Before you hire out-of-state remote workers – read this
Did you know that in California, a supervisor who isn’t even an owner of the business can be held personally liable for a labor claim from an employee? If you’re a Texas employer, does that matter? Yes! Here’s why:
Technology has allowed organizations of all sizes to hire remote workers. In fact, telecommuting has increased 115% since 2005. While many remote workers live near their employers, an increasing number do not—and there are some compelling reasons why. Hiring remote sales and customer support team members, for instance, allows an organization to be available to customers 24/7. It’s never been easier to expand an organization’s footprint nationwide.
But while technology has made hiring remote workers from out-of-state easier than ever, there is one major complication to overcome: You need to follow the labor and payroll regulations of the state and city in which your employee lives or plans to work. For Texas employers, that’s a big deal. Why? Because Texas is a very employer-friendly state with relatively few rules to follow. Heck, we don’t even have a state income tax. Compare Texas to California, which has some of the strictest labor regulations in the world, and you can start to imagine the headaches (or worse) that could befall an employer who doesn’t plan ahead.
Rules to keep in mind when hiring
Missteps can happen before an employee is even hired. Take employment applications and background checks for example. Some states and cities including Austin have a “ban the box” policy that restricts how employers can ask about and check for criminal backgrounds.
Then, during the interview process, it’s becoming increasingly important to avoid asking about salary history. Employers hiring in Philadelphia, New York City, San Francisco and throughout California, Massachusetts, and a few other jurisdictions face various bans on asking candidates about their salary histories. In many of these cases, the closest question you can ask is about salary expectations instead. In heavily regulated jurisdictions like California, the list of other off-the-table interview questions is quite extensive and nuanced. SHRM offers some insights here.
Rules to keep in mind during employment
Beckstead Terry PLLC compiled a helpful list of laws to keep in mind while employing out-of-state workers. The list includes some obvious areas to watch, like vacation and sick time accrual/pay out (see specific tips here), minimum wage requirements, and overtime/exemption rules. But it also includes some areas that might not already be on your radar, like special rules on meals and rest breaks, workers’ compensation insurance (which Texas doesn’t require, but most other states do), discrimination/retaliation, and invention assignment rights/proprietary information agreements.
See their full list of suggestions here. And for extra tips on payroll and payroll taxes across state borders (including an introduction to something called reciprocal agreements between states, which allows the employee to withhold taxes in their own state), see this advice from Gusto.
Rules to keep in mind for termination
If you have non-compete agreements with employees, be sure at the time of hire the agreements you hold with remote workers meet their own regional standards for what can be considered fair and reasonable. Some jurisdictions have special rules about final pay, paid time off accrual and other areas that should be addressed in a specific way, too. Even in at-will work states like Texas, there are nuanced rules to follow to terminate an employee legally.
The regulations listed above aren’t an exhaustive list—just a few key places to start. And remember that these rules are constantly changing on the federal, state, and city levels. For instance, Austin just passed a paid sick leave ordinance that affects nearly all Austin employers. As of October 1, even a generous unlimited PTO policy may not be structured well enough to avoid penalties. Although state legislators have vowed to overrule the ordinance in 2019, Austin isn’t the only city with a strict paid sick leave policy that requires careful reporting. It’s important to work with an employment firm and attorney knowledgeable about each municipality in which you have employees to get and stay on top of changing regulations.
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