The Covid-19 pandemic’s effect on how and where we conduct business is forever changed with remote and hybrid work models becoming the norm. The shift to remote work during the pandemic has made it possible for employers to expand into other geographical areas in search of the best talent in an ever-tightening labor market. Having access to and hiring out-of-state employees has been a game changer in terms of expanding the talent pool. However, the change has also led to many compliance questions as single-state employers become multi-state employers. For most, the change to remote work and subsequent hiring of out-of-state employees happened quickly without the ability to strategically plan for the change. Many multi-state employers are now realizing they are subject to the employment laws and regulations of every state in which they have employees making compliance very complicated. This blog addresses multi-state compliance issues that arise during pre-hiring and onboarding of new employees and employee record keeping. This is part one of three-part blog series designed to help you think through compliance issues and design policies and practices that make sure your bases are covered.
Pre-Hiring, Onboarding And Record Keeping
Today’s marketplace necessitates constant adaptation to stay on top of candidates’ needs and wants. Employees are in the driver’s seat and are dictating changes in employee benefit offerings, leave and remote work policies and starting salaries. Savvy employers study market trends and offer benefits and salaries that keep them competitive with their peers. Most employers have a handle on competitive salaries in their industry and geographical location. However, what happens when an employer wants to hire an employee in another state where the cost of living, or the amount of money one needs to cover basic living expenses like mortgages, utilities, and groceries, can vary greatly and has an important bearing on competitive starting salaries. If you are an Oklahoma employer looking to hire an employee in D.C. or New York, you must consider that it is much cheaper to live in Oklahoma than D.C. or New York where the cost of living is among the highest in the nation. A current salary survey is one way in which to benchmark salaries in other states. The U.S. Bureau of Labor Statistics offers free access to its database of BLS wage data by occupation for all states and geographical regions and can be found here. Salary surveys customized by industry, geographic location, and company size can also be purchased from numerous online vendors and consultants. Do your research before tapping into a talent pool in another state and be sure your starting salary is competitive with others in that state.
Applications remain an integral part of the recruiting and hiring process for several reasons. When signed and dated by the applicant, an application becomes a legal document that gives the employer recourse if, down the road, it is found the applicant or employee falsified information. The application also keeps an applicant’s pertinent information on one form, ensuring the same information is requested of and collected on every applicant and can be easily accessed by all involved in the interview and hiring process. Multi-state employers need to research what can and cannot be asked on an application for every state in which they have employees.
Many states have enacted “ban-the-box” laws that prohibit asking applicants about their arrest record on the application. Some refer to these laws as “fair chance” laws with the idea being employers should consider a candidate’s qualifications first without the stigma an arrest record often brings. Currently, fifteen states and the District of Columbia have mandated the removal of conviction history questions from job applications for private employers—California, Colorado, Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and Washington. Additionally, 35 states have adopted ban-the-box laws applicable to public-sector employment.
Increasingly, state and local governments are adopting laws that prohibit employers from requesting salary history information on applications in an effort to end the cycle of pay discrimination often affecting minorities and women. Currently, D.C. and Maryland have banned employers from requesting or relying on an applicant’s wage history to make decisions about employment or to determine an applicant’s wage. Some states have enacted laws prohibiting employers from relying on an applicant’s salary history to set compensation even when the pay information is volunteered. New York and California are among several states that prohibit employers from seeking salary information at any time during the hiring process, not just on the application. Multi-state employers should carefully review their application to ensure it is legally sound in all states in which employees work.
Employment verifications are a standard hiring procedure for most employers in which employers seek basic information on candidates such as job title and responsibilities, dates of employment, etc. However, most states have limitations and restrictions on what type of information is requested and under what circumstances. In some states, employers may provide information about a former employee only with the employee’s consent. In Georgia, the only information that an employer may disclose to a prospective employer or former/current employee is job performance, qualifications, skill or abilities and violation of state laws. However, in addition to the information Georgia allows to be disclosed, Louisiana allows employers to disclose information on performance evaluations, attendance, attitude, effort, demotions, promotions and disciplinary action. Because restrictions vary widely state to state, a one-size-fits-all employment verification policy is not advisable.
Some states, including Arizona, California, Illinois and New Jersey, have laws, sometimes known as service letter laws, that require employers to provide former employees with letters describing certain aspects of their employment—for example, their work histories, pay rates, or reasons for their termination. In some cases, states require the information follow a certain template and others provide a form for employers’ use. For ease of administration, multi-state employers with employees in a state with a service letter requirement may provide the letters for all terminations in every state in which employees work.
E-Verify is an Internet-based system that compares information entered by an employer from an employee’s Form I-9 to records available to the U.S. Department of Homeland Security and the Social Security Administration to confirm employment eligibility. E-Verify is not a substitute for completing the Form I-9, and I-9s must still be completed for employers using the E-Verify system. The DHS claims E-Verify is the best way for employers to ensure their workforce is eligible to work in the U.S. Companies registered with E-Verify can offer eligible foreign student employees in F-1 visa status an additional 24 months of optional practical training which can be a useful recruiting and retention tool. These employers can continue to employ F-1 STEM students who aren’t chosen in the H-1B lottery. E-Verify employers can also continue to employ certain STEM students for up to 36 months without petitioning for an H-1B, an expensive and time-consuming process. Some state and federal government contractors are required to use E-Verify, but it is voluntary for most employers. However, to date E-Verify is mandatory for some or all employers in the following states: Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia and West Virginia. Employers with employees in E-Verify mandatory states, must ensure the E-Verification process is part of its onboarding process.
New Hire Reporting Requirements
Federal law requires employers to report basic information on new and rehired employees within 20 days of hire to the state where the new employees work. The information is maintained in the National Directory of New Hires used by child support agencies used to locate a parent who owes child support and issue an income withholding order. Some states have additional reporting requirements. The U.S. Department of Health and Human Services provides a useful tool found here where employers can access new hire reporting requirements by state. The U.S. Department of Health and Human Services provides the following options for multi-state employers:
- Report newly hired and rehired employees to the states in which they work, following the new hire reporting program regulations, requirements and timeframes for each state in which employees work; or
- Select one state in which employees work and report all new hires to that state’s designated new hire reporting office. Employers choosing this option must first register with the Department of Health and Human Services as described here.
Employers are required to keep certain records pertaining to employees for a specific length of time under the FLSA. For a refresher on the federal requirements, go here. States have their own recordkeeping requirements that are often more comprehensive than those required by the FLSA. For example, Maryland’s Equal Pay for Equal Work law requires Maryland employers to keep records of employees’ racial classification and gender in addition to categories of wages and job classifications. Virginia requires employers to retain records related to family and medical leave including requests for leave, notices, correspondence and medical records. New York has an extensive list of employment records employers must keep found here. Multi-state employers should research record retention requirements for every state in which employees work and ensure HR staff complies.
Get Smart HR
The pre-hiring, onboarding and record keeping compliance issues addressed in this blog are not exhaustive but exemplify just how cumbersome compliance can be for multi-state employers. If you are among the many employers contemplating or already hiring employees in other states, it’s time to pause and ensure you are operating legally in those states. Smart HR’s consultants are well-versed in compliance issues and can help you examine your current multi-state operations and identify potentially problematic compliance issues. Call today.