees temporarily into state from the reciprocal state without purchasing in-state workers’ compensation insurance. However, since reciprocal agreements are generally for employees temporarily in the state, these agreements may not apply to a remote worker who intends to work in the state for an extended period of time.