The Challenges of Multi-State Compliance
February 10, 2025
Organizations with employees in multiple states face additional challenges when it comes to legal compliance. First, just keeping up with ever-changing state and local employment laws on top of federal regulations can be daunting. Especially for states like California and New York (including New York City, with its own set of legal requirements), which continually add rules and regulations for organizations with employees working in their states, keeping track of all compliance issues requires ongoing research and vigilance.
Remote work continues to grow post-pandemic, and it greatly expands the pool of potential employees for organizations, and can save them money. Many employees also enjoy the benefits of remote work, such as not having to spend time commuting. They may even have the flexibility to move to a different state without changing jobs. But with multi-state employees come increased compliance challenges for employers.
Perhaps the compliance area most difficult for organizations to cope with among the patchwork of employment laws in the various states is employee leave. From discretionary time off to sick leave to FMLA (Family and Medical Leave Act) leave to various kinds of paid and unpaid time off, navigating leave can be a lot to deal with, especially when taking various state and local regulations into account.
Employers must stay current on all state registration requirements (applicable for the payment of state taxes), the wage and hour legal requirements (some cities as well as states have enacted their own minimum-wage laws) including overtime exemptions and record-keeping requirements, as well as state unemployment, workers’ compensation, employee privacy (including Ban the Box prohibitions to protect ex-offenders from discrimination in hiring), and termination of employment issues, which vary from state to state.
It is crucial that employers establish how a relevant state classifies a worker as either an independent contractor or an employee of the organization. Failing to understand which classification someone falls under can lead to being subjected to payment of significant penalties.
HR can take a proactive approach to multi-state compliance by keeping track of employees’ employment status and location, and conducting regular compliance audits of rules, regulations, and legislative changes. The use of either an in-house or professional service partner (there are a number of professional services available to help with multi-state compliance concerns) is important to remain legally compliant.
Remember, to protect your organization, non-compliance must never be an option.