Now that remote work has exploded in popularity, the hiring landscape is forever changed. Employers can choose from nationwide talent pools, and employees love the convenience and flexibility of working from home. Remote work opens up a whole new world of possibilities—but it can also open up complex multistate employment issues.
Complying with Texas’ state-specific employment laws is paramount. If employers fail to meet their legal and tax obligations, they could expose the company to fines and penalties. You are required to establish an economic nexus, register for tax and insurance purposes and meet all of Texas’ legal standards.
The time, complexity and cost of researching each state’s employment laws can discourage employers from hiring out-of-state employees. SixFifty has developed robust multistate employer tools to make hiring Texas employees fast, easy and cost-effective. Here’s what the hiring process might look like.
Scenario 1: Employee works from home in another state
Before remote work became possible, most employees had to find a new job when they moved out of state. Today, workers are free to follow their partners to a new state, move closer to family or simply enjoy a new place to live. Employers should note that the new state’s laws apply to out-of-state employees. Even if their company is headquartered in California, Texas employment laws and protections apply to their out of state hire.
Scenario 2: Hiring out-of-state employees in Texas
Alternatively, you might want to broaden the candidate search and hire out-of-state employees from the beginning. This is usually a win-win situation for employers and employees alike. However, the same legal principles apply: Texas employment law governs any new employees living in and working from Texas. Employers must ensure their policies comply with Texas law. Otherwise, they may be subject to penalties from the Department of Labor.
Multistate Employer Registration Factors to Consider
No matter where you’re hiring, there are many state-specific issues to consider when hiring from outside of your home state. Because each state’s employment laws can vary dramatically, employers are required to do significant research and legwork to ensure compliance. This can discourage employers from hiring remote workers.
SixFifty has developed multistate employment tools with five key areas of focus. Here’s what the hiring process in Texas requires.
1. Texas Employment Registration
Your company must establish an economic nexus in Texas before conducting business. This involves registering with the state and reporting your new hire to the Department of Labor within 20 days. You will also need to register for or update unemployment insurance and workers’ compensation policies.
- Obtain a registered agent
- Register to do business in Texas
- Report 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. Texas Tax Registration
Employers who hire Texas workers have tax obligations to the state, even though they’re headquartered elsewhere. While other states would require registering for an income tax withholding account and having the employee complete required forms, Texas does not have state income tax. Instead, you’ll simply register for a sales tax license.
- Register for income tax withholding account
- Register for a sales tax license or permit
3. Texas Required Employment Policies (2024)
Texas has four state-specific employment policies, which must be included in your employee handbook. These policies cover four different kinds of leave, including jury duty and voting leave. You must review your existing handbook to make sure your policies don’t conflict, and add or update any as required.
- Crime Victim Leave
- Day of Rest Law (Workweek and Work Schedules Policy)
- Jury Duty Leave
- Voting Leave
- Witness Duty and Court Appearance Leave
4. Texas Employment Implications
Next, employers must consider certain employment implications. For instance, the employee’s wage must be at least Texas minimum wage ($7.25), overtime and payroll policies match Texas requirements. You should also review your insurance coverage and determine whether there are any COVID-19 restrictions that could affect your employee.
- Ensure non-compete provisions comply with Texas law
- Confirm the employee is paid at least the minimum wage
- Review the applicable overtime laws
- Confirm the payroll practices meet the payment frequency standards in Texas
- Consider whether insurance extends coverage to employees in Texas
- Consider COVID-19 laws that affect the employee
5. Texas Signage
Finally, Texas has three required and two optional types of signage to post or distribute to employees. The state has not determined how employers should do this for exclusively remote workers. Generally, federal law allows posting them on a website, in company communication channels or in an easily accessible web folder.
- 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 Texas employment laws and standards. It’s why SixFifty has compiled an extremely useful tool for businesses hiring out-of-state employees in Texas. To simplify the process of hiring out-of-state employees in Texas or supporting remote employees on-the-move, check out our 50 State Hiring Kit.