Question 1

What state income tax withholding requirements apply when employees work remotely from another state?

Accepted Answer

When an employee works remotely from a state other than where the employer is located, the employer generally must withhold state income tax for the state where the employee is physically performing the work—not the state where the employer's office is located. This rule, which most states reverted to enforcing after temporary COVID-era leniency ended in 2022, means employers may have tax nexus and withholding obligations in states where they have no physical office, purely because a remote worker lives and works there. A minority of states apply a 'convenience of the employer' rule—including New York, Connecticut, Nebraska, and others—which can require withholding in the employer's state even when the employee works remotely, unless the remote arrangement is required by the employer's business needs. Reciprocal agreements between certain state pairs allow employees who live in one state and work in another to pay tax only in their home state. Employers with remote workers across multiple states must track each employee's physical work location and set up withholding correctly for each applicable jurisdiction to avoid penalties and back assessments.

Question 2

Which state's wage and hour laws apply to a remote employee working from home?

Accepted Answer

For remote employees, the state wage and hour laws that apply are those of the state where the employee is physically performing the work—not where the employer is headquartered. This means that an employee who relocates from Illinois to Indiana while continuing to work for an Illinois-based employer is subject to Indiana's wage and hour laws: Indiana's minimum wage rates, overtime rules, permitted paycheck deductions, meal and rest period requirements, and pay stub specifications all govern that employment relationship. This can create significant complexity for employers with remote workforces spanning multiple states, as many of these requirements differ substantially. California, in particular, has some of the most employee-protective wage and hour requirements in the nation and applies them rigorously to any employee performing work within its borders. Employers must audit their remote workforce's physical locations and review applicable state requirements to ensure payroll, timekeeping, and pay practices are fully compliant with each relevant jurisdiction's standards.

Question 3

How is state unemployment insurance determined for remote and hybrid workers?

Accepted Answer

Determining which state receives state unemployment insurance (SUI) contributions for remote and hybrid employees requires applying a four-factor test used by most states to assign jurisdiction. The test evaluates factors in priority order: first, whether the employee's services are localized primarily within one state; second, if not fully localized, which state serves as the base of operations where significant service is performed or directions are issued; third, the state from which the employer directs and controls the employee's work; and fourth, the state of the employee's residence if none of the prior factors decisively point to a single state. For hybrid employees who work partly in the office and partly at home, the analysis depends on the specific facts—how many days in each location, where primary direction and control originate, and whether reciprocal coverage agreements between states apply. Employers with multi-state remote workforces must evaluate each remote employee's situation individually and may need to register as an employer in multiple states for SUI purposes, which also affects their experience rating and contribution rates in each state.

Question 4

What paid sick leave and mandatory leave laws apply to work-from-home employees?

Accepted Answer

Mandatory paid sick leave requirements are governed by the state or locality where the employee is physically working, not where the employer is based. As the number of jurisdictions with mandatory paid sick leave laws has grown significantly—now including dozens of states and many municipalities—employers with remote workers scattered across the country face a patchwork of different accrual rates, permitted uses, carryover rules, and notice requirements. An employee working from home in Colorado, for example, is entitled to Colorado's FAMLI and paid sick leave protections regardless of the employer's location. In states like California, Oregon, and Washington, mandatory sick leave laws are among the most expansive in the country. For hybrid employees, the determination of which law applies generally follows where the majority of work is performed. Employers must track the physical location of every employee and ensure their leave policies and payroll systems account for the applicable requirements in each jurisdiction. Failure to comply can result in state agency investigations, back pay claims, and civil penalties.

Question 5

What travel pay compliance issues arise for hybrid employees working in multiple states?

Accepted Answer

Travel pay compliance for hybrid employees is an often-overlooked but legally significant area, particularly for employees who periodically travel to an employer's office in a different state from their home work location. The core question is whether travel time is compensable and at what rate—and the answer varies by state. California has some of the most expansive travel pay requirements, treating various forms of travel time as compensable work time under specific circumstances. Arkansas, Iowa, Colorado, New Jersey, New York, Vermont, and other states have also enacted specific travel pay rules that may differ from the federal FLSA standard. For hybrid employees who routinely travel between home and office locations in different states, payroll must apply the correct wage rules for each travel scenario: commute time is generally not compensable, but travel between two work sites or travel required outside of normal working hours may be. Employers should audit their hybrid arrangements, consult state-specific guidance, and ensure their payroll systems can correctly classify and compensate travel time based on the applicable jurisdiction.

Employee Working from Anywhere…Compliance Issues That Must Be Resolved

Purchase Options

Recorded Webinar Only

All Access Membership

Vicki M. Lambert, CPP

ATAAA Credit

ATAHR Credit

ATAPR Credit

CPE Credit

HRCI Credit

SHRM Credit

RCH Credit

Webinar Survey Overall Rating

Average rating

3.0 / 5

Reviews From Webinar Survey

3.0 / 5

Frequently Asked Questions