A comprehensive guide to labor laws for remote employees

by Andy Nguyen
labor laws for remote employees

Confused about the labor laws for remote employees?

Remote work has surged across the world, especially after the life-changing COVID pandemic hit. 

As a result, companies face challenges in coping with remote work — especially when it comes to labor law compliance. 

Which labor laws do you need to comply with for remote employees?

In this article, we’ll cover what labor laws are, which ones apply to remote employees and other FAQs around them.

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Let’s get started.

What are labor laws for remote employees?

Are your remote workers working overtime without being compensated for the same?

Are some onsite workers being paid below minimum wage?

As a firm, you need to keep a lookout for these red flags to avoid legal trouble.

While you can’t quantify the benefits of creating a safe work environment, a nurturing and fulfilling environment would naturally ensure a higher productivity rate.

And that’s where labor laws come in.

A labor law, also known as employment law, outlines the employer’s obligation to allow for your employees’ security. 

The law acts as a framework to guard your employee, be it a remote employee, an employee in a physical office set-up or a contract worker.

A few objectives of such laws include:

  • Equality in terms of pay and opportunity.
  • Employees’ physical and mental well-being
  • Workplace diversity.

Labor law non-compliance is wrong on the part of the employer and means that the firm is breaking the law, leading to legal consequences.  

Key labor laws to consider when hiring remote employees

When you have a remote team, maintaining compliance with labor laws can be challenging. 

Here’s what you need to know:

A. In the US

The Fair Labor Standards Act, or the FLSA, is the federal labor law that governs the United States of America. 

Think of it as an umbrella law created by the Department of Labor. And then we have the state law which differs according to the US state you work in. 

When it comes to remote employees, they could be located in any state or city across the country. The employer must consider the state laws of where the remote team works from, along with the broader FLSA.

Here are the broad categories that would vary depending on the state or city you work in:

1. Immigration

Need to verify a new employee working remotely?

The FLSA requires companies to execute Forms I-9, used for verifying employee eligibility. 

This is then compared to various government records through the E-Verify system to certify that the new employee is authorized to work in the US.

Although Forms I-9 is mandatory by the federal law, some states may or may not enforce the use of E-Verify. 

For example, in Alabama and Mississippi, E-Verify is mandatory for all employers. However, California has limited the use of E-Verify.

2. Payroll, wage and hour laws

These laws cover the basic rights of an employee.

Employers need to be cautious of specific requirements, such as:

  • Minimum wage
  • Payroll tax and other tax requirements such as income tax
  • Payday frequency
  • Expense Reimbursement
  • Overtime 
  • Delivery of paycheck

3. Workers’ compensation policy

The law requires employers to register workers’ compensation insurance in the employee’s workplace, not the employer’s workplace. 

Workers’ compensation insurance covers both employees and employers should an accident or illness come along at work. Needless to say, one can only claim this if the incident is caused due to job duties.

Workers’ comp insurance also covers death benefits to the employee’s family in such an unfortunate incident at the job. 

This policy may differ on a state-by-state basis.

4. Labor law posters

The US state and federal labor law require employers to display the correct labor law notices outlining employees’ rights at the workplace. 

You would be violating the law by not framing these notices, making you subject to possible fines or lawsuits. Employers must watch out for the proper notices to display, which may vary with every state.

5. Unemployment insurance

Unemployment insurance can be seen as a safety net for employees in case they lose their jobs for no fault of their own. You could call it a temporary financial cushion for them in such an adverse circumstance.

States may have different versions of the unemployment insurance policy, which employers must note.

B. In the EU

Most of the broad labor laws are fairly standard across the European Union, such as the following:

  • Employees’ personal data protection.
  • Fixed-term contract negotiation.
  • Protection against discrimination.

However, each country in the EU can have its own law in addition to the broader EU law.

Which labor laws apply to remote employees?

This is one of the most critical questions that confuses employers:

A. In the US

The law of the state in which the employee works would be applicable in the US.

While you might be headquartered in New York, you might have employees across the country. Although it brings immense flexibility to workflow, it also adds a layer of intricacy, especially when it comes to labor law. 

A firm registered in New York with its remote employee working from Chicago would mean that Illinois’s labor law applies to that employee.

However, there’s an exception — exempt employees.

What is the difference between exempt employees and non exempt employees?

The FLSA describes exempt employees as those who aren’t subject to overtime compensation, such as an Outside Sales Executive or Computer Systems Analyst. 

This means that regardless of which state or city these exempt employees work from, the law relating to overtime would not apply to them. 

B. In the EU

As a thumb rule in the EU, you need to comply with the law of the nation where the employee works from, regardless of where the employer is based. 

Other FAQs on labor laws for remote employees in the US

Here are some FAQs for firms that have a remote work contract:

1. Do workplace policies apply to a remote employee?

All workplace policies must apply to those on a remote work contract.  

Think about it.

You should treat a remote employee, an in-office employee, or a contract worker as equally as possible to maintain fairness across the firm. 

A good practice is to scan the employee handbook from the view of a remote worker. Determine whether a clause might be ambiguous to the remote working employees and simplify it.

You could also consider adding a separate remote working section that outlines details such as maintaining data security, the financial and technical support they would get, or the work etiquettes. 

2. Does a remote employee need labor law posters?

Yes, posting requirements apply to telecommuting employees as well.

As a manager, you should send these posters to your remote team — electronically via email. Employers can also mail hard copies to remote workers to be put up at their remote worksite.

You must check what applies to your employees as per the work location and download the labor law postings from the federal and state websites. 

3. Is a remote worker eligible for workers’ compensation insurance?

Yes, certainly. 

An employers’ obligation lies towards all kinds of employees. As stated before, employers must consider the insurance policy of the state where the employee works out of. 

4. Is a remote worker eligible for unemployment insurance?

Yes. Employers must provide unemployment insurance to the employee in the US state where they perform services.

4 tips on hiring remote employees in the US

Apart from following state-wise labor laws, such as state income tax and paid sick leave, here are a few more suggestions on hiring a remote team:

1. Enforce company guidelines

You want workplace discipline and uniformity throughout the organizational structure, even when everyone is on a telework arrangement. 

To ensure this, you must first establish a set of rules and make sure your HR professionals enforce them. 

It is advised to allow each new employee to undergo a coherent orientation at the start to get habituated to the work and the workplace. This process would apply to an independent contractor as well who would not be working on a full-time basis

Employers could have an onboarding checklist drawn out for remote employees including but not limited to the following:

  • Send a laptop or any other required hardware.
  • Complete regulatory paperwork.
  • Have the new employee go through the employee handbook.
  • Provide onboarding instructions on the required applications.
  • Ensure the employee knows about the required standards regarding reasonable accommodation and home office to minimize work distractions.

2. Keep your payroll team updated

Keep your payroll department or your payroll provider updated with the employees and the different states in which your remote workers are or would be. This is in addition to the payroll taxes that firms should keep track of.

Not only is payroll to be considered with regards to the law, you must also consider how payments would be made to each employee spread across states. 

  • Would you send them cheques or would you make electronic money transfers? Would the same apply to an independent worker?
  • Which day of the month would you declare as payday?

These are just a few questions you must have answered before bringing in a remote workforce.

3. Maintain a safety standard

A remote work policy means that employees will not be physically present in your office every day or maybe ever.

But should that stop you from providing them with a safe environment to work in?

Firms should comply with health and safety rules at all times and minimize workplace hazards wherever possible. With a remote team, this would mean arranging safety training remotely and settling for an employee support system for them to report illnesses or injuries due to job duties. 

4. Protect your data

Monitoring Employees

A remote work agreement naturally results in limited supervision on what employees do during work hours. 

Can you be sure that employees are not misusing the firm’s data? Not entirely.

Secure your company’s confidential information by establishing a process for your employees to follow. 

You could establish an employee monitoring policy that helps you keep a check on the websites, applications, and tools being used by your remote workforce. You could also have every team member work on a protected network after installing credible anti-virus software.

Hiring remote employees in a foreign country

Dealing with labor law compliance issues for employees who telework within the US is fairly manageable. You would just have to toggle between the federal and applicable state labor laws.

The real complexity comes along when the remote worker is located in a foreign country. The applicable law would be that of the country where the employee performs the job duties.

Here are some aspects that you should consider when hiring remote human resources in another country:

  • What would be the tax implications?
  • Does being subject to foreign law bring about any risks to my firm?
  • Would my company need to have a registered entity in the foreign country?

The firm must consider a long list of such factors before agreeing to a remote work arrangement. 

Wrap up

It’s extremely important for firms to invest time and money in a remote team’s labor law compliance. You need an adept team to handle legal matters relating to tax, insurance, or wage issues. 

Employers should consider appointing HR professionals and legal counsels to take care of the labor law compliance issues that may arise at any time. 

Use the above tips and clarifications to optimize your labor law compliance process with ease. Once you get the labor laws for remote employees right, you won’t have to worry about any legal issues down the line.

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