Remote employees are proving that working from a home office is an effective option to an in-office environment. So much so that the work-from-home culture is transitioning to work-from-anywhere. This may include a second home, while on vacation, visiting family and friends, just to name a few. Many employers who offer the flexibility of remote work arrangements do so as a viable benefit to attract and retain talent.
However, when employees cross state lines, it can present risk to the employer. If not managed properly, employees working out of state could create new challenges for employers such as benefits, unemployment insurance, tax withholding, workers’ compensation, wage and hour laws and more.
Employees working remotely are immediately subject to the laws of the state where they work. Employers are liable for diverse state benefit programs or mandates, such as paid leave requirements, minimum wage, required disclosures, diverse wage statement requirements and more. For example, California employees are paid overtime if they work more than eight hours in a day, and double time in excess of 12 hours in day. California paid sick leave, and meal and rest break premiums must be paid using an employee’s “regular rate of pay.”
It is also important to understand the tax implications. For example, if an employee lives in California, travels out of state and then works from that out of state location there may be Temporary Presence rules that apply. These rules are diverse and often involve a number of days, an earnings amount, or a combination of factors that would determine tax withholding. If the employer doesn’t withhold tax from wages properly, the state can collect tax from the employer. Employers are held responsible for this, despite the fact that it can be very difficult to remain aware of each state’s specific rules and thresholds.
These are just some examples of the work-from-anywhere risks that employers must manage. Employers who offer this flexibility should consult with their tax counsel.
*Southland Data Processing, Inc. (“SDP”) is not a law firm. This article is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other SDP materials does not create an attorney-client relationship. SDP is not responsible for any inadvertent errors that may occur in the publishing process.