“As a remote employee, can I take legal action against my employer in my home state, or do I have to hire a lawyer in the state where my employer is located?”
Remote work has seen a meteoric rise in popularity among private sector employees following the COVID-19 pandemic. As a result, many employers have been carefully developing and updating their remote work policies. However, as an employee, these policies might not always be communicated clearly, and without knowing your legal obligations regarding the laws surrounding remote work, you could find yourself lost, confused, or feeling helpless should violations occur.
As an example, your employer is based in Virginia, but you have been working at home in Maryland since the pandemic. Your employer discriminates against you, and you want to take legal action against them. Where would you file suit? In Maryland? Or Virginia? What if one state has friendlier employment laws? Which is the smarter choice?
As with most legal issues and questions, the answer is that it depends.
Even outside of the discrimination context, other issues can cause confusion for remote workers, such as which state’s taxes apply to remote workers’ paychecks. While it is difficult to make a blanket statement, this article will discuss these intricacies and provide some clarity to remote employees looking to exercise or understand their legal rights.
Workplace Discrimination Claims by Remote Employees
At first glance, many employees tend to think that any remote employee’s workplace claim would be based in the state that they live and work in. This is not always the case, however, and can often lead to issues when looking to resolve these matters.
If the employee works remotely and the employer is based in another state, the employer most likely should be registered with the state in which the remote employee is located. This can be checked on the state secretary of state or business registration website. In Maryland, it’s the State Department of Assessments and Taxation.
If the employer is registered with the state, the employee can bring litigation against them in that state.
If the employer is not registered with the state, there may be threshold registration requirements that aren’t being met. The employee may therefore need to sue the employer in the state in which the employer is headquartered. For companies in which all employees are remote and there are no physical offices, that may be hard to determine. However, every American company has to be formed in a particular state, and the employee can bring suit in that state.
With all of this being said, there are reasons as to why it might benefit an employee to make a claim under the laws of a particular state should it be applicable, particularly since states’ employment laws can vary. Simply put, some states have workplace discrimination laws that are more friendly than others. In the example above, the employee could sue the employer in Maryland or Virginia, but should choose Maryland, as it has more employee-friendly anti-discrimination laws.
As companies continue to adapt to remote work, some are including specific language in employment agreements and handbooks, indicating which state’s employment laws apply in remote employee disputes.
Given the complexities of parsing which state laws apply and to save the time, money, and effort that comes with filing a suit, it’s important to examine what employers’ policies—if any—are in effect when it comes to choice-of-law provisions.
What About Taxes for Remote Employees?
When an employee is located in a different state than where the employer is based, the employer, by law, has to register with that state. This registration generally includes registration with the state unemployment division (unemployment taxes), revenue (withholding taxes), and the secretary of state (doing business). States have different thresholds for these registration requirements, varying by amount of revenue earned or salary paid in a state or number of employees in the state.
During the pandemic, with so many employees working remotely, many employers may not have registered to do business as they should. This is partly because a lot of employees were “based” in a particular office but may have moved to another part of the country, even if only temporarily, and did not necessarily inform their employer of where they were physically located. While this situation worked during the pandemic, we’re past that now.
Another concern when it comes to taxes applying to remote employees is if the state you are working for remotely is one of the seven “convenience of employer” states: Arkansas, Connecticut, Delaware, Nebraska, New York, Pennsylvania, and Massachusetts. Despite the name of the rule, these are actually imposed by the state and not the employer, and could lead to a remote employee being taxed twice. While there are some exceptions to the rule—often closely tied to whether or not you are forced to live in a different state by your employer—this can often lead to remote employees owing quite a bit more during the tax season.
These rules have already seen many challenges in court as the U.S. continues to grapple with how best to manage a remote workforce. As such, it may be wise to brush up on your state and your employer’s state’s tax rules, as well as discuss with your employer if you are in one of the “convenience of employer” states to see if they have adopted this rule to avoid any future legal action needing to be undergone.
These concerns and questions are only the tip of the iceberg when it comes to navigating being a remote employee post-pandemic. With policies surrounding data privacy, overtime pay, health and safety, and leave of absences all being hot topic issues when it comes to remote work, knowing what your state’s employment laws are and how to navigate choice-of-law provisions can best help you to protect yourself as we adapt to this new style of employment.
Don’t think that you have to tackle this alone. No employee should suffer simply because they are choosing to work remotely, so if you have additional questions about which state laws may be applicable to you or what path may be best for you when handling your legal issue, consider speaking with experienced counsel today.
Jennifer Hoffpauir is a senior counsel with Tully Rinckey PLLC where she focuses on representing government and private sector employees in discrimination, harassment, retaliation, and whistleblower matters. She can be reached at email@example.com or at 888-529-4543.