It's 2023: Do you know where your workers are? Key considerations for managing a remote workforce 

Even with an increasing number of employers calling their workers back into the office following the pandemic, many employees across the United States are still working from home or otherwise working remotely. While many employers tout the flexibility of work-from-home as a benefit for employees, managing a remote workforce can raise a number of multistate compliance challenges. In particular, remote and hybrid work has significant implications for employers' state and local tax withholding and unemployment insurance contribution obligations. Planning ahead with appropriate policies and procedures can help employers ensure compliance with federal, state, and local laws.

Quick Hits

  • Employers may have state or local income tax obligations, and unemployment insurance contribution obligations for remote employees in the states and municipalities where remote employees perform their work, even if an employer has no other connection to that jurisdiction.

  • Implementing a clear remote and hybrid work policy is key to ensuring compliance with state and local laws, fostering uniformity in the treatment of workers and performance standards, and providing a groundwork for individualized remote work plans.

State and Local Income Tax Withholding

The general rule is that an employer has an income tax withholding obligation for the jurisdiction where services are performed by each of its employees. This may require employers to be up to speed on state and local withholding requirements in each jurisdiction in which they have one or more employees working, whether the workers are in the office or working remotely. For example, if an employer is based in South Carolina, but has an employee working from home in Georgia, the employer is likely to have an income tax withholding obligation in Georgia even if the only connection to that state is the employee working there.

Some states have bilateral reciprocal agreements with other states where each state effectively agrees to tax only their own residents even if a nonresident from a state with which they have an agreement were to perform services within its borders. Some states have also implemented the "convenience of the employer" rule that enables the state to tax nonresidents who work for in-state employers when the employee is working outside of the state (not at the in-state employer's place of business) for their own convenience rather than due to a business necessity.

An employer may have tax withholding obligations even if employees fail to inform the employer that they have relocated and are performing services from a different jurisdiction. An employer's lack of knowledge of an employee's move likely will not excuse the employer's tax withholding obligations because employers are expected to know the location from which their employees are working. If an employee has been working remotely from another state without the employer's knowledge (or permission), the employer may be obligated to retroactively correct the tax reporting for that employee.

To keep tabs on employees, employers may look at so-called digital breadcrumbs (e.g., IP login information) to determine if the employee is working from where they say that they are. Regardless of whether an employee asks the employer for permission to work at a new location before doing so or forgiveness only after being caught, states may hold employers accountable for tax withholdings.

Unemployment Insurance Contributions

Unfortunately for employers, the analysis to determine to which state unemployment insurance contributions are made is a more complex process. There is a four-part test that each state has passed to determine to which state contributions should be made. First, the employer must look at where the employee's services are localized, meaning the place where the predominant amount of their service is performed such that service provided elsewhere would be considered transitory or incidental in nature. Second, if an employee's services are not localized, then the employer must look to where the base of operations is, meaning the place where the employees start and end their day. Third, if an employee has no base of operations, the employer must look at the place of direction and control, basically, where the employee's manager or boss sits. Fourth, the catchall looks at the state of residence of the employee.

Hybrid Workers Between States

Having a hybrid workforce, meaning employees are permitted to work part-time from their assigned office and part-time from home, adds another layer of complexity. Often for income tax withholding purposes, employers will be required to allocate the wages earned by the employee between the two jurisdictions based on the amount of time spent in each state. Whereas with unemployment insurance, contributions should only be made to one jurisdiction, even if an individual works in more than one state; typically, unemployment contributions are made to the state where the employee is providing more service.

Further, an employer may incur tax-withholding obligations when an employee works remotely in a new jurisdiction for only a temporary period. Technically, tax-withholding obligations are triggered even when employees travel and work for only a short period of time (e.g., one day). In general, a majority of states do not have a minimum threshold for earnings required before a nonresident traveler working in their state is subject to income tax withholding. For example, the issue may arise when an employee travels out of state for two weeks to visit family and takes vacation time for a week but works remotely for another week. The employer may have tax-withholding obligations for that other state. Moreover, a growing number of municipalities and localities are implementing taxes on earnings in those jurisdictions so employers may have local withholding obligations as well.

Remote Work Policies

These types of issues make it important for employers to consider implementing a strong workplace policy governing remote work and hybrid schedules. Among other provisions, a remote work policy can set forth:

  • the process by which employees request permission to work remotely;

  • the factors considered by the employer in the approval process;

  • which positions in the company are eligible to work remotely;

  • when, where, and how often employees are allowed to work remotely;

  • where workers are expected to work when working remotely;

  • information security measures employees are expected to take; and

  • communication expectations with managers and other members of their team.

Such a policy can guide not only employees but managers and human resource professionals who have to manage a remote workforce. The policy can ensure that employees understand the attendance and sick leave policy and know what is required of them in terms of performance and productivity targets. A policy can further serve as the groundwork for individualized remote working arrangements, particularly if remote work is provided as a reasonable accommodation for an employee with a qualifying disability under the Americans with Disabilities Act (ADA).

Next Steps

While many employers believe remote and hybrid work schedules can be a win-win for employers and their employees, this can be overwhelming and create a number of issues that employers may not have considered prior to allowing remote work. Employers may want to confirm where their employees are performing work to ensure compliance with any state and local income tax withholding or unemployment insurance obligations, and to have specific policies in place in advance of allowing remote work to address situations in which employees will be permitted to work someplace other than their assigned office.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Restrictive Covenants Under Attack Again: National Labor Relations Board Issues Memo Disfavoring Noncompete Agreements

National Labor Relations Board (NLRB) General Counsel Jennifer A. Abruzzo recently issued a six-pagememoto all NLRB Regional Directors, Officers-in-Charge and Resident Officers highlighting concerns that the use of noncompete agreements in employment contracts may violate federal law in some circumstances.

The NLRB memo underscores that noncompete agreements can limit employees’ mobility and job prospects, thereby potentially stifling competition and restricting the labor market. The memo asserts that such restrictions may violate Section 7 of the National Labor Relations Act (NLRA) by infringing upon employees’ rights to engage in concerted protected activity. The NLRA safeguards employees' rights to organize, bargain collectively, and engage in other concerted activities to improve their working conditions.

While acknowledging the legitimate interests of employers in protecting trade secrets and customer relationships, the NLRB memo highlights the need for a careful balance between those interests and employees’ rights. It suggests that overly broad or unduly restrictive noncompete agreements may be unenforceable under the NLRA. The memo emphasizes that employers must demonstrate a compelling business justification for imposing such restrictions on employees.

While the NLRA applies only to nonsupervisory employees, in light of the NLRB memo and the recent Federal Trade Commission (FTC) proposed rule to ban noncompetes(watch our previous Town Hall on the FTC proposed rule here), all employers should be addressing this issue now. Employers should take a hard look at their noncompetes and other restrictive covenants, see who is bound by them, and – particularly if any nonsupervisors have signed them – consider whether to rescind any agreements. At the same time, employers should consider what other steps may be warranted to protect company information, customer goodwill, and workforce stability.

Employers should consult with experienced human resources professionals and/or labor and employment counsel with any questions regarding employment law issues. For all MEA members, the Hotline is available to provide this assistance. For MEA Essential and Premier members, a Member Legal Services attorney is available for additional consultation.

Amy G. McAndrew, Esquire
Director of Legal and Compliance Services
MidAtlantic Employers' Association





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Financial uncertainties, cyberattacks, payroll emergencies, Oh my! What employers need to know in crisis about wage & hour obligations 

Last week, the financial world was upset by the seizure and shut down by regulators of two regional banks - Silicon Valley Bank and Signature Bank. With almost no warning, employers went from a position of high liquidity to one where their deposits were frozen. As depositors of those banks feared for the money in their accounts, the Federal Reserve, Treasury Department, and FDIC announced jointly that they would step in to guarantee deposits, including beyond the ordinary limits covered by the FDIC. As the week went on, regional bank stocks plunged, with First Republic Bank seeing its stock fall to an all-time low, prompting several large banks to jointly provide $30 billion in deposits to aid the failing institution. Some fear this volatility is just the beginning.

For employers that rely on regional financial institutions to fund payroll, this continued volatility could create major problems. Despite the bailouts, one thing is clear: employers should be prepared for immediate and unanticipated liquidity crisis as the financial industry remains in a state of uncertainty and the tech industry continues to take a downturn.

If the scramble feels familiar, that's because it is. Another major, unanticipated crisis affected employers in recent years. On December 11, 2021, the Ultimate Kronos Group, a major HR technology provider, was hit with a ransomware attack that crippled thousands of employers across the country with an inability to access time and pay records. This emergency created chaos around attendance, scheduling and payroll, and ultimately spawned a wave of litigation against the companies that relied upon Kronos.

These crises are a sober reminder of the fragility of the systems and institutions that employers often rely upon to satisfy their wage and hour obligations to employees. When faced with these circumstances, employers may not have enough cash on hand and may consider skipping payroll obligations to conserve cash, or may be unable to access the records needed to process payroll, handle timekeeping, and complete other necessary HR functions.

But, even in crisis, employers across the United States are subject to wage and hour obligations, and many states have specific rules regarding timing of payment, method of payment, and penalties for failure to comply with those specific rules. Because of that, employers must endeavor to satisfy their legal obligations notwithstanding the disruption caused by a third-party, regardless of how unforeseen or chaotic it may seem.

In Part 1 of this blog series, we provide an overview of employer's wage and hour law obligations in crisis, and issues to be aware of regarding short and long term solutions. Subsequent blogs will dive deeper into these topics.

Have An Emergency Plan

Sometimes you don't realize you needed an emergency plan until it is far too late. Let recent events serve as an opportunity to review your policies and practices to determine how your company would react moving forward in the event of a crisis that would affect how you ordinarily handle timely payment of wages to your employees.

Method of Payment Concerns

Confirm you maintain up-to-date records for employees who have authorized direct deposits, and which financial institution they identified. In the event of a crisis with an institution authorized to accept direct deposit for any employee, be prepared to timely and accurately pay those employees by paper check until the employee can establish a new bank account.

Delayed Payment Concerns

Under federal law, primary liability lies with untimely payment of overtime wages for non-exempt employees. Although the FLSA does not contain an absolute requirement that overtime be paid as soon as it is earned, the Department of Labor regulations provide that employers must pay overtime as soon as it reasonably can when circumstances beyond its control make it impractical to pay overtime on the regular pay date. What is "reasonable" in a crisis is very much in dispute. We recommend being prepared to create an emergency response team to create a plan to respond to a payroll crisis in a timely manner. Key issues to consider include: increased staffing on your internal payroll teams; contracting with a back-up payroll vendor in the event there are issues with the primary vendor; and identifying alternative means of financing payroll in the event of financial institution failure. Emergency plans need to be employer-specific, and appropriately balance the risk with the cost of such plans.

In some states, the inability to timely pay all wages owed can result in potential liability for penalties. For example, in California, a delayed payment may result in a violation of Labor Code §§204 and 210, which can lead to penalties of $100 or more per employee, per pay period where there is a late payment.

Inability to Pay - Furloughs & Layoffs

Employers that anticipate they may not be able to pay employees should consider immediate furloughs or other downsizing options. It is very risky (including from an individual liability standpoint in California and some other states) to allow employees to continue working if they end up not being paid.


For exempt employees, if any work has been performed during the workweek, the employee needs to be paid for the whole workweek (unless they are terminated and it is a partial final workweek, in which case pay can be prorated). In the event of a furlough, employees should be notified as soon as possible and told that they cannot work. If the workweek has already begun, it may be lower risk to tell the employees to stop working even if it is mid-workweek. Whether or not final pay is required at the time of furlough is a matter of state law, and is still in flux for many jurisdictions. For example, in California, the DLSE has taken the position - without direct approval from any state or federal appellate court - that any furlough without a specific return date within the pay period (and potentially within 10 days) requires cash out of final pay, although the issue is currently on appeal with the Ninth Circuit. In any event, employers must pay for all work performed prior to notice of the furlough.


In the event of layoffs, final pay is due. In California, waiting time penalties will begin to accrue at the final rate of pay for up to 30 days post-termination. Here, as with furloughed employees, employers must pay for all work performed prior to notice of the layoff.

Independent Contractor Payment Issues

If your workforce includes independent contractors, the law provides less protection to independent contractors than to employees, and generally, the terms of the contract between the company and the independent contractor will govern wage payments. In the event of crisis, we recommend working with these individuals in good faith to negotiate new pay dates or methods, if possible.

State-Specific Considerations

There are many state-specific considerations at play related to expectations for timing of payment, what payment is required in the event of furlough or layoffs, what penalties can be assessed, and against who (the employer or individuals as well), and more. For example, some states require final pay in the event of furlough, even though there is an expectation and understanding that those employees will return to the workforce at a later date. Some states charge hefty penalties for even the slightest delay in wage payment. California may even permit individual liability for directors, officers, managing agents and owners if they "cause" violations of any provision of the Labor Code or wage orders "regulating minimum wages or hours and days of work." There may also be attempts by impacted employees to "pierce the corporate veil" to recover unpaid wages or other damages for alleged wrongs.

Indemnification Agreements for Depositors

In the event your company is affected by an inability to pay wages timely, or in an accurate manner, consider creating an indemnification agreement for your depositors.

While it may not be all doom and gloom in the short term, it's always a good idea to prepare your team for a payroll crisis. We promise you'll be glad you did.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Kyla Miller and Michael Afar

Seyfarth Shaw LLP

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