Interstate Hiring – Considerations for Employers
As remote work becomes more prevalent, employers are often hiring workers in states they have not previously occupied. Many employers, busy with their day-to-day tasks of running a business, are not aware of the obligations that come with hiring in new jurisdictions. While not an all-inclusive list, this article is intended to highlight some of the most significant items employers should be mindful of when nexus is created with a new state.
Most states, and some local municipalities, impose taxes on wages earned by employees working within their boundaries. Even states without income taxes will impose state unemployment tax – or SUTA – obligations on employers. It is important to contact the applicable state or local agency wherever employees are present and complete the application process for the necessary state tax accounts, so taxes can be accurately reported and paid in a timely manner.
Paid Time Off
Many states, such as Arizona, California, and Washington, require paid sick leave for employees. The amount of leave required can vary from state to state, and it is often based on employer size. Additionally, even though very few states require vacation benefits to be provided to employees, some states do require employers that choose to provide vacation to pay out all unused time upon an employee’s termination. California and Colorado are examples of states that consider accrued vacation time to be vested wages owed upon termination of employment.
Several places, including D.C. and Rhode Island, have enacted their own versions of the federal Family and Medical Leave Act. These state-level laws require employers to provide job-protected leave, paid through a state fund in many cases, for a variety of medical and childcare reasons. Where in the past employers could usually focus on the federal FMLA when dealing with job-protected leave, some states are providing more generous benefits and often with lower employer-eligibility thresholds. For example, the D.C. paid family leave law applies to employers with at least 20 employees, where the federal FMLA requires an employer to have at least 50 employees for it to apply.
Pay Day Laws
The frequency of employee pay days can vary by state, so employers must be mindful that their payment practices are in compliance when paying employees in different states. For example, Connecticut requires employers to pay their workers on at least a bi-weekly basis, where Tennessee allows employers to pay employees on at least a monthly basis. Furthermore, final payments may become due at different times based on state law. Some states, such as California and Colorado, require immediate payment of final wages for discharged employees. Other states, such as Delaware and New Jersey, allow employers to make final wage payments to employees on the next regularly scheduled payday.
State Labor Laws
In addition to the items already mentioned, each state has its own requirements regarding worksite posters and employee notices. Many states also have rules governing minimum wage, overtime pay, meal and break periods, and employee benefit plans.
Recent trends that decriminalize marijuana at the state level have had a substantial effect on drug testing laws. Some jurisdictions, New York City and Nevada included, have made it unlawful for employers to consider marijuana in pre-employment drug testing for most jobs.
Employers have many considerations when hiring an employee in a different state, but this should not deter a business from taking advantage of opportunities to hire out-of-state talent. An employer that is mindful of the items discussed above will be able to avoid many compliance-related issues that can arise from remote employment.
As always, please reach out to Adams Keegan if you have questions or want to discuss these items in more detail.