Large corporations with facilities across the globe have systems in place to monitor compliance with local employment and tax laws for the various places where they maintain employees. Smaller U.S. companies with only one or a few locations may be in the habit of tracking only the applicable rules in their home state. The pandemic-induced explosion of remote workers … employees untethered from any brick-and-mortar location … dramatically compounds the challenge for large and small employers alike of understanding and complying with all of the state and federal (and international) laws, ordinances and regulations with a nexus to their workforce.
Employees in a company owned or leased workspace typically fall under the laws of the municipality and state in which that workspace is located and (for income tax) of where the employee resides. A General Motors employee working at the Renaissance Center in downtown Detroit pays City of Detroit and State of Michigan income tax and enjoys the protections of, for example, Michigan’s Elliott-Larsen Civil Rights Act. If GM transfers the worker to its Parma Metal Center in Cleveland, local and Ohio work rules take effect, notwithstanding GM’s Michigan headquarters. If the employee commutes between Michigan and Ohio each day, it gets a bit more complicated. But if GM clears the employee for permanent “remote work” without the need to report to a physical location, things become a lot more complicated.
As remote workers travel across the country, they create a shifting series of legal obligations for their employers. Depending on the extent of someone’s wanderlust and the residency requirements of the places they visit, an employer may have obligations to multiple taxing authorities in a single year. And if the employee puts down roots in a city or state with employee friendly laws (e.g., mandatory paid leave requirements or prohibitions against non-compete agreements), the employer must become familiar with those laws or risk the consequences of running afoul of them.
Remote work has proven surprisingly successful and popular. It is safe to say that it is “here to stay” in some fashion. That being the case, employers need to retool the ways they track employee location and ensure compliance with applicable employment laws. If not, they may be surprised by just how expensive a remote worker can be.