Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Dear Littler: We’re a small company based in Austin, Texas – but we’re growing. We made it through the pandemic, and we’re all looking forward to getting back to work. We recently announced that employees can return to the Austin office voluntarily, starting in August. When HR sent around the email, we heard from dozens of our employees letting us know they didn’t plan to come back; they want to continue working remotely. We anticipated this, and we’re working with them to navigate their individual situations. But one thing we did not anticipate: some of them don’t want to come back because they’ve moved!
Fortunately, most of them are still in Texas – and we’ve made it work. But one employee, Wanda Wanderer, moved to Bismarck, North Dakota in April last year – without telling us! Wanda is a Junior Analyst in our Accounting department. She’s a delight to have around the office but to be honest, she’s been quite productive working remotely during the pandemic – she worked overtime nearly every week during our financial challenges in spring 2020. We don’t want to lose her.
We see this as an opportunity; maybe allowing more remote work and flexibility will open the door to better recruiting for our growing teams. But before we cross that bridge, is it a problem that we’ve been paying Wanda as a Texas employee?
We’re only worried about our wage and hour issues for now. Our pay practices are nothing out of the ordinary for Texas; everyone is full-time, we follow the FLSA, we pay semi-monthly, we provide two weeks of paid time off for all employees to use for whatever purpose they want each year and they can carry it over year after year. That should be fine… right? It’s not as though she moved to California after all!
—Worried & Wondering About Wanda Wanderer
Dear Worried & Wondering,
The first rule of thumb for remote worker relocation (wandering workers) is “location, location, location.” The law that applies to a person’s work will most likely be the law of the jurisdiction where that person is working – even if the employer is located elsewhere. With limited exceptions of states whose courts have found “extraterritorial application” of their laws, most state legislatures and courts recognize that their power to regulate the work is limited by the state’s border. What does that mean for you? It means, if your employees are working in a different jurisdiction, you need to assess and determine what compliance obligations you have in that jurisdiction, from the beginning.
Now, that didn’t happen here. But let’s start with the good news: North Dakota does not have daily overtime or double time pay requirements or mandatory split-shift premiums. And, both Texas and North Dakota follow the federal minimum wage rate. And other good news: Texas and North Dakota both allow semi-monthly pay – not all states do! So, your current pay practices are likely compliant in North Dakota. As long as Wanda has accurately recorded her time, and she’s been paid for hours over 40 at 1.5 times her regular rate, you likely don’t need to worry about minimum wage, overtime, or late wages.
Which may lead you to ask, what other wage/hour problems are there to worry about? Well, Worried & Wondering, quite a lot, even in a Midwest flyover state! We see three wage/hour challenges here:
- Unlike Texas, North Dakota law includes a general indemnification provision for “expenses or losses incurred as a direct consequence of discharge of duties.” N.D. Cent. Code. 34-02-01.
- Unlike Texas, North Dakota law has a provision regarding mandatory off-duty meal periods for non-exempt employees. N.D. Admin. Code. 46-02-07-02.
- Unlike Texas, North Dakota has a quite particular law describing the limited conditions in which earned, unused vacation time can be forfeited at an employee’s termination. Generally, in North Dakota, once paid time off is awarded, it is considered wages due at separation. See N.D. Admin. Code 46-02-07-02.
We’ll also note, North Dakota is a “Captive Program” state for workers’ compensation insurance coverage. This means that workers’ compensation insurance cannot be obtained through private insurance or self-insurance. In general, workers’ compensation laws are employee-friendly and typically allow the employee their choice of where to file a claim for injury incurred during the course and scope of employment in any state where the employee works. Besides filing in their work state, an employee can also file a workers’ compensation claim in the state where the work injury occurred, even if that state is not a place where the employee typically works. For this reason, employers should consider having insurance coverage that applies wherever the employee works, and many employers already have nationwide coverage. To determine if you have a coverage problem for Wanda’s prior work in North Dakota, and coverage for the future, consult your insurance broker and look into the state program.
What does this mean for Wanda Wanderer? She might be entitled to payments that you have not provided (business expenses) and she might have claims that she could raise with the state’s department of labor (missed meal periods). If Wanda has an injury on the job while working remotely, and files a claim in North Dakota, both the state and Wanda will be surprised to learn that the company has not paid into the mandatory program. And, if at some point you decide to require her return or part ways with Wanda, she may be entitled to all her accrued paid time off if she doesn’t come back.
Of course, each of these topics requires an individual assessment of the law, and potential risks; we’re here for you! Remember the second Wandering Worker rule of thumb: “ignorance is no excuse.” The fact that Wanda did not tell you she moved might help with some arguments about good faith and lack of willfulness (always good things to have in wage/hour world) but there is no exception that allows employers to violate laws they do not know about. As G.I. Joe used to say: Now you know, and knowing is half the battle!
There are a few more items to think about: other areas to review and consider when evaluating a remote worker relocation, or considering allowing remote work in a new jurisdiction:
- state and local taxation, including “nexus” coverage;
- registration to do business in new jurisdictions;
- additional or new paid sick leave obligations;
- counting issues under the Family and Medical Leave Act and similar state laws;
- payment of a different minimum wage or salary to be exempt from overtime;
- different meal and rest break compliance;
- additional wage and hour obligations, including a change in available exemptions under a different state law;
- job posters, pay data reporting, and hiring notifications;
- wage-theft notice requirements where none previously existed;
- unemployment insurance payment obligations; and
- conflicting laws, including extraterritorial application of a variety of state laws.
One final tip: Tackle this head on, before Wanda Wanderer wanders again! Remember to get a remote work agreement in place, recognizing only one approved remote work location, and establish a policy that remote workers need permission to change remote locations.1
I suspect if you do not tell Wanda to stay put until you’re up to speed on compliance obligations nationwide, we may hear about Wanda Wanderer again… did I mention North Dakota has an emergency paid sick leave requirement?
Stay tuned for our next Worried & Wondering About Wanda Wanderer installment, where we will address other thorny employment law issues arising from our Wandering Worker.
1 Littler’s Remote Work Package for Employers is a great place to start; it includes a model policy and model agreement that have those features. Click here for more information.