Since the start of the COVID-19 pandemic, it’s been much more common for employers to hire remote employees, or allow their existing employees to work remotely. When hiring an employee in another state (or even another country), or when an employee moves out of state and continues to work remotely, what legal considerations arise?
1. Which state’s law applies? Typically, the employment law of the state where the employee lives applies. Depending on the political climate in the states where the employee and the employer are each located, employment laws may be very different. In some states, the employer and employee can contract to determine which state’s law applies, but not every state will enforce such a choice of law provision. Individual states can vary widely regarding such areas as minimum wage, work hours and restrictions, benefits, leave requirements, employment agreements, restrictive covenants, and other areas.
2. Trade Secret Protection? Which state’s law applies regarding the protection of the employer’s trade secrets? This can include non-disclosure agreements, non-compete agreements, non-solicitation agreements, and other types of restrictive covenants. For example, some states have no restrictions on non-compete agreements, but other states generally do not allow non-compete agreements at all, and still others will only enforce them in particular circumstances. Maryland and Illinois will only allow restrictive covenants if employees earn above a certain income threshold. Colorado even recently criminalized restrictive covenants in employment agreements.
3. “One size fits all” or individualized approach? Should employers have a separate employment contract drafted for every state where they have remote employees, or should employers use a “one size fits all (or most)” form agreement instead? This is going to depend on the particular circumstances and states where the employer and employee(s) are located. This is also worth considering for employee handbooks, forms, and other “standard” documents.
4. Does the employer need to register to do business in each state where an employee is located? Again, this depends on the state and also depends on the type of work being done. If the employer uses a payroll company or an HR provider, those third parties may take care of all necessary corporate or tax registrations in each state. It may also be necessary to consult with a local attorney regarding what other types of registration may be required.
If you’re looking to hire remote employees, or want to make sure you’re complying with the requirements in states outside of Michigan, contact us. We can help and can also connect you with firms in other states (and in other countries, if your employees are outside the US) through the law firm network to which our firm belongs: Primerus.
