Trying to figure out employee benefits laws may feel like being stuck in a maze. Employers must consider federal and state laws where the business and employees are resident. So, how do you determine the legal implications of remote working as far as employment benefits are concerned?
It all starts with how you classify your remote employees. Correctly classifying your employees sets you on a path to avoid unnecessary legal issues with remote employees. Strictly speaking, a remote employee is an employee of a company who works for your company but not in the same office or physical environment. A remote employee can be stationed in a coworking place, at home, or in a coffee shop.
Many employers at times treat remote workers as independent contractors. Mis-classifying employees means that the employee, the state, and the federal government would suffer losses. The employee will miss out on benefits they’re legally entitled to such as insurance, while the federal and state government would miss out on unemployment, workers’ compensation funds and low tax revenue, respectively.
Because of this, companies that mis-classify employees expose themselves to employee lawsuits and IRS penalties.
Labor laws specify the employer’s obligations towards their employees. Labor laws apply to all employment relationships including remote employees, contract workers or employees who show up to a physical office. The primary objectives of labor laws are to:
- Protect the employee’s right to equal pay and opportunity.
- Safeguard the employees’ physical and mental-wellbeing.
- Encourage workplace diversity
Employers who cannot adhere to labor laws are vulnerable to penalties that may derail the realization of your company’s objectives. Non-compliance may mean prospecting investors and consumers who consider ESG (Economic, Social and Governance) metrics before deciding to engage a business opt for your competitors.
Among the relevant laws to consider are:
FLSA is the main federal labor law in the United States. For remote employees, employers must adhere to both the FLSA and the state law where the remote employee works or lives. Under FLSA, employers must consider:
- Employee Eligibility Verification
Form 1-9 under FLSA is completed by the employer for each employee hired whether working remotely or not. Every employer has a responsibility of verifying whether their remote employees are eligible to work in the US and that they have the relevant documentation.
To verify employees, companies are required to execute Forms 1-9 which are then transmitted to the E-Verify system to certify that an employee is eligible to work in the United States. However, some states such as Louisiana, Minnesota, and Pennsylvania do not enforce the E-Verify, therefore allowing non-eligible immigrants to work.
- Payroll, Wage and Hour Law
Every employee working in the United States is eligible to:
- Minimum wage
- Income tax, payroll tax, and other tax requirements
- Overtime pays
- A predictable pay cycles
- Expense reimbursement
- Delivery of paycheck
- Workers’ Compensation
Often, a small business may overlook workers’ compensation as an important legal consideration for remote work. Workers’ compensation covers the employer and the employee, should the employee suffer an accident while at work or carrying out their contractual duties. If an accident leads to the death of an employee, workers’ compensation covers benefits payable to the family of the deceased employee.
- Training and Posting of Notices on Employee Rights
State and federal law require that employees showcase or display in posters the employers’ rights at the workplace. Not framing and putting up such notices violates the law. Apart from the rights articulated under FLSA, the laws vary from state to state.
You may want to regularly find ways of informing your remote employees of their legal rights. When employees understand working from home legal issues, it empowers them to negotiate with your corporate structures and avoids unnecessary grievances.
- Unemployment Insurance
Unemployment insurance guarantees the employee’s safety in case they lose their jobs. However, this only applies if the reason for job termination isn’t their fault. The insurance cushions the employee against the adverse effects of unemployment. Different states may have a variation of the unemployment insurance requirement for remote employees.
- Payroll Requirements
As a general rule, if your employees work remotely and out-of-state, the state in which the work is performed will determine the taxes and deductions that will be withheld from your employee’s salary.
The exception to the rule, however, happens when bordering states have entered agreements that would require withholding taxes to be paid to the state in which the company lives and not the employee.
In other instances, the employee may be subjected to double taxes by the state in which they work and the state in which the employing business is resident.
However, states have amended taxing rules for employees working from home as a COVID_19 precaution.
Employers must allow employees to take leave since it is a legal right as provided by the Family and Medical Leave Act. The regulation states that “an eligible employee under the law must be employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite.”
Many employers neglect to offer leave days to their employees since they construe the remote workplace to be a worksite. However, according to the FMLA regulations, “a worksite is the office to which the employee reports to and from which assignments are made.”
State laws may require other leave obligations to the employer.
Disclaimer: The information provided in this article does not constitute legal advice, but seeks to provide legal information to employers with remote employees.