The COVID-19 pandemic laid down the framework for remote work, as companies were forced to move their operations to a virtual mode. Due to the convenience of remote working for both employers and employees, this working model has become a part of the business world today.
However, remote working also throws many challenges for organizations, especially from a legal and compliance standpoint. To ensure data integrity and privacy in a virtual or hybrid mode, regulators have included new provisions to existing laws, and in some cases, have even come up with new legislation.
In this comprehensive guide, we will look into all the applicable laws in the U.S. and how you can comply with them.
Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) lays down the minimum wage and overtime pay across both the government and private sector. These laws are designed to ensure that every employee is reasonably compensated for the hours they work. It also requires employers to display an official poster outlining the FLSA regulations, and track employee time and pay records.
Let’s break down each of these provisions to better understand how they impact remote workers and companies with a hybrid or virtual working model.
Minimum Wage
The federal law states that the minimum wage is $7.25 per hour, while many state laws also determine the hourly wage. If an employee is subject to both the federal and state laws, then the higher minimum wage will prevail.
Now, you might wonder how the minimum wage is determined when employees work from different locations. Well, the calculation depends on the base location of the employee and not the place where the employer is incorporated or headquartered. For example, let’s say a company is headquartered in Chicago, where the minimum wage is $14 per hour. But an employee works from Texas, where the minimum wage is $7.25 per hour. In such a case, the minimum wage for the employee is only $7.25 and not $14.
Overtime
Similarly, the hourly overtime pay can also be confusing. The federal law states that employers must pay one and a half times the regular rate for every hour over 40 hours. But in Colorado, overtime means hours that exceed 40 hours, 12 consecutive hours, or 12 hours per workday. Some states like California also offer safe or sick leaves, while Washington and a few other states allow time off for certain familial obligations.
Hence, organizations must consider the employee’s location while ensuring compliance with the FLSA.
Taxation
Like FLSA, tax laws also vary greatly among states, and the rates depend on the employees’ location. For example, Texas has no individual state tax while New York state has nine income tax rates, ranging from 4% to 10.9%.
Organizations must understand the local tax laws of each state and compute salaries for their employees accordingly. This process is complex and intricate, and even one misstep can result in hefty fines for non-compliance. Hence, organizations should leverage taxation and HRIS software to ensure compliance with these varying tax laws.
Workers’ Compensation Insurance
Workers’ compensation insurance provides benefits for employees who get injured on the job. Again, the coverage requirements vary greatly between states. Also, the rule is that the local laws of the state where the employees reside apply.
While hiring employees, organizations must ensure that they are living in a state that is covered under the existing workers’ compensation insurance. Otherwise, the organization must extend coverage to the states where employees reside.
Note that some states file criminal cases against organizations that do not provide workers’ compensation insurance. Also, there are reputational and financial losses associated with non-compliance. For example, New York can impose a $2,000 fine for each 10 days of non-compliance. To avoid such fines and legal consequences, ensure that your workers’ compensation insurance covers the location of all your employees.
Family and Medical Leave Act (FMLA)
The FMLA is another important legislation that protects employees’ rights. Under this Act, employees can take unpaid leave for medical and family issues for up to 12 weeks during 12 months. These issues can include
- Serious health issues that prevent an employee from performing the assigned duties on the job
- Birth of a child
- Caring for a spouse, child, or parent with serious health issues or who is on Active Duty.
Can remote employees avail of FMLA?
Yes, provided the employee meets the following eligibility criteria.
- Must have worked for the employer for at least 12 months, with at least 1,250 hours of work.
- The location where the company carries its work must have at least 50 employees, and all of them must live within a 75-mile radius of the worksite.
- A remote employee must receive assignments from a location that has at least 49 employees on-site.
- Regardless of whether organizations use a remote or hybrid model, eligible employees must have FMLA coverage.
Overall, the residence of an employee is not a prerequisite for FMLA coverage. In this sense, they are treated as salespersons or drivers who take work from a qualifying worksite that has at least 49 employees on-site.
Americans with Disabilities Act (ADA)
The ADA is designed to ensure that employers don’t discriminate against employees with disabilities. Moreover, employers must make reasonable accommodations for those with known disabilities to provide equal opportunities for everyone. That said, no rule requires organizations to offer remote opportunities to disabled workers. However, if there is a telecommuting option available, disabled workers can take up this option. The larger idea is that an organization must not discriminate against an employee based on disability.
Discrimination Laws
Federal laws prohibit organizations from discriminating against employees based on their gender, origin, race, color, disability, familial status, ancestry, culture, birthplace, or language. What this means is that employers cannot deny a job to an individual because they are from a certain country or follow a specific culture. These discrimination laws also apply to remote employees.
Another aspect is the pay scale. An organization cannot pay lower wages to employees based on any of the above-mentioned factors. Some states like Rhode Island, Washington, New York City, Connecticut, California, Toledo, and Cincinnati in Ohio require the employer to advertise the pay scale range at the time of posting the job to maintain transparency. Moreover, states like Maryland and California explicitly prevent employers from asking about the compensation history of potential employees.
Any violation of these laws can attract stringent fines and penalties for organizations.
Overall, employers must think about discrimination, diversity, and equality right from the time they post a job to hire an employee and maintain it throughout the employee’s lifecycle.
Business Expenses
According to Federal laws, employers are liable to compensate employees only for work-related expenses that bring down the earnings of employees below the minimum limit. Unfortunately, this can be confusing for remote employees, as it’s hard to determine which are work-related expenses.
Some states are explicit in what constitutes reimbursable expenses. Here is a state-wise table to help understand the reimbursable expenses.
State |
Reimbursable Expenses |
| California | All expenses directly related to the discharge of one’s work duties. |
| Washington D.C | Cost of purchasing and maintaining tools required for performing the assigned tasks. |
| Illinois | Expenses directly related to the work performed for the employer. |
| Iowa | Costs authorized by the employer. The reimbursement must be within 30 days of submitting a claim. |
| Massachusetts | Expenses that are unavoidable and necessary for employees to carry out their duties. |
| Minnesota | Includes purchased or rented equipment costs, except tools of trade, motor vehicles, or anything else that can be used outside of employment. |
| Montana | Expenses incurred to obey the employer’s orders or for executing duties. |
| New Hampshire | Expenses incurred in connection with employment, except those borne by the employee as a precondition of employment. Reimbursement must be within 30 days of raising the claim. |
| New York | Business-related expenses that an employer has promised an employee. |
| North Dakota | Expenses incurred for the direct discharge of an employee’s duties. |
| Pennsylvania | Employees can claim unreimbursed expenses as deductible under the state income tax law. |
| South Dakota | Expenses incurred for the direct discharge of an employee. |
Now, it’s hard to identify a direct expense in every scenario. In general, employers don’t have to reimburse employees for most expenses, though in some cases, reasonable expenses can include Internet services, mobile data, laptops or computers, and equipment like printers. In some states like California, employers will also have to pay a portion of home utilities like heating and air-conditioning.
The other states don’t have such explicit rules, and the reimbursement largely depends on the agreement entered into by the employer and employees. To avoid these confusions and the resulting legal problems, organizations must have a clear policy on what expenses are reimbursable and the maximum allowable amount for each category.
Occupational Safety and Health Administration (OSHA)
According to OSHA guidelines, employers are responsible for providing a safe and healthy working environment for employees, including those who work remotely. The organization is responsible for identifying and addressing potential hazards that may impact an employee.
An essential part of ensuring safety is to provide information on workstation ergonomics for those employees who use the computer to carry out their work responsibilities. While OSHA does not mandate inspections to ensure safety, employers are responsible for providing the necessary safety information to remote employees.
Another essential part of OSHA compliance is tracking the injury and illness records, even if they occur at an employee’s home. However, the injury or illness must have occurred while the employee was working and during the agreed working hours, and it was directly related to the employee’s work. In such cases, it’s the employer’s responsibility to provide medical treatment and support.
Lastly, employers cannot act against employees who report OSHA violations, including disputes about denying benefits and overtime payments. Organizations cannot fire or demote employees due to their complaints.
Immigration Laws
Employers can hire non-U.S. citizens who are living in the U.S. as remote employees. Again, there must be no discrimination based on the culture or origin as per federal laws. More importantly, employers must ensure that every employee has the required work authorization to work in the U.S., and the employer can even sponsor work visas if needed, based on the employer-employee agreement.
As a part of this work authorization verification process, employers must file the I-9 form, or they can choose to e-verify. However, the onus to verify an employee’s work authorization before hiring lies on the employer.
What happens if you hire an employee remotely from another country?
Well, the employer must understand the local laws of the country in which the employee lives and comply with them. For example, if the employee is from the European Union, the employer must comply with laws to keep the concerned employee’s data safe, as per GDPR. Also, the employer has to offer equal compensation and no discrimination in any form. There may also be laws specific to other EU countries that the employer must adhere to.
On the other hand, there are no major requirements in China, making it easy to hire remote employees from here. Moreover, the employees are responsible for taxes, and employers don’t have to make additional effort. However, the hiring organization must file employment contracts with the government.
As you can see, the laws vary greatly for different countries, and this is something to consider while hiring international employees.
Data Security and Privacy
Another key responsibility for organizations is maintaining data security and privacy for remote employees. Employers must implement measures to safeguard employee data and ensure it meets the requirements of standards like HIPAA, GDPR, and SOC 2. Organizations must use secure communication channels, encrypt data, implement robust security controls, provide continuous training for employees, and more.
Thus, these are some broad laws and regulations that U.S. employers must consider while hiring remote employees.
Next, let’s look at some best practices that organizations can implement to ensure they adhere to the existing laws.
Best Practices for Organizations to Meet Legal Requirements for Remote Workers
Below are some best practices U.S. employers can take to provide flexibility for remote employees while balancing their legal obligations.
Understand the Laws
As a first step, thoroughly understand the laws surrounding remote work. Take time to understand the provisions of the above-mentioned laws, including FLSA, OSHA, FMLA, and more. Furthermore, understand the state laws about these aspects and how they can impact your processes. Based on these laws, make the necessary changes to your workflows to ensure continuous compliance.
Develop Remote Work Policies
Before you start hiring remote employees, establish clear and comprehensive remote work policies to avoid ambiguities. Besides helping you meet compliance, it also provides clarity for your employees, enhancing their productivity and contribution to your organization.
Check if your policies cover every aspect of work and compensation, including reimbursable expenses, expectations for work hours, communication protocols, performance evaluations, data security measures, and more. With such clear and written policies, you can reduce misunderstandings with employees.
Ensure Compliance with Wage and Hour Laws
A tricky compliance area is wage and hour laws because they vary so much between states. Hence, you need a process to accurately track remote employees’ hours worked, including any overtime hours, and ensure they receive appropriate compensation according to federal, state, and local regulations. Also, maintain accurate records of wage payments and hours worked to demonstrate compliance in the event of an audit or legal dispute.
Address Workplace Safety
While you may not have direct control over remote employees’ home offices, you are still legally responsible for providing a safe work environment. This may include offering guidance on ergonomic workstations, conducting ergonomic assessments, and providing resources for injury prevention. Also, ensure that remote workers know the reporting procedures for workplace injuries or accidents.
Protect Confidential Information
Maintaining data security is critical when employees are working remotely. Implement robust cybersecurity measures to protect sensitive company information and client data from unauthorized access or disclosure. This may involve providing employees with secure devices, using encrypted communication channels, and enforcing strong password policies. Additionally, establish protocols for handling confidential information and responding to security incidents.
Ensure Non-Discrimination
Your remote work arrangements must be fair and equitable for all employees. Avoid discrimination based on race, gender, religion, disability, age, etc. This includes ensuring that remote employees have equal access to job opportunities, training, promotions, and other employment benefits. Put processes in place for addressing discrimination or harassment complaints in the remote work setting.
Provide Training and Support
Remote work can be challenging for both employers and employees, particularly when it comes to understanding and complying with legal requirements. Consider providing training for remote employees on relevant legal obligations, cybersecurity best practices, and remote work policies. Additionally, offer ongoing support and resources to help remote workers navigate any issues or challenges while working remotely.
Stay Updated on Legal Changes
Laws surrounding remote work are constantly evolving, with new regulations and guidance being issued at the federal, state, and local levels. Stay informed about these changes and update their policies and procedures accordingly to remain compliant. This may involve consulting with legal counsel or HR professionals who specialize in remote work issues and participating in industry groups or forums to stay abreast of emerging trends and best practices.
With such best practices, you can ensure compliance with legal requirements for remote workers while promoting a productive, safe, and inclusive remote work environment for your employees.
Final Words
To conclude, remote working is here to stay, and organizations must adapt to the evolving legal and regulatory requirements. In this article, we looked at the different laws and how they apply to remote workers. Lastly, we looked at some best practices to follow for complying with regulations and ensuring happy and productive employees. We hope this information helps you formulate clear policies and implement them to make the most of a remote workforce.