Remote work has been relatively common for decades, but it became even more so after the COVID-19 pandemic. This has created a lot of opportunity for business owners to hire from a broader pool of candidates and to rethink some of their operating costs, but it has created some new legal wrinkles too. Here are a few things to keep in mind if you decide to employ remote workers, particularly if they reside outside of California.
Local Tax Laws
Even though your business is owned and technically operated in California, your employee’s payroll should reflect the local tax laws. If your employee has a hybrid position, you will have to check to see whether both states have an agreement on state tax withholdings.
Issues may arise when remote workers come to California temporarily for projects since California taxes income based on services rendered in the state. The California Franchise Tax Board is responsible for determining the taxable income of out-of-state employees. They do this using a formula that compares the number of days the employee will inevitably do work within the state vs. the number of days they will continue to work outside the state. For example, if one of your out-of-state employees must come to California to complete a complex project, their employment contract should outline the number of “duty days,” or days physically working within the state, in order to avoid potential tax penalties.
Local Workplace Laws
How will you track your employee’s work time? Are there overtime or salary laws you need to know about? Businesses need to be especially clear about work time and places in the event that an employee experiences an injury on the clock. Each state may have different laws regarding what qualifies as a workplace injury when employees work from home. Some municipalities even require employers to apply for home occupation permits.
Outfitting Your Remote Team
One of the major benefits of remote work is that you may not have to invest in leasing an office. However, you may need to consider how you will supply your workforce with the appropriate materials for their work. Whether you ship the equipment out to employees or reimburse them, you need to make it clear in the company handbook or employment contract that all paid equipment is officially the property of the company with instructions on how to return it once their employment has ended. You also will need to outline the policy on broken or stolen equipment. Do you have an insurance plan to cover these items, or does the employee need to cover a portion of the accidental damage?
Certification Rules
One of the most important considerations for hiring remotely is whether your business is allowed to conduct business in a different location. Depending on your business’s legal certification, certain states may require additional registration or an application process to hire employees within that state.
Getting Help
The items outlined above are just some of the things to consider when hiring and managing a remote workforce. With so many people working outside the office for the first time, this is new terrain for a lot of employers and employees with the potential for a lot to go wrong, especially for companies whose employees live and work in a different state where different laws apply. Integrated General Counsel can help you navigate this tricky terrain. For a consultation, contact our firm at (925) 399-1529 (1LAW).
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