Q&A #21 – Which state’s laws govern our telecommuting employees?

Question: I am the Executive Director of a nonprofit in a metropolitan city that has employees who live in various nearby states. Prior to COVID-19, all of our employees worked at the office, and we understood that the organization’s obligations as an employer were limited to the state where our office is located. Like everyone else, we instituted a remote work policy in March, and employees have been working from home ever since. It seems clear that employees will not be returning to the office on a regular basis anytime soon, so do we need to start considering the organization an employer in all of the states where our employees live?

Answer: You have correctly identified an extremely complex issue for which you will certainly need individualized advice. The issue of which state employment laws govern telecommuting employees impacts your organization’s responsibilities on a wide range of laws including but not limited to unemployment, workers’ compensation insurance, income tax withholding, wage & hour laws, workplace safety, anti-discrimination, and paid and unpaid leave.

In general, you are probably correct that the organization was previously only subject to the state employment laws where the office was located. This probably remained largely the case when employees began working from home on what seemed at the time to be a temporary, emergency basis. The complications arise as remote working becomes a long-term or permanent arrangement, because eventually the states where the employees reside will have jurisdiction over these employment relationships.

As a general rule of thumb, an employee will usually be deemed to be employed in the state where the majority of the employee’s services are performed. This means you will need to keep a close eye on when your staff’s work time reaches a tipping point of being mostly from home in their state of residence. However, two notes of caution: (1) this is not as simple as it sounds and is not an exact science – inevitably, there will be judgment calls requiring a strategic risk assessment; and (2) this approach may not work for every state law at issue (for example, some states take the position that their wage and hour and workplace safety laws apply to any work performed in the state, regardless of the number of hours).

Planning Tip – As soon as possible, start counting the days and hours each employee has worked at home vs. at the office for the 2020 calendar year , and make a note of all states of residence where the organization is not registered as an employer. This data will be important to any strategic risk assessment. Keep an eye on the frequently changing employment laws related to COVID-19 in all relevant states, and seek the guidance of an employment attorney to help you determine the path forward.

Remote working has many advantages, but it also raises major legal complications for organizations with employees who live in a number of different states. As remote working shifts from being a temporary arrangement to a permanent or long-term reality, many organizations will need to plan for new compliance issues sooner rather than later.

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