Why Do Some States Have Restrictions on Remote Jobs?
When it comes to remote work, everything changed in 2020.
You know how it happened. The pandemic struck and employers who weren’t already allowing remote work were forced to do so. The pandemic continued and employees continued to stay at home. Then, as vaccinations became widely available and COVID-19 rates dropped, employers saw the benefit of employees working remotely.
Remote work, which a decade ago was a benefit employers could dangle in front of candidates, has become a standard practice in many industries.
Not everyone has embraced the work-from-home model (we’re looking at you, Elon Musk), but most companies have recognized the benefit of at least having some form of a hybrid model.
That said, depending on where you live and where the company resides, you might face some difficulties finding a remote job. That’s because of state restrictions surrounding remote work.
So why do some remote jobs have state restrictions?
4 Reasons for State Restrictions for Remote Jobs
Brie Reynolds, a career services development manager at FlexJobs — a site featuring millions of flexible remote work opportunities — offers some insight into these state laws.
“It’s a little bit weird when you’re looking for a job you can do from home, but you’re being told, ‘Nope, you can’t do that from home if you live here,’ ” Reynolds said.
Unfortunately, these location requirements aren’t uncommon. Only about 5% of the remote jobs featured on FlexJobs have zero state restrictions, Reynolds said.
These are the main reasons companies can’t or won’t hire remote workers from every state to work at home.
1. State Taxes and Legal Requirements
Employers have to jump through more governmental hoops when they hire out-of-state workers. The company will need to register with local and state tax agencies for every state in which they have employees — and frequently pay taxes in those states. They’ll also need to make sure they’re following the correct procedures for each state’s labor and unemployment agencies.
Reynolds said this is one of the biggest reasons for state hiring restrictions. And, like everything else, employment tax laws vary by state — even city.
“When a company starts to hire a remote worker in a state that’s different from the one they operate in, it has to be able to set itself up to collect employment taxes, so that might change on state, local and federal levels,” she said.
In addition, companies also have to provide workers’ compensation and unemployment insurance for every employee. Those programs are run by states, and they can vary a lot.
2. Registrations, Licenses and Certifications
A business that employs a worker out of state needs to be registered in that state. Because of all the paperwork and fees associated, the business might simply pass on hiring workers in a different state.
In addition, jobs like medical professionals, lawyers and teachers require in-state certification or licenses. So if an employer wants to hire someone out of state, they are limited to employees who are licensed in that state.
Some states also require remote employees to have a home occupation permit. Companies looking to hire out-of-state workers could encounter myriad local city or county laws governing such permits.
3. Workplace Regulations
This might sound weird, but it’s a big one.
Workplace regulations don’t necessarily mean the office needs a break room. It means state law might require that employees have to work a certain amount of hours before taking a break. And is the break paid or unpaid?
For companies to hire remote employees across different states, they’d have to comply with those individual laws. Rather than deal with all that compliance, some employers simply won’t hire from a state with overly stringent workplace requirements.
California is an example of a state with more stringent laws regarding the work space.
“Each state does that independently,” Reynolds says. “So it’s a huge maze to wade through for employers who want to bring people on in different states.”
4. Other Job-Dependent Reasons
There are other factors why companies might hire for work-from-home-jobs only from certain states.
If they frequently hold in-person meetings, want you to visit clients in the field or complete on-site training, that could create a hefty travel bill. Reynolds has noticed some companies requiring remote employees to be near a large airport if it’s a travel-intensive job.
Time zones can create more logistical challenges. If a company is in Atlanta, it might not be inclined to hire employees who live in Los Angeles, simply because of the three-hour time difference. A daily standup meeting that occurs at 8 a.m. ET would require the L.A.-based worker to be up at 5 a.m. For most companies, that’s simply not feasible.
Which Companies Aren’t as Likely to Face These Restrictions?
There are a few types of companies to look out for if you’re wanting to avoid state restrictions on remote work — although these rules aren’t universal.
Most of them lie at two ends of the spectrum: new startup companies and large corporations.
Many companies starting out are willing to hire remote workers in any state.
“A lot of smaller and startup companies will say, ‘OK, we’ll deal with whatever employment issues we have to; we just want to get the best people when we’re starting,’ ” Reynolds said.
Once these companies have hired a solid staff of remote employees from five to 10 states, they might implement some state hiring restrictions to spare their HR department from copious amounts of legal research.
On the other hand, there are the large corporations that need a robust remote workforce to function. They often have huge internal HR and legal teams that can handle national and international work-from-home regulations.
“Once a company gets to a certain size, it becomes easier because they have more resources available,” Reynolds said.
What to Do if the Remote Job You Want Has State Restrictions
Don’t get too discouraged. Reynolds encourages you to still apply to your dream remote job.
“One thing we have heard from a couple employers that have this issue — that are not hiring at the moment for a specific state — it doesn’t mean they won’t in the future,” Reynolds said.
The primary advice from hiring employers?
“Most employers say to put your information into their system anyway, and then at least they have it if they do start hiring in that particular state,” she said. “You’ll already be in the system.”
Also see if you can sign up for job email notifications. Depending on the company, it will update you if the state employment laws have changed.
Robert Bruce is a senior staff writer at The Penny Hoarder covering earning, saving and managing money. He has written about personal finance for more than a decade.