There are a number of implications for employers for hiring workers across state lines, especially as it relates to state employment laws. Below are some considerations for hiring employees across state lines:
- New hire reporting. Both federal and state laws require employers to report new hires to a designated state agency within a certain time frame. Employers with employees in more than one state have two options for reporting new hires: (1) choose one state to report all new hires; or (2) report each new hire to the state in which the employee is working. Multi-state employers that choose to report to one state must: (1) submit new hire reports by magnetic tape or electronically; and (2) notify the federal Department of Health and Human Services’ Office of Child Support Enforcement. If all of your employees work in the same state but some live across state lines, you must report all employees to the state in which they work.
- Background checks. While background checks are a common part of the hiring process, employers need to consider laws in both the state they are in and the state hired employees will be working in. Some states have restrictions on asking about criminal convictions and/or credit history as well as their own set of rules and procedures governing the process. Where state laws differ, the employer may effectively comply with the law by following the requirements that are more beneficial to the employee.
- Wage and hour laws. Many states have their own rules governing minimum wage, permitted deductions, rest breaks, meal periods, and overtime. In general, the law in the state in which the employee performs the work applies.
- Tax withholding. In general, employers are required to withhold federal and state employment taxes from employees’ paychecks. Depending on the jurisdiction, if an employee works in one state but lives in another, the employee’s wages may be subject to taxes in both states. However, some states have entered reciprocity arrangements with neighboring states so that taxes are only required to be withheld for the employee’s home state. In some cases, employers may be required to perform tests to determine which state’s taxes apply. Employers should consult a tax advisor for more information.
- Final pay. Under federal law, final pay is due by the next regular payday, but many state laws have stricter deadlines and/or require final pay to also include accrued, but unused, vacation and paid time off. To ensure compliance, check the state law in all of the jurisdictions where your employees work.
These are just some of the implications for employers who have employees who live or work in another state. For multi-state employers, determining which state’s laws apply can be complicated, so employers should consult with legal counsel and a tax advisor as needed. It is also important to remember that there are federal and local laws that may afford additional employee protections. Where these laws conflict, the law that is more generous to the employee generally applies.