Although the focus on remote work began as a means for businesses to continue operations, the reality is that remote work is here to stay for many businesses. Over the past two years, many employees have moved locations within the US and this increased remote workforce has resulted in employers’ geographical workforce expanding as well.
Since the pandemic began, an employer’s ability to offer a flexible work arrangement has become increasingly important to employees. While expanding your geographic workforce presents employers with many benefits such as recruiting and retention as well as new growth opportunities, employers must also be aware of the associated risks involved when employees are working in another jurisdiction.
These risks extend beyond the obvious administrative considerations such as taxes, registration, and insurance, and also implicate issues related to compensation and benefits requirements.
At the state level, the employment law landscape is experiencing many changes and several states have recently enacted laws that greatly impact employers’ obligations— particularly requirements related to paid leave and payouts upon termination. To add to the complexity, these requirements and obligations greatly vary from state to state and are rapidly changing.
For example, Massachusetts and Maine recently joined California, Colorado, and several other states that mandate the payment of unused, accrued vacation upon termination.
Under the new Massachusetts Wage Act, employees are entitled to be paid all wages, including accrued vacation time, on the day of termination. If an employer fails to comply with this requirement, it is liable for mandatory treble damages and attorneys’ fees. Similarly, Maine’s new wage statute requires the payout of unused, accrued vacation time upon separation for Maine employees. Violations could result in payment of the unpaid accrued vacation time, in addition to liquidated damages equal to double the amount of unpaid accrued vacation time plus attorneys’ fees and costs.
Some states have similar payout requirements but allow employers to implement policies that limit payout obligations by capping accruals or requiring forfeiture of unused vacation. On the other hand, states like California and Colorado prohibit such “use-it-or-lose-it” policies.
In addition, some states treat vacation pay as wages for purposes of wage payment requirements, and a number of states also require separate sick leave, including California, Connecticut, New York, and Washington.
The main takeaway is that employers with expanding geographical workforces must face the myriad of state laws and be aware of the varying obligations and requirements they must comply with. Going forward, employers should confirm the locations of all employees to determine what, if any, additional requirements and obligations those jurisdictions impose on them. Now is also a good time to review vacation, sick, and PTO policies to ensure compliance with applicable state and local law requirements.
If you have any questions regarding the different state laws that may be affecting your workforce, please contact Berenzweig Leonard for assistance.
Aleksey House is an Associate at Berenzweig Leonard, LLP. She can be reached at ahouse@berenzweiglaw.com.