Find out what federal and state laws still apply to remote employees.
Key takeaways:
- Labor laws to know include the Fair Labor Standards Act (FLSA), Family Medical Leave Act (FMLA) and workers’ compensation laws.
- State labor and taxation laws apply to the state where an employee lives.
- Employers may have to deal with multi-state tax requirements and insurance coverages if remote employees work in another state.
Currently, 20% of adult U.S. workers work remotely, either hybrid or full-time. Pew Research found that 35% of employees who have jobs that can be done remotely work from home full-time.
If you have remote employees, you may not know their setup can bring new risks and compliance concerns to the company. Federal and state labor laws must still be followed for work-from-home employees, and compliance can be tricky if workers are telecommuting from another state.
Find out what labor laws you need to know for remote employees.
Fair Labor Standards Act (FLSA)
Whether employees are office-based or working at home, it’s easy to forget all Fair Labor Standards Act (FLSA) standards must be met, including breaks.
Here are the key considerations for employers regarding the Fair Labor Standards Act:
- Minimum wage: The state minimum wage is the minimum employers can pay their workers at an hourly rate (currently $7.25). There are also state minimum wage requirements, and if your state is different from the federal minimum, your company will pay whichever is higher.
- Overtime pay: Employees who work overtime have the right to a higher hourly rate for those extra hours. Overtime is considered any hours worked over 40 hours in one workweek. When employees work over 40 hours, they must be paid at wage-and-a-half their normal wage.
- Employee breaks: The FLSA outlines break requirements for workers, including allotted meal breaks and rest breaks, though states can ultimately decide what to enforce.
- Exempt versus nonexempt: If employees make a fixed salary of more than $844 per week, as of July 1, 2024, they are “exempt,” meaning they are exempt from certain FLSA protections, like overtime and breaks. All other employees are considered “nonexempt” under the FLSA. Typically, exempt workers are salaried; nonexempt workers are paid hourly.
Each of these FMLA protections and rights apply to remote workers and in-office workers alike.
Family and Medical Leave Act (FMLA) and Sick Leave
Another law that still applies to your remote staff is the Family and Medical Leave Act (FMLA). This legislation outlines requirements for leave should employees experience certain medical or family issues.
Here are the basics:
- Employees can have up to 12 weeks of unpaid leave with job protection for:
- A family or medical reason including having a baby, adopting a child, caring for a family member with a serious health condition or getting a serious health condition that impacts their ability to perform their job.
- Employees can have up to 26 weeks of unpaid leave per year to care for a family member with a serious injury or illness.
- To qualify for these benefits, employees must have worked for more than a year for the employer, worked at least 1,250 hours over that year and worked at a location where there are 50 or more employees within 75 miles.
Any remote workers who meet these requirements are covered by the FMLA.
In addition, almost half of state governments have laws in place to accommodate paid sick leave, which also applies to remote workers. Check your state’s laws surrounding leave.
Notice Posting Requirements
Certain federal laws also require that employers post notices where employees can see them, outlining rights and responsibilities. Since remote employees may not travel to a central office for work, these notices can be posted on the company’s intranet, or you can send hard copies to remote employees.
Workers’ Compensation
Workers’ compensation laws also apply to remote workers. This insurance covers injuries sustained by employees in the course of their employment, so if they’re doing work-related tasks remotely and get injured, you may have to submit a workers’ compensation claim.
Workers’ comp carriers have a specific code for “work from home” employees. Pay attention to your state’s laws regarding workers’ compensation. Talk to a professional employer organization (PEO) when you’re not sure which steps you’re required to take.
What If a Remote Employee Works Out of State?
Unfortunately, when employees work from a state different than the company’s location, legal requirements get more complicated. For example, each state has different minimum wage laws, and those laws apply to employees who physically work in that state.
If the company is in one state and a worker telecommutes from another, the employer must be careful to follow that other state’s laws, too. These situations are dictated by wherever the employee is performing the work.
States also typically require that an employer obtains workers’ compensation and unemployment insurance in whichever state the employee is working in. You may also have to start withholding state income taxes for your remote employees in the other state and even filing and paying taxes there.
Finally, be prepared to address risks of remote workers that don’t exist for in-office workers. For instance, say you are unaware that one of your employees works in another state for part of the year, perhaps at a vacation home. If they file a claim to receive disability or unemployment benefits in that state, the state government will be alerted that they’re working there and may see that you didn’t report their wages for tax purposes. You may be subject to fines if you didn’t withhold in that state.
Strengthen company policies to avoid this risk. Require workers to notify you if they’ll be working anywhere new. Let them know why it’s important and how it can also create issues for their personal tax situation. If an employee is going to move states and has your approval to do so, get to know all applicable employment laws for that state to ensure compliance.
How to Get Help Managing a Remote Workforce
These considerations need your consistent attention to ensure you understand any changes to laws and compliance requirements. Working with a PEO helps you manage your policies and stay compliant with remote employees.
PrestigePEO makes sure small and medium-sized businesses fully understand their obligations when managing their workforce. We also assist with payroll, benefits administration, retirement planning, workers’ compensation and more.
Contact PrestigePEO today to learn more.
