Many remote employees are taking advantage of the flexibility and contemplating a move to another state. What are some considerations for the employer if an employee wishes to continue working remotely in a state where the employer does not have an office?
The initial step is to assess whether the employee’s work can be done remotely on a permanent basis. Many employers may find it easier to consider this possibility after the past two years of the COVID-19 pandemic.
After this initial hurdle, the employer will need to research state laws. There is no federal or uniform rule on this topic. This means an employer will need to be aware of the labor and tax laws in the state in which the employee intends to move, in addition to the labor and tax laws in the state which the employer is located. Three sources play an imperative role in this review: Department of Labor, Department of Taxation, and Secretary of State in each applicable state.
When assessing the state laws, an employer should consider the likelihood of the following:
- Paying taxes in the employee’s intended location;
- Having to obtain workers’ compensation insurance and unemployment insurance in the employee’s intended location;
- Registering as a foreign entity in the employee’s intended location;
- Supplementing the employee handbook reflecting state laws in the additional state; and
- Enforcing of the employee’s employment agreement, non-competition agreement, and eventually a possible termination agreement in the intended state.
The employer will need to balance whether the increased complexity is worth retaining the employee. It is at the employer’s discretion to decide whether to allow an employee to work remotely from a new state.