How to navigate state labor laws when hiring remote workers
Brann & Isaacson
Jamie Szal, left, and Hannah Wurgaft are lawyers at Brann & Isaacson, with offices in Lewiston and Portland.
When companies closed their offices in March 2020, employees trundled off to work remotely, whether from their homes or far-flung locations. Under normal circumstances, the in-state presence of those employees would have raised a whole host of red flags for employers and employees alike.
“Quarantimes” were not, however, normal times. Now that we find ourselves coming out of the pandemic in the hottest job market seen in years, with flexible work opportunities in high demand, there are several key issues employers should keep front of mind:
Navigating labor and employment laws
As we have seen, many employees looking to escape the hustle and bustle of the big city relocated. According to Bloomberg News, during the pandemic droves of New York City residents moved upstate, to Connecticut and as far away as Miami. In Maine, Portland and South Portland saw a 6.8% net increase in moves into the area.
Whether state-specific laws implicate employers with remote workers depends on the number of employees in a given state and the law or regulation at issue. For example, Maine’s Family Medical Leave law applies to all employers “doing business in or operating within the state,” whereas Maine’s Earned Paid Leave law imposes paid time off requirements only on those employers with more than 10 employees in Maine for more than 120 days in any calendar year.
The Maine Human Rights Act includes yet a third definition of “employer,” subjecting “any person in this state employing any number of employees … and any person outside this state employing any number of employees whose usual place of employment is in this state” to claims of discrimination and harassment arising out of employment in Maine.
Similarly, employers with remote workers in California are likely subject to its assorted labor laws, such as its Vacation Pay Law, Final Paycheck Law and Meal and Rest Break Law, which are broadly applicable to any employer who “directly or indirectly, or through an agent or any other person, employed or exercised control over wages, hours, or working conditions of any person,” per Martinez v. Combs.
Employers with remote workers should also stay abreast of state and local laws regarding COVID-19 and the workplace. New York requires employees to receive paid time off to get vaccinated. In contrast, Montana prohibits employers from refusing or denying an individual's employment “based on the person’s vaccination status or whether the person has an immunity passport.”
The state also bans vaccine mandates in the workplace for vaccines authorized under emergency use authorization or “any vaccine undergoing safety trials.” The law is enforceable against “anyone who hires one or more persons” in Montana and likely applies to employers with remote workers in Montana.
As the pandemic evolves, employers should work with counsel to carefully review the web of labor and employment laws potentially implicated wherever remote workers are located.
Post-pandemic tax implications of remote employees
Early in the pandemic, many states adopted pandemic-specific nexus policies that took the position of “maintain the status quo.” In effect, states turned a blind eye to the in-state presence of remote employees and announced that these employees will not create nexus for the out-of-state employer for business taxes, or trigger a change in the type of sales/use tax registration for those states that offer remote seller specific flat tax rates.
Most states have announced an end to the so-called pandemic nexus waivers. In short, these states will no longer turn a blind eye to the in-state presence of remote employees. Some states have allowed a transition period of one to three months, meaning that although the official state of emergency has ended, the state will not impose nexus on a company or person on the basis of in-state remote employees unless those employees remain working remotely after the end of that transition period.
As businesses shift out of the pandemic policies, the place in which employees work once again becomes a critical consideration for a business’ tax footprint. Under almost any circumstance, having an employee working from home in a state will trigger a business’ liability for taxes like income taxes, gross receipts taxes and sales or use taxes that you may not otherwise be subject to.
Now is when the strategic planning conversations are critical. Businesses that have not already done so have a window of time to determine the following:
- Where your employees actually have been working throughout the pandemic
- Will you maintain a remote or hybrid workforce?
- What states are you not willing to hire in?
- What the going-forward implications of that work environment will be
Maine employers embracing workplace flexibility to attract and retain talent should recognize there may be going forward tax consequences. The choice is one that should be exercised knowingly based on the tax and non-tax implications.
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