The expansion of remote work has created a complex legal landscape for employers. This article examines how state employment laws apply to remote workers, what factors determine jurisdiction, and practical steps employers can take to navigate compliance challenges when their workforce spans multiple states.
The Kuklenski Decision
Despite not being binding precedent in Michigan, a recent 8th Circuit Court of Appeals case, Kuklenski v. Medtronic USA, Inc., offers important insights into how courts may approach remote work jurisdiction questions. The court determined that the Minnesota Human Rights Act requires physical presence within Minnesota to qualify a worker as an “employee” under the statute.
In this case, the plaintiff worked remotely for Minnesota-based Medtronic from California, Illinois, and Michigan without ever residing in Minnesota. While she occasionally traveled to Minnesota for work before the pandemic, she hadn’t physically been to Minnesota since February 2020. After being terminated following medical leave, she sued under Minnesota law, but both the district court and the 8th Circuit concluded she wasn’t an “employee” under the Minnesota Human Rights Act due to her lack of physical presence in the state.
This case highlights the critical question facing employers: when employees work remotely across state lines, which state’s employment laws apply? The answer involves several key principles that all employers in Michigan and beyond should understand.
Which State’s Laws Apply? The General Framework
As a general principle (the specific facts and circumstances of each case must be carefully analyzed), the rights of a remote worker are generally determined by the laws in the state where they reside and work. This is true regardless of where the employer is headquartered or incorporated.
While this principle forms the foundation of remote work jurisdiction, several factors can influence how courts apply it:
- Physical Location Controls: Courts typically look at where the employee physically performs their work when determining which state’s employment laws apply.
- Employer Knowledge Matters: An employer who knowingly permits an employee to work from another state generally becomes subject to that state’s employment laws.
- Employment Agreements Can Help: Written agreements specifying applicable law can provide clarity, though they may not override certain mandatory state laws where the employee works.
- Multiple States Create Complexity: For employees who work in multiple states, courts may look at the predominant work location or apply different state laws to different aspects of employment.
Michigan employers with out-of-state remote workers should assume that many of the employment laws of the state where their remote employees physically work will apply to those employment relationships, even when those laws differ from Michigan’s requirements.
Key Areas of Legal Differentiation
When managing a remote workforce, employers should be particularly attentive to these areas where state laws significantly differ, such as:
1. Wage and Hour Laws
State minimum wage and overtime requirements vary considerably. For example, other states have significantly higher minimum wages than Michigan. Similarly, some states have unique daily overtime requirements or meal and rest break provisions that Michigan doesn’t require.
2. Leave Laws
State leave laws also vary widely, and employers may need to comply with the leave laws of the state where the employee works.This includes paid sick leave, family and medical leave, and other protected time off that may exceed Michigan requirements.
3. Employment Discrimination Protections
States differ in which categories they protect from discrimination. While federal anti-discrimination laws provide a baseline, many states offer broader protections than Michigan does, covering additional classes or applying to smaller employers.
4. Non-compete and Non-solicitation Agreements
Enforceability of restrictive covenants varies dramatically by state. California, for instance, generally prohibits non-compete agreements, while Michigan allows them with reasonable limitations (although a new bill in the Michigan House would, if passed into law, impose California-like restrictions). An employee’s physical location may determine which state’s law applies to these agreements.
Practical Strategies for Michigan Employers
Michigan businesses can take several proactive steps to manage legal risks associated with out-of-state remote workers:
1. Establish Clear Remote Work Policies
Develop a comprehensive Remote Employee Policy that addresses jurisdictional issues and clarifies expectations. This should include:
- Designation of primary work location
- Which state’s laws govern the employment relationship
- Requirements for physical presence at company facilities
- Process for requesting or changing remote work location
2. Use Employment Agreements
Consider including forum selection and choice-of-law provisions in employment agreements to clarify which state’s laws will govern the relationship. While not always enforceable, these provisions can provide some protection against unexpected jurisdiction.
3. Conduct a Multi-State Compliance Review
When permitting remote work in a new state:
- Review that state’s employment laws to identify key differences from Michigan
- Determine if company size triggers additional obligations in that state
- Evaluate whether the benefits of having an employee in that location outweigh compliance burdens
Embracing Remote Work While Managing Risk
Remote work presents both opportunities and legal challenges for Michigan employers. By understanding the factors that determine which state’s laws apply and taking proactive steps to manage jurisdiction, businesses can offer flexible work arrangements while minimizing legal uncertainty.
The law in this area continues to evolve as courts address novel remote work scenarios. Michigan employers should stay current on developments, regularly review remote work policies, and consult with employment counsel when establishing remote work arrangements across state lines. With thoughtful planning and clear policies, Michigan employers can navigate this new landscape successfully.
If you have questions or require assistance, please contact Zana Tomich.
