Remote, distributed work teams have become a mainstream approach to business. There are many advantages. You can attract talent from anywhere, independent of the “home office.” Many employees enjoy a more flexible and balanced lifestyle without long commutes. Technology has made communication and collaboration doable in real time over long distances. However, having employees in multiple states does create compliance issues for employers.
While federal employment laws are uniform across all states, many states, counties and cities have their own laws to regulate things not covered in federal law, or have a higher standard than federal law. Some of these are paid and unpaid leave, workers’ compensation, taxes, wage and hour laws, unemployment and disability.
As a rule, state laws cover the employee where they live and work, not where the head office is located.
Here is an overview of the some of the compliance issues:
Unpaid and Paid Sick and Family Leaves
The federal Family and Medical Leave Act (FMLA) entitles eligible employees to take up to 12 weeks of unpaid, job protected leave for specific family and medical reasons. There are no federal laws concerning paid sick leave or family leave. However, a number of states, cities and counties have gone beyond that standard, requiring paid leave.
Currently, states with paid sick leave laws include Arizona, California, Connecticut, Maryland, Massachusetts, Maine, Nevada, New Jersey, New York, Oregon, Rhode Island, Vermont, Washington, and Washington D.C.
States with paid family leave include California, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Washington, and Washington D.C.
The federal Americans with Disabilities Act (ADA) requires employers to provide accommodations to applicants and employees with disabilities, which may include providing modifications to existing leave policies and providing unpaid leave.
Some states go beyond that and provide paid short-term disability, such as California, Hawaii, New Jersey, New York, and Rhode Island.
Worker’s Compensation Insurance
Worker’s compensation provides cash benefits and/or medical care for workers who are injured or become ill as a direct result of their job, even if they are working remotely. Every state has its own worker’s compensation laws, which vary from state to state.
It is the employer’s responsibility to purchase workers’ compensation insurance in every state where their employees live.
Unemployment insurance follows Federal guidelines, but it is up to each state to run its own program.
It is the employer’s responsibility to pay the appropriate state unemployment tax (SUTA) and federal unemployment tax (FUTA).
Employees file unemployment claims with the state where they worked. If they worked in more than one state, the Department of Labor has created a set of rules to determine which state should pay unemployment.
While FICA and federal taxes are always withheld, employers are also subject to state tax obligations wherever they have employees. These include state and local payroll taxes and other additional state tax requirements. States do not always have agreements with other states that allow employees to only pay income taxes to their resident state, so employers should be aware of the potential complications.
Minimum Wage Laws
The federal minimum wage sets the floor for minimum wage, but states can set a higher minimum wage requirement, sometimes much higher. In addition, some states such as New York have adopted tiers based on location within the state. Likewise, the federal Fair Labor Standards Act (FLSA) defines eligibility and payment rate for overtime, but states such as California have enhanced overtime rules.
Rest Periods and Meal Periods
Federal law does not require lunch or coffee breaks. Many states do require employers to provide an unpaid meal period for employees who work a certain amount of hours per day, and some require pay for “short” rest periods.
Remote employee teams are here to stay, and they provide many benefits for employers and employees. However there are also compliance issues that arise from differences in state laws. You must be aware of these differences and apply them to avoid penalties and even more serious issues.
Want to be in compliance without adding this to your “to do” list? We’ll do it for you. Schedule a free consultation with Aspire HR today.