Still Have Remote Workers? Things to Know to Stay in Compliance

Posted by: Karen Booher on July 18th, 2022

The COVID-19 pandemic forced most companies to shift gears and allow their employees to work remotely for a period of time. Some companies have since had their employees return to work, but many are still allowing either fully remote, or hybrid, work to take place.

It’s important for employers to know that many employment laws and wage & hour laws are based on where the employee works from, not from where the employer is located.

So, if your remote employee has moved out of state to live with their family, or has hit the road in their RV and logs into work from various places throughout the U.S., you have additional work to do to ensure you are complying with laws in all of the correct jurisdictions.

State Payroll Taxes

Most states require payroll taxes to be paid if an employee is working in their jurisdiction for more than a specified period of time. This generally requires the employer to register with the tax authority in the other state. Some states have a relatively easy tax registration process, while other states are more cumbersome or expensive.

City Payroll Taxes (Occupational Privilege Taxes “OPT”)

In Colorado, OPT taxes – if applicable – are based on where the employee works from most of the time. So, if your company is in Denver, but your employee works from their home in Aurora 50% or more of the time, the company needs to be withholding and submitting Aurora – not Denver – OPT taxes. If a remote employee of the same company lives and works in Broomfield, no OPT should be withheld from their paycheck as Broomfield does not have this city tax.

Workers’ Compensation

If the employee’s workers’ comp code is “Clerical Office Employees” (8810-05) when they work in the office, the correct workers’ compensation code for someone working 50% or more of the time from home is most likely “Clerical Telecommuter Employees” (8871-05).

Leave

Leave laws (including sick leave, voter leave, military leave, emergency paid leave) vary greatly from state to state and by locality. Under The Colorado Healthy Families and Workplaces Act (HFWA), Colorado employers must provide their employees with Paid Sick Leave (1 hour accrues for every 30 hours worked), and up to 80 hours of Public Health Emergency (PHE) Leave for COVID related absences. If a Colorado employer’s worker lives and works outside of Colorado, then Colorado’s HWFA does not apply (but the other state’s leave rules will apply).

A Myriad of Other Employment Laws That Vary Based on Where the Remote Employee is Located

• Minimum wage and overtime laws
• Pay checks and Payday laws
• Drug testing laws
• Pay deductions
• Garnishment laws
• New Hire reporting forms and requirements
• Harassment and discrimination training and reporting

Employers Should Develop a Written Remote Work Policy

To safeguard your Colorado-based company from these potential non-compliance pitfalls, it is recommended that companies implement a written policy that provides that:

• Work From Home (WFH) employees cannot work in another state or country for more than 30 days without advanced written approval, and
• the exact location of all work performed remotely needs to be communicated to the HR department or to management in writing.

When there is no written policy, the employee can persuasively argue that he or she was not aware that notification was required. Having a mandatory written notification policy gives you a better likelihood that you will be timely made aware of your WFH employees’ moves to help you control labor costs and try to ensure compliance. In addition, if the employee fails to notify you, and there is a written policy requiring written notification, you will have a stronger argument that you did not willfully violate the other state’s or country’s laws.

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Sources:

1. ASA Staffing Today, 6/29/2022. “Hiring Remote Employees in Other States? Make Sure Your Business is Compliant”, by Debra Mastrian, SmithAmundsen LLC, June 15, 2022.
2. ASA Staffing Today, 7/13/2022. “A Remote Work Policy That Ensures Employees Do Not Hop From Place to Place”, by Mark Spring and Todd Wulffson, CDF Labor Law LLP, July 5, 2022.