Which employment laws apply to remote workers?

In addition to federal labor laws that apply across the entire US, each state has the authority to establish its own labor laws, outlining minimum wage rates, overtime, break and leave entitlements, workers' compensation coverage requirements, health and safety requirements, and more. While these laws vary from state to state, they typically apply to both onsite and remote workers. 

In this article, we'll discuss which labor laws apply to remote workers by state, the challenges associated with remote work, and best practices for managing a remote workforce. 

Which federal laws apply to remote workers?

The Fair Labor Standards Act (FLSA), among other federal laws, outlines employment conditions for nonexempt public and private sector employees, including remote workers. The FLSA and other federal laws cover:

• Minimum wage: Remote nonexempt workers are entitled to at least minimum wage, regardless of their location. 
• Overtime requirements: Nonexempt employees working over 40 hours weekly, including those working remotely, are eligible for overtime pay.   
• Meal and rest breaks: Employers are not required to provide meal or rest breaks. However, breaks lasting 5 to 20 minutes are considered compensable work hours. Meal breaks lasting 30+ minutes are usually unpaid.
• Workers' compensation: While the FLSA does not speak to workers’ compensation requirements, and workers’ compensation laws for remote workers may differ from one state to another, employers are generally required to cover employees for work-related injuries, even when they work from home.
• Health and safety regulation: Employees must be safe regardless of their working locations and informed about the procedures for addressing safety issues.
• Anti-discrimination laws: Remote workers, like onsite workers, are entitled to the same protections against discrimination and harassment on the basis of their protected characteristics.
• Payroll tax withholding: Employers must consider where an employee physically works to ensure compliance with state-specific tax obligations, such as income tax and unemployment Insurance.
• Leave entitlements: Remote workers may be entitled to paid time off and up to 12 weeks of unpaid medical leave under the Family and Medical Leave Act (FMLA).

Remote work laws by state

After the pandemic normalized remote work, it became increasingly clear that labor laws would not be relaxed when it came to remote workers, but instead would apply with the same force irrespective of whether the employee was working in-office or from home.

Among the states that made this explicitly clear are:

• California
• New York
• Maryland
• DC (District of Columbia)

California remote employee laws

Remote workers are entitled to the same rights and protections as onsite employees, including rest and meal breaks, paid time off, minimum wage, and more. Additionally, under the California Labor Code Section 2802, employers managing remote employees must reimburse employees for any reasonable and necessary remote work expense, which may include internet and phone bills, office supplies, and work-related equipment.

Cal/OSHA (The Division of Occupational Safety and Health (DOSH) takes care of the health and safety of onsite and remote workforce in California through:

• Setting and enforcing standards
• Continuous education and assistance
• Issuing permits and certifications

California's anti-discrimination and harassment laws also apply to remote workers. The laws require employers to create an inclusive and respectful work environment for all employees regardless of their working location. Employees are protected from discrimination or harassment based on factors such as sexual orientation, disability, or gender.

New York remote work laws

Various employment laws apply to remote workers in New York, covering areas such as minimum wage, overtime pay, health and safety, paid sick and medical leave, and more.

Remote employees working in New York are entitled to a state minimum wage. They must also receive 1.5 times their regular rate of pay for every extra hour worked beyond the 40-hour workweek. Employers must follow New York payroll tax withholding rules regardless of where the company is based. So, if an employee works from New York, their employer must follow New York's tax laws.

Remote workers in New York are protected by the state's anti-discrimination and equal opportunity laws. These laws ensure that everyone working remotely receives equal opportunities, wages, and benefits as their coworkers working onsite. New York's health and safety regulations also apply to remote workers, guaranteeing an adequate working environment regardless of location.

New York's paid sick leave law allows employees to take paid sick leave for personal illness, to care for an ill family member, or for reasons related to domestic or sexual violence. Finally, New York's Paid Family Leave provides partial wage replacement for employees taking time off to bond with a new child or care for ill family members. 

Maryland remote employee laws

Remote workers based in Maryland are entitled to the state's minimum wage and must be covered for potential injuries that might occur while working remotely. Maryland remote work laws also require employers to compensate employees for every extra hour they work beyond their 40-hour workweek.

Under Maryland's Healthy Working Families Act (HWFA), remote workers can accrue sick and safe leave based on hours worked. If an employee works for a Maryland-based company but is located elsewhere, their employer can, but it's not obligated to offer them sick and safe leave. 

DC remote work laws

Employment laws in DC impose various financial and legal obligations on employers, whether their employees work onsite or remotely. First, employers who want to expand their operations in DC must be careful with business registration and filing deadlines, as missing these can result in financial penalties. 

Next, employees whose primary working location is DC are entitled to paid leave for medical reasons under the Accrued Sick and Safe Leave Act (ASSLA). Employers must also contribute to the  Paid Family Leave (PFL) fund, which operates similarly to Unemployment Insurance and provides employees with paid leave for family or medical reasons.

Finally, for companies that offer paid time off (PTO), when an employee is terminated, the employer is required to pay them any accrued unused leave. The only exception is when the employer has a written policy stating that unused leave will not be paid upon termination.

Remote work tax implications

As mentioned in the previous sections, when managing remote employees, employers must adhere to the tax laws of the location where the employee performs their work. Even if the company and employee are not in the same location, the employer must apply income tax withholding rules for the employee's physical location. 

Employee benefits and remote work laws

Remote work arrangements call for adjustments in benefits such as Unemployment Insurance, health insurance, or workers' compensation coverage.

For instance, the federal labor law provides standardized tests for every state to determine which one should collect wage and Unemployment Insurance tax reports. Typically, only one state receives tax and wage reports even when employees live and work from various states. 

The goal is to unify all the services an employee performs for one employer under one state law. 

Remote employees are entitled to Workers' Compensation coverage based on the state's laws where they work. Suppose an employee works in a different state from where the company is based. In that case, the employee may need to obtain a policy supplement to ensure coverage in the employee's location, especially if the employee gets injured while working remotely elsewhere.

Health insurance entitlements may differ when employees move from one state to another or work intermittently in two states. Some health insurance plans may not be available or may provide limited benefits outside the employee's primary location. Employers must ensure their healthcare policies provide adequate coverage to remote employees, primarily those who relocate frequently.  

Legal challenges and considerations for remote workers

Varying local and state employment laws impose challenges for employers with remote workforces across different locations. When a company and part of its workforce are split between states, employers must be able to handle the following situations:

Tax withholding complexities

It may be difficult to navigate withholding employees' income tax if for employees who live in a different location than they work. Additionally, local and state-related tax rules may differ. Regardless, employers must adhere to the tax withholding rules of the state where the employee mainly lives and works. 

Conflicting paid leave requirements

States enforce different laws regarding sick leave. In some, paid sick leave is mandatory; in others, it is not. When employees work remotely, employers must apply the sick leave rules of the location where the employee resides and performs their job; otherwise, they risk non-compliance and possibly legal and financial consequences. 

Workers' compensation coverage

Workers' comp coverage varies by state. Employers must provide coverage to their remote workers regardless of their primary working location. Sometimes, employers must provide additional coverage or policy supplements to ensure compliance with workers' compensation rules in their employees' locations. 

Employee classification risks

Employers must ensure their remote employees are classified correctly based on their jobs and responsibilities. Misclassifying remote employees as independent contractors can cause legal and financial problems. For instance, employers may be liable for unpaid wages, benefits, and taxes if they misclassify them as such. 

Multi-state compliance best practices for managing a remote workforce

Companies need processes, tools, and people to manage remote workforces effectively. Many businesses use a Professional Employer Organization (PEO) to handle HR and payroll admin work and ensure compliance with employment and payroll tax laws.

1. Regularly update employee work locations in HR systems

Employers must keep track of remote employees' relocations. Record keeping helps employers make adequate changes in employee compensation packages and ensure compliance with employment laws in the location where the employee is moving. 

2. Implement clear remote work policies

Clear remote work policies ensure transparency and equity in the workplace, preventing animosities between onsite and remote workers. While these policies must comply with state laws, employers must ensure everyone across the organization, regardless of their working location, is covered by the same rights and protections. 

3. Use compliance software to automate tax and payroll adjustments

Managing payroll and taxes is demanding and prone to error. Instead of relying on manual record-keeping, companies should consider using specialized software to automate these processes, enhancing accuracy and efficiency. 

4. Train managers on state-specific laws and obligations

Companies should invest in training their staff, primarily managers and HR personnel, on state-specific laws and regulations that apply to remote work. Understanding these rules and policies enables those in charge to address employee requests properly and promptly while ensuring compliance with location-specific legal obligations.

How Rippling helps with multi-state compliance

Remote workers are an integral part of today's global workforce. While working remotely from another state unlocks business opportunities, it also imposes legal and organizational challenges, primarily upon employers.

Multi-state compliance should not be a one-person job but can be managed in one platform. 

Rippling's ASO technology and services automate payroll, tax withholdings, and benefits contributions, helping you stay compliant across various jurisdictions.

Remote work laws FAQs

How long can I work remotely in another state before tax withholding is required?

It depends on the location, how long you have been working there or the amount earned while working remotely. For instance, depending on the state, a wage can be subject to taxation after two weeks of working in a particular area, or your wage will only be subject to tax withholding once you earn your first $5,000 in a particular location. In some states, tax withholding may be activated on the first day of travel to the state for business purposes. 

Which state laws apply when employees work remotely in multiple states?

When employees work in various states, the state law that applies typically depends on where they physically perform their jobs. Working in different locations can lead to multi-state compliance issues, so employers must specify where their employees work to ensure compliance with state-specific laws and regulations. 

What are "convenience of the employer" rules?

"Convenience of the Employer" rules refer to employees' tax-related obligations. Delaware, Connecticut, New Jersey, New York, Nebraska, and Pennsylvania maintain this rule, under which employees working in a different location from their employer must primarily pay income tax to the state where the company is based unless the company requires such a work arrangement. 

Do employers need to track temporary work locations for tax purposes?

Yes, employers should track temporary work locations for tax purposes. Even short-term relocations for business purposes require compliance with state-specific tax obligations.

This blog is based on information available to Rippling as of October 21, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.