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At the start of the COVID-19 pandemic, remote work was a temporary fix. Now, with workplaces reimagined and employers pulling out the stops to ensure retention and boost recruitment, remote-work positions are a permanent fixture. Many employers in the Pacific Northwest, both in the public and private spheres, are reaching beyond state boundaries to hire remote employees around the country. Even employers who want to dip their toes into this hiring pool need to have a list of the legal considerations when weighing costs and benefits associated with hiring out-of-state employees.
Employers Will Need to Follow Out-of-State Laws
States have an interest in protecting their own residents in the workplace. Employees who will be permanently remote and working full-time in their state of residence, are therefore protected by the laws of the state where they live and work. In other words, generally the labor and employment laws of the state where employer headquarters are located will not apply to the out-of-state employee. And for the rare employee who commutes from their residence in a neighboring state to an external workspace outside of their home, the state laws of the state where they work will cover their employment. As a general rule, it matters less where the employee lives and more where the employee is physically working.
At each stage of employment, including job postings, separation, hiring, civil rights, wage and hour, occupational safety, privacy and leave laws of the state where the remote employee will be working will cover the employee’s employment. In many cases, that may mean that the employee is entitled to less protections and benefits than other employees and that the employer has the option to provide more beneficial programs/restrictions across the board or provide the remote employee only what is required under their local state law.
The Employer May Become Subject to New Laws in Their Home State
Many federal and state laws cover only employers of a certain size — most often measured by employee count. Some state laws count only in-state employees towards the threshold. Other state and federal laws measure employer size by the number of employees nationwide. For example, the Oregon Family Leave Act that provides unpaid leave only counts Oregon employees in defining employer coverage, so hiring someone in Idaho will not affect the employer’s coverage under that law. On the other hand, the equivalent family and medical leave law in California counts all employees nationwide, so a current California employee may not be entitled to California leave because an employer’s new hire in Idaho pushed them into coverage.
Workers’ Compensation Coverage
Hiring even one employee in a new state will require employers to confirm their policy covers workplace injuries in other states, and may require buying supplemental or broadening existing coverage. Even the most employer-friendly states require workers’ compensation coverage. Some states have formal agreements with others states, which allows workers temporarily or intermittently working out-of-state to be covered under their home-state insurance policy. However, those agreements usually do not cover employees working permanently in states outside their employer’s home states. Therefore, employers need to ensure their existing workers’ compensation coverage complies with the state where they are hiring new employees.
Business Registration
State laws vary as to which licenses and registrations are required to conduct business within the state. However, most often, states require all employers to report to the state employment agency newly hired and recently re-hired employees within 20 to 40 days. States have an interest in tracking the arrivals of new employees working in the state for payment of personal income tax and any specific payroll taxes that might apply. For that reason, state registration systems often allow employers to create a single account for registering new hires and submitting unemployment insurance contributions to the state. Additional registration may be required with the state’s Secretary of State or regulatory agencies overseeing industry licensing and oversight.
Notices & Posters
Despite the lack of physical office environment, remote employees must receive legally mandated notices. In addition to the requirements under federal employment mandates, states and major cities require and provide posters to comply with state and local notice requirements. More and more states have specific allowances for providing remote employees with posters electronically, but other states are silent on how to comply with physical posting requirements.
In addition to the legal intricacies of having remote workers in the same state as employer headquarters, hiring out-of-state remote employees adds complexity. Whether you are hiring your first employee over the river in Washington or recruiting someone from the balmy South, factor-in these considerations when evaluating locations for remote workers.
Charlotte Hodde is an attorney at Barran Liebman LLP. For any questions about managing remote workers, contact her at 503-276-2102 or chodde@barran.com.
