If I’m a Remote Employee, which State Laws apply?

If you work remotely from home in one state and your company is based in another state, which state laws apply? At Ask Ginkgo, we get plenty of customers who fall under this bucket, and it can be confusing to know which laws their employment contract should be governed by. While it goes without saying that federal laws apply to everyone regardless of location, let’s dive into how individuals are impacted by jurisdiction where state laws differ.

State laws vary across many key topics

Why does it matter which state laws are used to enforce your contract? Almost every topic important to an employee faces different treatment across states, such as:

1. Restrictive Convenants: Non-Competes and Non-Solicits can be broadly unenforceable in one state (e.g. California) while generally unchallenged in another (e.g. Kansas).

2. Minimum Wage and Overtime Pay: 20 states maintain the federal minimum wage of $7.25 whereas Washington D.C. has the highest at $17.

3. Payment Laws: States have many unique pay-related laws such as California’s pay transparency law enforcing job postings to include pay ranges and West Virginia’s requirement of at least biweekly pay frequencies.

The list goes on, including topics like Reference and Background Checks, Layoffs, Income Tax, Parental Leave, Multiple Jobs, and Intellectual Property Ownership (we’ve written blog posts on most of these topics).

When does your ‘remote’ state laws apply?

Unfortunately, this question isn’t easy to answer post-COVID, and it also has different answers depending on the state. However, let’s look at a set of questions referenced by the American Bar Association that applies to most states:

1. Does the employer conduct business in the remote employee’s state?

2. Did the employer seek out the remote employee while they were in that state?

3. Does the remote employee live in that state for personal reasons?

4. Does the employer facilitate remote work with office equipment?

Essentially, the questions get to defining whether the employer is purposely supporting operations in that state, or the remote employee is being given an exception to live in that state for personal reasons.

1. Less Likely: If a previously onsite analyst has been given an exception to move elsewhere for personal reasons and works entirely with clients from the employer’s state, it’s much less likely for the laws of their new state to apply.

2. More Likely: If an employer seeks a remote salesperson and funds their home office setup for the purposes of expanding business there, it’s far more likely.

When your case falls in the middle, it’s important to ask your employer how they view your role and whether you should consider yourself a employee of your remote state instead.

Identifying Jurisdiction and Governing Law in your contract

There are two ways state-specific law gets referenced in employment contracts. First, ‘Jurisdiction’, also known as ‘Governing Law’, is a type of Miscellaneous Clause found in every employment agreement. They refer to the law, typically the state, that the employer would like to be used to interpret the contract, and as a result also the location where contract disputes will be brought to court.

The second way is in state-specific appendixes. Entire sections of your employment agreement such as Non-Competes and Personal Inventions may reference a separate document that provides a different clause for your state. It’s important to read these in detail as a contract may include a 2 year Non-Compete, only to state in the Appendix that if you live in California, that clause is nullified. Conversely, the Personal Inventions clause may claim the employee has rights to such inventions, only to be heavily restricted in the Appendix depending on your state.

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We don’t love to write posts that don’t have a conclusive answer, but the matter of jurisdiction is so complex that entire lawsuits are hinged on and thrown out due to lack of jurisdiction. The legal landscape is also changing as states like California seek to ‘expand’ their reach with laws like SB 699 which cover out-of-state non-competes for new California residents. We hope this post helps you ask the right questions to determine the state that applies to your employment contract.

For advocacy and beyond,
The Ask Ginkgo Team