I run a business in California and would like to hire someone from a different state to work remotely. What, if any, additional steps should I take when hiring an out-of-state remote employee?
Understanding the legal complexities and requirements of employing workers across state lines is essential for maintaining a compliant work environment.
Below are some important considerations for hiring out-of-state employees.
State Labor Law Compliance
Labor and employment laws covering wages, overtime, sick leave and other matters often vary by state. Employers must familiarize themselves with and adhere to the labor laws of the state where the employee works.
For multi-state employees, reconciling conflicting laws between the states where the employee works can be tricky.
Although the general rule is to apply the laws of the state where the work is performed, there are exceptions, such as under the Fair Employment and Housing Act, where California law might extend to an out-of-state employee.
Engage legal counsel to help you handle these legal complexities, and to update your company’s policies (for example, your employee handbook) accordingly.
New Hire Paperwork/Labor Law Postings
Proper onboarding for out-of-state employees includes completing all new hire forms and providing all notices required by the state where the work is performed.
This may include providing a new out-of-state employee with forms and notices beyond what your home state and federal law require.
Review and comply with new hire form and notice requirements, including any posting requirements, in all states where you have employees performing work.
Business-Related Considerations
• State Registration: Some states require business registration when your employees are working within that state. Consult with legal counsel for assistance in navigating this process.
• Tax Implications: When employees are working across multiple states, navigating multi-state tax withholding may be necessary. Consult your payroll provider and a tax professional to ensure compliance and proper tax handling.
• Insurance Considerations: Many insurance policies, such as workers’ compensation and health benefits, are state-specific. Contact your insurance carrier(s) or broker to verify existing coverage limitations and secure any necessary coverage in the state where the employee works.
Additional Considerations for Remote Work
• Job Expectations: Make sure you have a detailed job description and remote work policy that set clear expectations around work hours and remote availability.
• Information Technology (IT) and Security: Ensure remote employees have secure and efficient access to company networks (for example, through VPNs or other remote access solutions) to protect sensitive information and maintain productivity.
• Expense Reimbursement: Define which expenses you will reimburse (for example, home office supplies, personal cell phone use, etc.) and the process by which you want employees to submit their reimbursement information. Confirm you understand and comply with state-specific legal requirements regarding reimbursement for your employee.
As you can see, there are a number of considerations that come into play when hiring an out-of-state remote employee. As discussed above, it’s best to consult legal counsel in the areas with which you are unfamiliar.
Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred members and above. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.
