Which State’s Employment Laws Apply to My Business?

In this new era of remote work and dispersed workforces, one of the questions we see most often is: which state’s employment laws apply to my business? If my company is headquartered in Texas with employees in Texas, California, Arkansas, and Oregon, which state’s laws do I need to comply with? Which law governs offer letters and contracts with employees?

The answer to that can be tricky, and it can vary depending on the specific area of law you’re dealing with and the types of agreements you have with your employees. It can get really complicated if you have employees who work in multiple states, or who live in a different state from company headquarters, and split their time between onsite and remote work. So if you ask a lawyer, “Which state’s employment laws apply to my business?” you’ll probably get the technical, and unhelpful, answer: it depends. The good news is that there’s a general rule of thumb you can follow to make sure that your business is in compliance with the right laws.

Comply with the law of the state where your employees work

Businesses should comply with the law of the state(s) where their employees work. So if your company is headquartered in Texas with employees in Texas, California, Arkansas, and Oregon, you should be prepared to comply with the laws of all four of those states, even if you just have one employee in each state.

What about a governing law provision?

You might be asking yourself, “What if I include a governing law provision in all of my employment contracts that specifies that the law where the company is headquartered will govern the contract? Will that let my business cut down on the number of state laws we need to comply with?”

Unfortunately, the short answer is: probably not. If you include a governing law provision in an employment contract that specifies a state other than the state where the employee works, there’s a real risk, if a dispute ever arises over the contract, that a court won’t enforce the governing law provision and will just apply the law of the state where the employee works after all.

So, while it’s definitely a best practice to include a choice of law provision in your employment contracts, the general rule is that you should write the provision so that the law of the state where the employee works governs the contract. Because courts almost always uphold choice of law provisions that select the state where the employee works, this practice will give your business some valuable certainty about which laws will apply to its employment relationships, even if it doesn’t let you cut down on the total number of state laws that apply.

This rule becomes a bit more complicated if you have an employee that works in multiple states. However, the governing law in this situation is likely the state where the employee performs the most substantial part of their services (i.e. the state in which the employee completes most of their work). If the employee splits their time evenly between multiple states, you should consider complying with the state whose employment law is most strict (meaning the one that gives the most benefit to the employee). That way you will be compliant no matter which state law applies.

SixFifty can help

SixFifty’s Employee Handbook and Employment Agreements toolkits help you generate customized legal documents that comply with every state and federal employment law. Our easy-to-use software platform helps you generate the necessary documents to manage and hire employees in every jurisdiction across the country. We continuously monitor employment laws across the country and update our tools to reflect any changes in the law so your handbook and agreements are always up to date.

For more information, or to see our document generators in action, request a demo today.