The rise of remote work over the past few years has significantly changed the modern white-collar workplace. Many candidates now view remote work opportunities as a key part of a competitive job offer. Even employers who prefer an on-site workforce may feel compelled to explore remote work options to attract and retain talent.
Once employers make the initial leap into remote work, it may be tempting to broaden the hiring pool with out-of-state candidates, or to allow existing employees to work from any location they choose. However, employers should carefully assess the risks and obligations of becoming a “multistate” employer before making these decisions. Below, are a few of the key considerations.
Handbooks, Policies, and Agreements
A common misconception among employers is that California law provides more employee protections than any other state. Employers assume (incorrectly) that applying California-based policies and agreements to out-of-state remote workers will be sufficiently “generous” to comply with other states’ laws.
In fact, almost every state has unique employment-related restrictions or entitlements. For example, many employers are unaware that employment in Montana generally is not at-will (meaning, employers must have “good cause” to fire an employee). In New York, even exempt employees may be entitled to meal breaks. Tennessee provides for fully paid jury duty leave for most employees. Massachusetts prohibits many types of work on Sundays and holidays. There are dozens of paid family leave and sick leave laws across the country, and no two are exactly alike. California-based policies not only fail to address these variations, but also may directly conflict with them.
Employers also must consider how state law affects agreements with employees, such as trade secret, arbitration, and separation agreements, compensation plans, and more. It is not all bad news, though; depending on the state, employers may have additional options to protect their business. Many states permit reasonable non-compete and non-solicitation agreements, for instance. Of course, complex choice-of-law issues also mean that employers may have to litigate such agreements outside of California.
In short: employers should not treat out-of-state remote workers simply as an extension of their California workforce. Employers should consult with employment counsel in advance of approving out-of-state work to tailor their policies, handbooks, and agreements to applicable state and local laws.
As of 2023, California joins Colorado, New York City, Washington, and other local jurisdictions in requiring employers to provide a wage scale within job postings. Employers advertising for fully remote positions may therefore need to comply with multiple laws within the same posting. For example, the New York City wage transparency ordinance applies to any position advertised from any state that could be filled by a candidate who resides in New York City. Employers need to ensure they understand the intersection of all of these laws prior to posting remote jobs.
In California, Illinois, and several other states, employers must reimburse employees for certain business expenses. However, these laws are not clear regarding when an employer must reimburse the costs of working remotely. Although employers generally need not reimburse expenses incurred solely for the employee’s own convenience (e.g., where the employee simply prefers the comforts of home), this analysis becomes trickier when an employee applies for a position that does not have an in-office option (e.g., where the employer purposely hired a remote employee outside of reasonable commuting distance).
Employers frequently do not consider the costs of requiring remote employees to travel to a physical worksite for trainings, meetings, or events. Depending on the circumstances, an employer may be required to compensate the employee for their time spent travelling as well as all travel expenses. Employees also may be entitled to California wage and hour protections while temporarily working in California, further complicating payroll. Employers should consult with counsel to ensure they fully understand the reimbursement obligations of out-of-state remote positions before committing to them. Notices, Postings, and Electronic Signatures
Every jurisdiction requires employers to provide certain notices and postings. Employers must therefore ensure they have processes in place to provide employees up-to-date documents in accordance with state and local law.
Although many employment documents may be provided to employees electronically, employers also should consider how they will collect acknowledgements and other signed documents from remote employees. Courts may not enforce electronic signatures on employee documents without clear evidence of the authenticity of the signature (i.e., that only the employee could have signed it). A basic form, spreadsheet, or agreement to sign documents electronically generally is insufficient.
Finally, there are certain situations in which electronic interactions will not suffice. I-9s, for example, must be signed in the physical presence of an authorized employer representative. Many state laws also require that final pay be in an employee’s hand at the time and place of separation. Employers must consider how they will meet these requirements with remote employees.
The above considerations are only the tip of the iceberg. Employers must consider a number of complex issues relating to a multistate remote workforce, such as state and local tax implications, wage and hour laws, and workers’ compensation requirements. In addition to legal requirements, there are morale and employee relations issues, such as maintaining pay and benefits parity, and preserving company culture and engagement.
The bottom line: remote work is here to stay, and it may provide significant benefits to employers. However, understanding the legal implications of multistate employment is crucial to avoid pitfalls. Employers should consult with counsel prior to hiring out-of-state remote workers to ensure they understand the risks and benefits.