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Employers with Remote Workers Must Comply with Local and State Employment Law Requirements

Employers with Remote Workers Must Comply with Local and State Employment Law Requirements

Ever since the COVID-19 pandemic arose, many employers have faced new challenges from managing remote workforces, including designing new approaches to management that ensure accountability and productivity, as well as new legal risks.

One of the biggest risks stems from understanding and complying with employment law requirements for a multi-state, remote-work workforce. The issues employers face include local employment laws, workers’ compensation insurance, and data privacy concerns, among other issues.

The potential risks of noncompliance with applicable employment laws are significant, and include:

  • Fines: Government agencies can and do audit businesses, bring enforcement actions and levy fines for noncompliance with various employment laws.
  • Litigation: Lawsuits by employees or former employees are among the most common legal disputes businesses face.
  • Reputational Harm: Even if a fine or lawsuit isn’t involved, employment-related issues can lead to significant reputational harm for a business and its leaders. Employment-related disputes are common fodder for media coverage.

Local Employment Laws

Remote workers are generally subject to the local laws of the city and state where they are physically located and perform work. Accordingly, if an employer has employees living and working in different locations, it’s necessary for them to become familiar with the laws of the cities and states where those employees are located.

Such laws may include:

  • Compliance during recruiting and interviewing phase including requirements such as ban the box, salary history bans, salary transparency laws, and social media privacy laws.
  • State and local income tax withholding
  • New hire reporting obligations
  • Occupational licensing requirements
  • Medical and disability leave entitlements
  • Paid leave requirements
  • Payment of accrued vacation
  • Unemployment insurance tax liability

For example, a Michigan employer with a remote worker living in San Francisco must familiarize themselves and abide by the applicable local laws of San Francisco and California which, in general, are more stringent than those in Michigan.

Workers’ Compensation 

In most cases, remote employees will be considered treated as “localized” in the state where they work remotely, which means that state’s workers’ compensation laws will likely apply in the event the worker gets injured. To the extent that an employer does not comply with a state’s workers’ compensation insurance requirements, and a remote worker gets injured, the employer may face penalties—both civil and criminal.

Data Privacy Concerns

Data privacy is increasingly becoming a concern for legislatures throughout the country, with new data privacy protection laws being adopted in states such as California, Colorado, Connecticut, Utah, and Virginia. These laws impact not only businesses who collect data from consumers, but also employers who store, and in some cases share employee data.

Employers with remote workers must know whether these data privacy laws require them to take steps to protect data in order to avoid liability. If a business employs workers who are located in California, the California Consumer Privacy Act and the California Privacy Rights Act may apply, in which case such employers would be obligated to protect employee data pursuant to the statutes.

For example, the California Privacy Rights Act imposes a number of obligations on covered employers, including:

  • Posting a detailed privacy policy about how the employer handles human resources data
  • Complying with new rights regarding human resources data. This includes the rights to delete, correct, and get a copy of specific pieces of personal information; and
  • Including specific provisions in contracts with vendors that handle human resources data.

Failure to comply can result in significant fines.

Stay on Top of Applicable Employment Laws for Remote Workers

The issues described above are just a few of the employment-law related issues employers face while managing remote workers. To remain compliant and mitigate risks, employers should consult with experienced employment law counsel and take steps to stay on top of their obligations, including:

  • Routinely auditing their workforce to identify workers who are working remotely out of state.
  • Require employees to periodically certify physical work locations.
  • Gaining an understanding of applicable local and state laws and updating their handbooks and remote work policies accordingly.
  • Acquiring additional insurance to cover remote worker risks, as appropriate.

To discuss these issues, and for assistance addressing remote worker policies and risks, please contact Zana Tomich.

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