Remote Work, Real Risk: What California Employers Need to Know About Multi-State Compliance

By Anelya Law Offices | Strategic Legal Counsel for California Businesses

The remote work revolution has redefined how companies build teams—but it has also complicated how they comply with employment laws across state lines. As more California-based businesses hire talent in other states—or allow local employees to work remotely while living elsewhere—the legal obligations quickly multiply.

From wage laws and tax obligations to leave policies and business registration requirements, multi-state compliance is no longer just an HR issue—it’s a legal one.

🏛️ Why It Matters: Remote Work and the Legal Risk Landscape

When an employee works outside California, your business may become subject to that other state’s employment laws—even if your company is headquartered in Los Angeles, San Diego, or San Jose. This can expose you to conflicting regulations on:

• Minimum wage and overtime
• Sick leave, paid family leave, and vacation
• Payroll tax and unemployment insurance
• Workers’ compensation coverage
• Business tax nexus and registration requirements

Failing to comply with even one state’s requirements can result in fines, lawsuits, or penalties—especially if regulators or former employees bring claims.

📌 Common Multi-State Compliance Issues for California Employers

1. Wage & Hour Law Conflicts

Each state sets its own rules for minimum wage, overtime exemptions, and required breaks. A non-exempt employee working remotely in New York or Colorado may be entitled to higher minimum wages or different overtime triggers than a California-based worker.

✅ Tip: Employers must follow the laws of the state where the employee physically works, not just where the company is based.

2. Tax Withholding & State Unemployment Insurance (SUI)

Employers may be required to register for payroll tax accounts in each state where remote employees work. This includes income tax withholding, state disability insurance, and unemployment insurance programs.

✅ Tip: Work with your payroll provider or tax advisor to ensure you’re correctly withholding and remitting state-specific taxes.

3. Leave Laws & Employee Benefits

States like Massachusetts, Washington, and Oregon have their own versions of paid family or medical leave—often more generous or different from California’s CFRA or Paid Sick Leave laws.

✅ Tip: Your employee handbook should clearly differentiate between policies that apply to California workers and those working in other jurisdictions.

4. Business Registration & Nexus

Hiring a remote employee in another state may create a tax nexus—a connection that triggers corporate income tax or franchise tax obligations. Some states even require foreign entity registration if you’re doing business through remote workers.

✅ Tip: Check registration requirements in each state where you have employees. Ignoring this can result in administrative penalties and tax liabilities.

5. Workers’ Compensation Coverage

Every state mandates different rules for workers’ compensation coverage. California’s policy doesn’t automatically extend to out-of-state employees.

✅ Tip: Confirm with your insurance provider whether your current policy covers remote workers in other states, or if separate policies are required.

🧭 How California Businesses Are Responding

Smart companies are investing in multi-state compliance audits and updating their internal policies to reflect the geographic diversity of their workforce. In particular, we’re seeing:

Creation of state-specific addendums to employee handbooks

Adoption of centralized tracking systems for remote worker location and tax filing

Formalization of remote work agreements outlining roles, expectations, and state-specific obligations

👩‍⚖️ Final Thoughts

Remote work may feel borderless—but the law isn’t. With increased enforcement and more litigation from remote workers, California employers must be diligent in meeting compliance obligations across jurisdictions.

At Anelya Law Offices, we help California businesses navigate the legal complexity of remote work. From drafting compliant remote work policies to advising on multi-state tax and labor law issues, our goal is to protect your business while supporting workplace flexibility.

Disclaimer:
This blog post is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. For advice specific to your business or intellectual property strategy, please consult with legal counsel.