Understand Employer Obligations for Out-of-state Remote Workers

Members should be aware that there may be some unanticipated financial and legal implications if they allow employees routinely to work remotely from another state. MCIT recommends that members contact their county attorney or other legal counsel with any questions related to the legal implications of allowing routine out-of-state remote work.

Workers’ Compensation Coverage

For example, workers’ compensation coverage may differ for employees working from another state. MCIT is organized in Minnesota and as such, may only provide this coverage on Minnesota-based employees, including the occasional out-of-state travel, pursuant to the workers’ compensation statute.

MCIT is not licensed or statutorily authorized to provide workers’ compensation coverage under another state’s laws. If a member allows its employees routinely to work remotely outside of Minnesota, the member does not have coverage through MCIT in the remote-work state.

The member would be responsible for purchasing workers’ compensation coverage for those remote employees from a company that provides coverage in each state where the member has employees routinely working. MCIT risk management consultants can assist members in identifying providers.

Employment, Tax Laws

Employment and tax laws may be implicated as well. Employment and tax laws vary greatly from state to state, and out-of-state remote employees may be subject to the laws in the state or city where they perform the work.

The employer may be obligated to follow state and local laws, and employee protections of the remote-work state. Among others, this includes:

• Unemployment compensation programs
• Leave laws
• Wage and hour laws
• Break requirements
• Health care and benefit requirements
• Disability insurance
• Jury duty and voting leave laws

Conversely, certain Minnesota laws, such as the new paid leave program, may not cover employees who are primarily working outside of Minnesota.

The employer may also need to withhold payroll taxes for the state of residence, depending on the specific remote employee situation and state.

Know Where Employees Work to Determine Application of Laws

Each of these laws may have a different definition of when they will or will not apply to a remote employee. Members should know where remote employees are routinely working and determine which laws apply to remote employees based on the facts and circumstances of each remote work arrangement.

A member could be liable to the employee or the state if it fails to comply with applicable laws.