Nearly three years since the pandemic forced companies to leave their offices, many of us have maintained some version of a remote or hybrid working model. This has in turn afforded employees the opportunity to move out of state while keeping their jobs.

But while laws regarding remote work and employee residency were lenient at the beginning of the pandemic, that leniency is gone.

If your agency has a distributed staff model with employees working in other states, you need to comply with the rules and regulations of wherever the employees are located and register your company in those states.

Let’s look at some of the key considerations you should understand to bring your agency into compliance — no matter where your employees work.

States are Cracking Down on Registration Requirements

What does this mean for your agency? In short, any company conducting business or employing workers in another state is subject to foreign qualification requirements.” And there are, of course, penalties for noncompliance.

So if you have employees distributed across the country, this means you need to register to do business as a foreign company where your employees are located. You’ll also need to consider unemployment insurance, workers compensation insurance, and local/​state employment law requirements.

Register with Every State to Remain Compliant

Whether it’s one employee or 100, you must register your agency with the secretary of state in whichever state the employee works. If you don’t, you risk paying back taxes, fines, and additional penalties.

Every state has its own processes, fees, and turnaround times for registering as a foreign business. Even the name of the process can vary from state to state: authorization to do business,” certificate for registration,” or application for authority.”

The registration fees range from $50 to as much as $750, with an annual renewal fee that is usually lower than the original registration cost. In some states, you can fill out and pay for your registration entirely online. In others, you have to mail a hard copy or use a service agent. Still others require a wet signature on the paperwork — no DocuSign or e‑signatures allowed.

Most of the required information is basic. When did you first begin doing business in the state? Do you have a business address there? What is the name of your company and where is it incorporated? However, other states ask more detailed questions about individual company owners, company assets in various states, and even specifics around the value of a company’s stock.

The turnaround time for registration also fluctuates. Some states can finalize your registration in a matter of weeks. In states like California or New York there is a considerable backlog and the process can take six months or longer. It’s important to start the registration process the moment you are aware of an employee’s relocation to another state.

While the process is not particularly complicated, you need to have a firm grasp on each state’s particular requirements. And because every state’s requirements are different, the process can be tedious and time consuming. This makes it even more important to be thorough and accurate, which is why many agencies opt to have their lawyer handle it.

Remote Employees Are Covered by Their State’s Laws (Not Where Your Agency is Based)

Once you’ve registered with each state where you have employees, you’ll need to make sure you also address the state employment laws that apply to those workers. These laws are enforced by each state’s department of labor as well as its department of revenue.

Your payroll and HR departments need to make state-appropriate deductions, withholdings and other accommodations in areas like:

unemployment taxes

workers’ compensation

minimum wage

overtime pay

sick leave

parental leave

Many states have generous and favorable laws for employees. For example, if your company is based in Florida but you have remote employees in Oregon or California, your employees in Oregon and California are entitled to more sick leave (potentially paid) than those in your home state. 

Failure to comply with a state’s requirements could be costly, particularly if multiple employees are involved. Every state wants its piece of the pie, and they will work to claw back all of the taxes they are owed plus penalties and interest in some cases.

Put Your Agency’s Remote Work Policies in Writing

In addition to registering where your employees live, consider establishing a remote work policy to make sure employees understand their responsibility to keep you informed about their residency.

You can include your policy in your agency’s employee handbook and present it as part of your onboarding process.

And continue to keep the lines of communication open. Remote employees can live wherever they like and move on a whim. The more notice they can provide the better you can remain in compliance with any state where an employee works.

Remaining Compliant as More Agencies Embrace Remote Work

Giving employees the freedom to work remotely is good for company morale, employee satisfaction, and even your ability to hire talent that you maybe can’t find locally.

Nevertheless, registering with every state where you have employees can create confusion and invite additional costs for your agency. Having an attorney handle these details can relieve that burden and provide you assurance that your remote workforce is in compliance.

If you’d like to hear more about how Matchstick can help you navigate various state requirements, we would love to hear from you.