We’re in a Lockdown. It’s Fine; What’s the Risk with an Employee WFHawaii or Another State?
The COVID-19 pandemic and its effects on society have accelerated the digital transformation of the modern workplace. With the increasing use of telecommuting technologies and more employers instituting permanent work from home policies, employees and employers are – or should be – asking the question: what are the potential legal issues an employer may face if it allows an employee to work from a state other than the one the employer is based in? There are many potential legal issues that can arise in such an event. The following post will generally discuss five of those issues.
Licenses and registration
On the state level, if a telecommuting employee is working from another state, their employer may need to register with that state’s Secretary of State and pay applicable taxes. On the local level, some cities and municipalities in the United States consider employing even one individual within the city as doing or transacting business. Therefore, an employer may need to acquire a business license from the city in which one or more of its employees work in. In addition to acquiring a business license from the city, some cities require individuals who work from home to acquire a home occupation permit.
Payroll taxes, wage withholdings, and wage payment
The applicable state payroll taxes, employee wage withholdings, and schedules for the payment of wages vary depending on state and local law. In regard to taxes, an employee working remotely in another state may be subject to income tax in the state in which they are working from, and the state where their employer operates from. Furthermore, an employer may be required to apply for a payroll tax account number to use for filing returns and making deposits in all electronic and paper filings.
In terms of the payment of wages, in Washington, an employer must pay its employees at least once a month. This may not be the case in other states, as some states require an employer to pay its employees at least twice a month. Finally, if an employee is discharged or separates from their employer, the time period that the employer has to pay the employee their final paycheck, and the place of the final wage payment may depend on which state the employee is working from.
Leave and time off
An employer must comply with federal family and medical leave laws in addition to state and local leave laws regarding employee leave and time off. For purposes of FMLA, for an employee who does not have a fixed worksite, i.e. an employee working remotely, the worksite is the office the employee reports to or receives assignments from. Therefore, a telecommuting employee is still eligible to take leave under the federal Family and Medical Leave Act.
In addition to federal leave laws, an employer must comply with state leave and vacation time laws, which vary from state to state. Whether an employee qualifies for leave under state law depends on numerous factors, including the period of time the employee has worked for the employer for, and whether the state the employee is working remotely from has employee leave laws. For example, some states impose no legal requirements on an employer to provide its employees with either paid or unpaid vacation time. Nevertheless, an employer may be required to provide vacation pay if it has an established vacation pay policy.
Washington state maintains formal reciprocal arrangements with some states that provide Washington worker’s compensation insurance coverage for employees who are temporarily working in another state for Washington-based employers. However, it is advisable to determine whether the state your employee will be working from has a reciprocal arrangement, since some states require employers with one or more employees to purchase worker’s compensation insurance either through a private insurer or through the state. Finally, to limit disputes on what constitutes a work-related injury, an employer should specify in advance the work hours of an employee who is working remotely, and agree with the employee which specific area of the employee’s home constitutes their home office or work station.
Discrimination and accommodation
Washington state law prohibits discrimination and unfair practices by employers and employment agencies. Most states have similar laws. However, which laws apply depends on numerous factors such as the number of employees an employer has, the business entity type that the employer is organized under, and whether an employee is an in-state or out-of-state employee. Additionally, an employer must treat all workers, remote or on-site, equally so as to avoid claims of disparate treatment. For example, if an employer is offering telecommuting opportunities, it must offer those same opportunities equally to all eligible workers. Furthermore, in order to limit the possibility of discrimination claims, an employer must ensure that all eligible workers are exposed to the same training and advancement opportunities.
These are unprecedented times for employers and employees alike. If you are an employer who has questions about or is considering allowing one or more of your employees to telework from another state, please contact us at Helsell Fetterman. Our experienced employment law and business law teams can provide you practical and cost-effective advice in navigating this transition as smoothly as possible. We regularly represent employers, which gives us unique and balanced insight that we apply to accomplish win-win solutions for difficult employment issues.