We’ve all gotten the hang of working with remote workers over the past few years. Chances are you’ve realized the benefits to the point of allowing—and maybe even encouraging or specifically hiring—remote workers. That’s great! But be sure to understand the potential hazards along the way.
Different Rules for Different States
At our last Employment Law Update, Amy Beckstead of Beckstead Terry Ditto PLLC overviewed a few of the considerations needed to employ happy remote workers in a compliant manner. Significant threats to success are the inconsistencies regarding employment laws and regulations that may differ depending on the state.
As we’ve pointed out before, Texas is employer-friendly, which means Texas has far fewer state-specific employment laws compared to states like California, Illinois and New York. Pay transparency, wage and hour laws, non-competes, and other issues are exponentially harder to navigate outside of Texas. And you must follow the employment laws of the jurisdiction where an employee works. For example, while Texas remains at the lowest allowed minimum wage rate, more than half of all states (and some local jurisdictions outside Texas) exceed federal minimum requirements.
Beckstead offers a few questions to ask yourself before hiring remote workers in other states. It’s not an exhaustive list (each situation is different), but it’s a starting point:
- Have you registered to do business in that state?
- Have you talked to your accountant about the potential nexus for business sales and/or corporate tax requirements for having an employee in that state?
- Do you have all the required insurance (workers’ comp, etc.)?
- Are you registered to have an employee in that state?
- Does the state have an indemnification statute with which you need to comply?
- Is it a state with a higher required exempt minimum salary? If so, are you complying with that state law? (New York, Colorado, Washington and California are among the states with stricter overtime exemptions.)
- If non-exempt, are you complying with all the state-specific wage-and-hour issues (California, in particular, has very strict requirements for meal and rest periods, for instance.)
- Has the person received all required notices under that state law? (For example, New Jersey has numerous notices that must be provided in writing, even to remote workers.)
- For those dealing with intellectual property: Does the remote worker need a different invention assignment notice? Several states require an invention assignment notice to be provided to employees; the language is statutory.
- Are non-competes and non-solicitation agreements permitted? If not, have you revised your proprietary rights agreement to comply with that law? Several states have passed restrictions on non-competes, including imposing substantial salary requirements and/or requiring payment if enforced.
- Are you compliant with that state or local government’s paid sick leave laws? These laws may require a certain amount of carry-over, and not all states explicitly indicate that “flexible PTO” policies qualify.
- Are you compliant with that state or local government’s leave laws? California, for example, has an FMLA-style policy that applies to private employers with five or more employees!
- Are you complying with rules surrounding payment into the state’s disability and family leave systems? Massachusetts, for one, has an employer-required portion that must be contributed.
- Are you compliant with the state’s sexual harassment training laws? Several states have explicit training requirements.
- Does the state have legalized marijuana? How will that affect your workplace policies?
- Are you compliant with any pay equity and transparency laws, such as Colorado’s robust law?
What About Traveling Remote Workers?
After being cooped up in the early days of the pandemic, most of us have gotten the urge to travel the world. The Wall Street Journal reports that the number of Americans who identify as digital nomads—combining remote work and travel—doubled to 15 million from 2019 to 2021. Some European cities and villages have even created promotion campaigns to lure digital nomads to their hamlets. For example, the National Network of Welcoming Villages for Remote Workers helps remote workers settle in Spanish villages with 5,000 or fewer inhabitants.
On the surface, a remote job seems to be the perfect complement to the travel bug. But having employees in another country is problematic for multiple reasons, Beckstead cautions. Namely:
- You cannot just assume you can utilize the person as a 1099 contractor. In many cases, this would not be compliant with either the U.S. or the other country.
- Many countries are not at-will like Texas is, and terminating the employment relationship may lead to serious severance ramifications.
- Employing an individual in another country may also subject the company to corporate taxation. A failure to comply with such laws could prevent the company from being able to do business in that country in the future.
- Suppose the individual is developing IP and that country’s law applies. In that case, you might not own the IP developed by the employee in the other country, or you may have to pay the person for a license to use it.
So letting your remote workers explore other corners of the world while clocking in may sound like a great perk with few drawbacks. In the words of Matthew McConaughey, employees and job candidates might think it’d be a lot cooler if you did. But…
“You need to proceed carefully,” Beckstead warns. “Seek legal and tax advice before allowing an employee or even a 1099 contractor to work in another country while working for you.”
Even When Your Remote Workers Are Local
And finally, keep an eye on other changing regulations and concerns regarding remote workers near and far. For example, a reasonable accommodation/disability analysis may be worthwhile, says Beckstead. “Even if your small business isn’t eligible for FMLA regulation, ADA requirements kick in at 15 employees,” she adds.
IP safety and security should always be concerns with remote workers—or any workers accessing data remotely. With the perfect storm of increased remote work and attacks, 2021 was a record-shattering year for data breaches. Studies show that 20% of organizations experienced a breach because of a remote worker and that the average data breach cost increased by over $1 million whenever remote work was a causal factor.
And then there’s the more abstract challenge of how allowing remote work affects employee retention. Beckstead suggests that HR must grapple with questions of fairness, whether those questions enter legal territory or not (surprisingly, some might). Who continues to work remotely versus who needs to come in, and why? Do other benefits/perks differ? How does your treatment of remote workers affect morale and productivity?
Lean on your legal, financial, and HR support to cover these bases so that your use of remote workers is a win for everyone.
