Remote work is increasingly popular today, and for good reason: it allows employees greater flexibility in the workplace, while employers are able to source talent from anywhere in the United States. More employers are offering remote accommodations to hire and retain the best workers, including hiring out of state employees in California.
When you hire outside your own state, you open yourself up to certain complications. Employers need to be aware of each state’s employment laws. They must register with the state as an employer, register to withhold income tax and review all policies to ensure that they comply with state law.
That can get complicated, fast. Every state has different standards for their employees: what works in Arkansas may not apply to California employees. SixFifty’s multistate employment tools simplify the process to hire workers in California. The examples below demonstrate what it takes to hire in California, and how we can save employers time, money and hassle.
Scenario 1: Employee works from home in another state
Sometimes employees need to move to another state, whether to save on housing costs, be near family or to accommodate a partner’s employment. Employers may choose to keep them on as a remote employee in the new state.
However, this becomes an issue if the company hasn’t already established an economic nexus in the new state. They must take the time to ensure compliance with the new state’s employment laws. Because California has strong worker protections, what passes muster in Utah, for example, may not be compliant with California laws.
Scenario 2: Hiring out-of-state employees in California
Employers may also choose already out-of-state employees. For instance, a company might be headquartered in Idaho, but the best candidate for the job is in California. Even though the company does the majority of their business in Idaho, they must register as a California employer. This ensures that the employees get the benefit of California worker protections, and employers will not be penalized for failure to comply.
Multistate Employer Registration Factors to Consider
In both of the above scenarios, employers need to pursue multistate compliance or risk being held accountable by the Department of Labor for failing to comply with state-specific employment standards. Compliance differs across all 50 states. To simplify the process, SixFifty has narrowed down multistate employer registration considerations to five core areas of focus.
Here’s what it looks like for companies hiring out-of-state-employees in California—or accommodating employees moving to California if there’s no established business nexus.
1. California Employment Registration
The first order of business is establishing the company as a California employer. This requires an economic nexus, which you can create by registering the business with the Secretary of State, reporting new hires to the Department of Labor, and obtaining workers’ compensation and unemployment insurance coverage.
- Obtain a registered agent
- Obtain a certificate of authority in California
- Report the new hire to the Department of Labor
- Register for unemployment insurance
- Report unemployment insurance account to payroll provider
- Obtain workers’ compensation coverage or update the policy
2. California Tax Registration
Employers must register with the Employment Development Department if they operate a business and employ one or more employees, and pay more than $100 in wages in a calendar quarter. Additionally, they must:
- Register for income tax withholding account
- Obtain the completed state income tax withholding form from the employee
- Register for a sales tax license or permit
3. California Employment Policies
California has 22 state-specific employment policies which must be covered in the employee handbook. SixFifty’s employee handbook tool makes it easy to include the required policies and review your existing ones for compliance purposes. Keep in mind that certain cities have hyperlocal policies, so you’ll need to review your handbook every time a new employee comes on board.
- Review employee handbook for compliance
- Update policies or add new leave policies as needed
4. California Required Employment Policies (April 2023)
- Adult Illiteracy Leave (25 Employees)(School Activity Leave)
- Alcohol and Drug Rehabilitation Leave (25 Employees)(School Activity Leave)
- Bereavement Leave
- Business Expense Reimbursement
- Civil Service and Air Patrol Leave (15 and 50 Employees)
- Crime Victim Leave
- Domestic Violence Leave (25 Employees)
- FMLA (5 Employees)
- Health and Safety Policy
- Home Office Reimbursement (if remote work is encouraged or required)
- Jury Duty Leave
- Lactation Accommodation
- Meal and Rest Breaks
- Military Service Leave
- Organ, Bone Marrow, and Blood Donor Leave (15 Employees)
- Outside Employment Policy
- Paid Sick Leave (including separate policies for Berkeley, Emeryville, Los Angeles, Oakland, San Diego, San Francisco, and Santa Monica)
- Paid Time Off
- Pregnancy Leave (5 Employees)
- School Activity Leave (50 Employees)
- School Appearance Leave
- Voting Leave
5. California Employment Implications
California has unique policies specific to the state. Minimum wage, at-will employment, exempt status and overtime are just a few of the policies employers need to comply with. Additionally, California’s COVID-19 policies may be different from the provisions in your original state. Employers must ensure that their employment agreements and handbooks reflect these laws.
- Ensure that non-compete provisions comply with California law
- Confirm that the employee is paid at least the minimum wage
- Review the applicable overtime laws
- Confirm that the payroll practices meet the payment frequency standards in California
- Consider whether insurance extends coverage to employees in California
- Consider COVID-19 laws that affect the employee
6. California Signage
Finally, California requires certain signage to be “posted” in the workplace. This includes remote workers: the state allows signage to be posted online, as long as the worker can easily access the information. Required signage includes information about payday, workers’ compensation, paid sick leave, COVID-19 policies and more.
- Post or distribute required signage
Simplify Multistate Compliance with SixFifty
The process of maintaining compliance can be complex and extremely nuanced for companies unfamiliar with California employment laws and standards. It’s why SixFifty has compiled an extremely useful tool for businesses hiring out-of-state employees in California. To simplify the process of hiring out-of-state employees in California or supporting remote employees on-the-move, check out our 50 State Hiring Kit.