Remote Workers: What Law Governs?

As every human resources professional knows, the employment relationship is heavily regulated, with state, federal and local laws setting the rules regarding how employees are to be treated, paid, and even terminated.  Generally, employers know and understand that they are bound by the laws in effect in the state or locality where they have their business and, typically, where their employees perform their work.  However, in today’s new workplace – the home office – which is often populated by remote workers, the question of what law applies becomes even more complicated.

Is the employment relationship between a business and a remote worker governed by the laws where the business is located or the laws where the employee is located?  Must an employer provide workers compensation benefits through the laws of the state where the worker is located or where the business is located?  How is the employee paid?  Does the employee get meal periods, vacation time, and other benefits based on the employer’s location or the employee’s state of residence? 

The question of how a remote worker affects an employer’s business often goes beyond the questions of how the employee must be treated to include the question of whether various state laws apply to the employer.  For example, under many of the state laws in effect for paid leave, the decision of whether an employer is covered by the state law is governed by the size of the employer.  Some state laws include remote employees in determining the size of the employer, while other states exclude out of state workers from both the number of employees and whether an employee is eligible for benefits under the law. 

This patchwork of federal, state and local laws creates a complexity for employers in terms of the most basic employment relationship where an employee shows up to work at a business that is located within the same state or city where the employee resides.  Adding remote workers to the employee ranks only adds to the complexity – must the employer register their presence in the state where it has remote workers?  What are the tax consequences to the employer and the employee for earnings of the remote employee – who pays the state taxes where the employee lives?  Is the employee eligible for unemployment benefits?  Which state’s unemployment insurance program provides those benefits?  The list goes on and on. 

The purpose of this week’s tip is to highlight the considerations that go into a remote working arrangement and the steps that an employer must take when adding a worker who lives and works out of state to their payroll.  myHRcounsel can assist you in navigating this area of the law and can help you determine your obligations when using remote workers.