Labor & Employment Law Update

Hiring your first out-of-state employee can introduce a complex web of local and state employment laws that may differ dramatically from those you already follow. From paid leave requirements and pay transparency laws to non-compete restrictions and city-specific ordinances, multi-state employment compliance can quickly become a challenge for unprepared employers.

Hiring an Out-of-State Employee Requires Extra Caution

Stop. Look. Listen.

I remember seeing these safety signs at railroad crossings when I was growing up. Stopping, looking and listening was supposed to help you avoid getting struck by a 200-ton locomotive, which does seem rather imperative to avoid. Whenever I hear an employer casually discussing taking their first foray into hiring an out-of-state employee, I picture that 200-ton locomotive barreling down the tracks at the unsuspecting employer. I would encourage that employer to do the same before proceeding: Stop. Look. Listen.

How Employment Laws Vary by State

Employment laws are becoming increasingly varied by state and, in some cases, by city. An employer that has been operating under one set of relatively static employment laws for the past 20 years in, say, Wisconsin, probably has a pretty good handle on compliance matters for its current Wisconsin employees. That employer has a staff that is accustomed to complying with Wisconsin law and federal law when it comes to hiring, employment, benefits, and separation. 

Examples of Key Multi-State Employment Law Compliance Risks

So how hard could it be to add one measly employee working remotely from just 90 minutes to the south in, say, Chicago? Not quite as hard as dodging a 200-ton locomotive, but certainly challenging and full of pitfalls for the unprepared employer. While of course there are plenty of similarities in having a Wisconsin employee and an Illinois employee, the devil is in the details. 

Examples of common compliance risks include:

• Leave laws. Get ready to provide that new employee with new forms of leave—some of it paid—that isn’t required under Wisconsin law. This also entails various provisions surrounding when the new employee can use that leave and what information you can request surrounding their use of that leave. Also be prepared to train your managers and HR on compliance with Illinois leave laws.
• Unenforceable restrictive covenants. That well-crafted non-compete you have your Wisconsin employees sign may be entirely unenforceable with your new Illinois employee and provide you no protections at all depending on their annual compensation level.
• Rest and break requirements. I hope you are prepared to deviate from your break policy you’ve been following for the past 20 years in Wisconsin and provide that new employee with specific break times required by Illinois law.
• Pay transparency laws. If you aren’t already familiar with pay transparency laws, you better become familiar before you even dream of posting the job looking for an Illinois candidate to fill the position.
• Minimum wage and local laws. If that employee happens to live and work in the city of Chicago, then be prepared to comply with additional leave laws, the fair workweek requirements, increased minimum wage, and any other employment laws Chicago has instituted in the meantime.
• Continually changing laws. Of course, once you hire that Illinois employee, be ready to keep up with the breakneck pace of changes in Illinois employment law going forward.

This is true whether you are thinking of adding your first out-of-state employee in Illinois, New York, California, Minnesota, or Texas. Each state has its own nuances.

Before You Expand Your Workforce Across State Lines: Stop, Look, and Listen

A company should not stifle potential expansion and growth because of additional compliance issues. However, you should stop, look, and listen before hiring that first out-of-state employee. Fully understanding multi-state employment law obligations ahead of time allows you to make an informed decision about whether to hire an employee in another state.