Cameron Miranda
The COVID-19 pandemic has led to a rise in remote work, with many employees now working from home. This new way of working has raised questions about which labor laws apply to remote workers, and the issue is complex. Generally, employees working remotely are subject to the laws of the state in which they work and live. This includes laws regarding minimum wage, overtime pay, and working hours. For example, an employee working remotely for a company in another state will still be subject to the labor laws of the state in which they are physically located. This can create challenges for employers, who must now navigate the differing laws of multiple states.
In the US, the Fair Labor Standards Act (FLSA) sets out standards for wages and overtime pay, and applies to most private and public employment. The FLSA also covers issues such as privacy, anti-discrimination, and equal pay. Additionally, the Family and Medical Leave Act (FMLA) allows employees to take up to 12 weeks of unpaid leave annually for family or medical reasons, while still retaining their job.
Other considerations for remote workers include meal and rest breaks, safety regulations, and reimbursements for work-related expenses. Employers must also be mindful of state surveillance laws and data privacy when monitoring remote employees.
| Characteristics | Values |
|---|---|
| Laws applied | The laws of the state where the employee is working apply |
| Workplace posters | Required for remote workers, can be delivered electronically |
| Workplace policies | All policies should apply to remote workers, with remote work-specific policies added |
| Non-exempt workers | Must keep track of hours worked and take required breaks |
| Overtime | Must be tracked and approved in writing |
| Paycheck laws | Differ by state, e.g. when an employee must receive their last paycheck |
| Business expenses | Must be reimbursed if they reduce an employee's pay below minimum wage |
| Employee monitoring | Must comply with state surveillance laws |
| Data privacy | Must be protected by the employer |
| Anti-discrimination laws | Apply to remote workers |
| Equal pay | Applies to remote workers |
| Medical leave | Applies to remote workers |
| Paid time off policies | Differ by state |
| Labor law notifications | Can be delivered electronically |
What You'll Learn
Wage and hour laws
In the US, the Fair Labor Standards Act (FLSA) establishes the minimum wage, overtime pay, record-keeping, and youth employment standards for employees in the private sector and in federal, state, and local governments. The federal minimum wage is $7.25 per hour, and this applies to workers covered by federal wage law. However, states can set higher standards than federal law, and in these cases, workers are entitled to the higher state minimum wage. For example, in Massachusetts, the Attorney General's Fair Labor Division enforces laws about minimum wage, overtime, payment of wages, sick time, meal breaks, temp workers' protections, domestic workers' protections, and record-keeping, among other things.
Some workers are deemed "exempt employees", and minimum wage and overtime pay requirements do not apply to them. These include farmworkers and public sector employees. There are also special considerations for tipped employees and employees with disabilities.
For remote workers, the laws of the state in which the employee is working will generally apply, even if the employee is receiving work from a different state. This means that employers must comply with the minimum wage requirements for that state. Additionally, employers must pay remote employees for the hours worked, including overtime, and ensure proper tracking of these hours.
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Workers' compensation
Working from home has become a common practice, with many employees enjoying the flexibility it offers. However, this new work arrangement also raises questions about labour laws and how they apply when employees work remotely. One key area of concern is workers' compensation and whether employees are covered in the event of an injury while working from home.
In general, workers' compensation covers injuries that occur while the employee is working, regardless of the work location. This includes injuries sustained during authorised breaks, such as an 'ordinary recess' or shorter breaks to access refreshments or use the bathroom. However, it is important to note that the injury must be directly related to the work being performed. For example, if an employee trips and falls while moving work-related boxes from their garage to their home office, they would likely be eligible for workers' compensation. On the other hand, if an employee slips and falls on a wet floor while taking a break to make lunch, their injury would not be considered work-related, and their employer would not be liable.
When working from home, employees should notify their employer as soon as possible if they are injured during work hours. It is also important to follow the employer's procedures for filing a workers' compensation claim, which usually involves submitting a claim form. Time limits for filing a claim vary by state, typically ranging from 30 to 90 days from the date of the injury. Failing to file within this timeframe could result in the loss of the right to receive compensation. Additionally, it is worth noting that workers' compensation claims can be denied if the injury is not deemed work-related, but employees have the right to appeal such decisions.
To summarise, workers' compensation laws generally cover employees who work from home, and employers must have the appropriate insurance in place. The specific laws and requirements may vary depending on the state or territory, so consulting the relevant workers' compensation authority is essential. Employees should also be aware of the procedures for filing a claim and the time limits involved. By understanding their rights and responsibilities, both employers and employees can ensure they are prepared in the event of a work-related injury while working from home.
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Tax withholding
Employee Classification
The first step is to determine whether your remote workers are classified as employees or independent contractors. This classification is crucial because it determines your withholding obligations. If your remote workers are employees, you are responsible for withholding payroll taxes from their earnings. On the other hand, if they are independent contractors, they are responsible for managing their own taxes. Misclassifying an employee as an independent contractor can result in employer liability for the employee's taxes.
State Income Tax Withholding
Employers are generally required to withhold state income tax from employee wages, even for non-resident workers. However, it's important to note that some states, such as Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, do not have a state income tax. In contrast, some states tax all income of their residents, including wages earned in another state. Therefore, it is essential to review and comply with the relevant state laws and regulations.
State Payroll Reciprocity Agreements
Remote workers may sometimes be taxed twice if they work in a different state than their residence. While employees can resolve this issue when preparing their state tax returns, it creates an additional burden. To address this, some states have reciprocity agreements, allowing residents of one state working in another to pay taxes based on their resident state's laws.
State Unemployment Tax Withholding
The State Unemployment Tax Act (SUTA) is a type of payroll tax that varies by state. While most states consider SUTA an employer-only tax, Alaska, New Jersey, and Pennsylvania require employers to withhold SUTA taxes from employee wages and remit them to the state.
Additional State Deductions
Certain states require additional withholdings to fund specific programs. For example, California, Hawaii, New Jersey, New York, and Rhode Island mandate temporary disability deductions to maintain their temporary disability insurance (TDI) benefits program. Additionally, several states, including Colorado, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, and Washington, have paid family and medical leave (PFML) programs, requiring contributions to be deducted from employee wages.
"Convenience of the Employer" Rules
Some states, including Connecticut, Delaware, Nebraska, New Jersey, New York, and Pennsylvania, have a "convenience of the employer" rule. This rule deems that employees working from out-of-state for an in-state employer owe state income tax primarily to the employer's state, unless the employer specifically requires the employee to work remotely. In these cases, employers must withhold taxes accordingly, and employees may need to file income tax returns in two states.
State Corporate or Business Activity Taxes
If an employee works in a different state, it may trigger new registration requirements and tax liabilities for the employer. Even a single employee working remotely from another state can create a "nexus" for state corporate or business activity taxes. This may include the need to register with the secretary of state, provide a registered agent address, and pay various taxes, including corporate, sales, and employment taxes.
Compliance and Correcting Mistakes
Employers are responsible for knowing and applying the relevant tax laws for their remote employees. Mistakes in multi-state payroll processing can be corrected through payroll remediation by working with state and tax authorities to rectify past errors and ensure future compliance. Additionally, hiring a third-party service provider for payroll remediation can help resolve compliance issues and ensure ongoing compliance with payroll taxes for out-of-state employees.
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Unemployment insurance
The U.S. Department of Labor's unemployment insurance programs provide unemployment benefits to eligible workers who become unemployed through no fault of their own and meet certain other eligibility requirements. To be eligible, workers must meet their state's requirements for wages earned or time worked during a specific period, usually the first four out of the last five completed calendar quarters before the claim is filed. They must also meet any additional state requirements.
To receive unemployment insurance benefits, individuals need to file a claim with the unemployment insurance program in the state where they worked. Claims may be filed in person, by telephone, or online. It generally takes two to three weeks after filing a claim to receive the first benefit check.
During the COVID-19 pandemic, federal law provided states with flexibility to pay benefits in various scenarios related to the virus. For example, benefits could be paid if an employer temporarily ceased operations due to COVID-19, preventing employees from coming to work, or if an individual left their job due to a risk of exposure or to care for a family member.
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Employee benefits
Employees working from home or other remote locations are entitled to the same benefits as those working on-site. The Fair Labor Standards Act (FLSA) covers any employee in the U.S., regardless of their work location. This includes rules on minimum wage, overtime, and break time. For example, employees must be paid at least the federal minimum wage, and for anything over 40 hours, they must be compensated at 1.5 times their normal rate.
The Family Medical Leave Act (FMLA) also applies to remote workers. It requires employers to provide 12 weeks of unpaid but job-protected leave for medical or family issues. To be eligible, the employee must have worked for a covered employer for more than a year. A covered employer is a private company with 50 or more employees within a 75-mile radius of their primary location.
Additionally, workers' compensation laws apply to remote workers. Employers are responsible for providing a safe working environment for all their employees, regardless of where they work. This means that if an employee slips and falls on their way to the kitchen on a workday, they may still be covered by workers' compensation.
Privacy laws are another area of concern for remote employees. While the law generally allows employers to use software monitoring tools to track remote employee activities, these rules are rapidly evolving.
Furthermore, remote workers may be entitled to certain state-specific benefits, such as paid family leave, depending on the state they are working from. This can create complexities for employers, who must ensure compliance with various state laws and regulations.
Overall, it is important for employers to understand the applicable laws and regulations regarding remote work to ensure they are providing their employees with the benefits and protections they are entitled to.
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Frequently asked questions
Remote workers are entitled to the same protections as employees working in a standard employment circumstance. This includes federal laws such as the Fair Labor Standards Act (FLSA) and state laws regarding payment of wages, overtime, and other labor requirements. The laws that apply are those of the state where the employee is physically working.
Yes, employers are required to withhold applicable state and local income taxes based primarily on the physical location of the employee. This can become complex when employees work across multiple states, as each state has its own rules and thresholds for tax withholding.
The state law that applies to payroll taxes is the law of the state where the employee is doing the work. For example, an employee working remotely from Indiana will have Indiana law applied to their state tax withholding.
Yes, many states require that employees be given mandatory meal and/or rest breaks if they work beyond a certain number of hours. Courts have held that employers are liable if remote employees do not receive the mandated breaks. To ensure compliance, employers can require remote workers to clock in and out.
Yes, just like regular workers, remote employees are entitled to a safe working environment. Employers should mandate health and safety regulations for the remote work area, such as requiring a non-hazardous work area with safe equipment, unobstructed walk areas, and proper heat and ventilation.
