Three Things to Consider Before Hiring a Remote Workforce

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November 2021

In the wake of the global pandemic, many employers have concluded that an on-site workforce may be both unnecessary and undesirable.

A remote workforce can cause a dramatic reduction in overhead (via lessened or nonexistent rental costs on office space, energy usage, etc.), can promote employee goodwill, and can potentially enable tapping into a global market for the best available talent. Whether these positive factors outweigh the potential negatives (e.g., reduced human interaction, workflow efficiency concerns) is a matter best left to sound business judgment. However, there are also many legal concerns you should consider before beginning to hire remote workers or allowing existing employees to permanently shift to remote status, especially if they intend to move to a different county or state.

How Will This Affect My Employment Law Compliance Requirements?

In the United States, the rights and issues surrounding the workplace can vary significantly from state to state; and even within the state depending on which cities and counties are involved. Issues include basic wage and hour requirements, how a worker is categorized (e.g., employee vs independent contractor), payroll and wage statement reporting requirements, and issues such as discrimination or sexual harassment.

If you are an employer in California, you are likely aware that California has among the most stringent requirements for employers. However, that doesn’t mean adhering to California standards for all employees, regardless of their location, would necessarily protect an organization from employment liability in every jurisdiction. And of course, the international landscape adds another layer of complexity to this issue. The European Union, for example, has significant and robust protections for employees, to which you would be required to adhere if you allowed any employee to work from (e.g.) France or Spain.

 How Will This Impact My Tax Liability?

If an employee is working from out of state, the employer is now likely considered an employer by that state and would need to file taxes and conduct wage withholdings in accordance with the new state’s rules. Depending on the nature of your existing business relationship with that state (or country) allowing one of your employees to work there could also impact its treatment of your existing sales or other contacts with the forum. You should have your accounting team consider these implications before inadvertently incurring taxes which may vastly eclipse the salary you expected to pay your remote employee.

Do I Need to Consider Workplace Safety Concerns?

An employee working from home may be subject to workplace safety protections, and you would do well to understand what – if any – liability you may have if your newly remote worker slips and falls in her own kitchen while “on the clock,” so to speak. Workers’ Compensation laws also vary from state to state and could require an employer to have additional insurance stemming from employees working in other states.

In conclusion, it is important to understand the effects a remote workforce can have on your business before making the leap; and to implement a plan to protect your company and yourself from any potential pitfalls before they arise. If you are well-prepared, and well-advised, your organization will be in a great position to thrive as the business environment continues to evolve.

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Christopher de la Vega, Attorney

CdelaVega@FLASllp.com

(Direct) 805.966.7599

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DISCLAIMER:  This Advisor is one of a series of business, real estate, employment, estate planning and tax bulletins prepared by the attorneys at Fauver, Large, Archbald & Spray, LLP. This Advisor is not exhaustive, nor is it legal advice. You should discuss your particular situation with us or with your own attorney. Our legal representation is only undertaken through a written engagement letter and not by the distribution or use of this Advisor.

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