Compliance Challenges of Multi-State Remote Work: Common Pitfalls

Remote work policies often look solid on paper. Clear expectations, flexible arrangements, and broad applicability across the workforce. But when legal risk emerges, it rarely stems from the policy itself. Rather, it comes from how that policy is implemented day to day. In a dispersed workforce, small execution gaps can quickly turn into significant liability. Below are the most common “risk zones” where employers tend to get burned.

1. Misclassification

Employee classification, particularly exempt and non-exempt, becomes more complicated across jurisdictions. While the Fair Labor Standards Act (FLSA) provides a baseline, a lot of states recognize different exemptions, and impose their own tests and salary thresholds. For example, Pennsylvania does not recognize a separate “computer professional” or “highly compensated” employee exemption. Other states like New York, Colorado, and California have higher salary thresholds for exempt employee classification. In short, an employee properly classified as exempt in one state may not meet the test for exempt in another. Employers should be mindful of these differences and avoid using a one-size-fits-all classification model across a geographically diverse workforce.

2. Timekeeping & Off-the-Clock Work

When employees, particularly nonexempt employees, are not physically present in a workplace, tracking time and productivity becomes more difficult and more legally sensitive. Similarly, tracking productivity for purposes of accountability, promotion, wage increase and evaluation, takes planning and time in a remote setting. Common issues include employees responding to emails or messages outside scheduled hours, logging in early or continuing work after clocking out, and failing to accurately record all hours worked. Under federal and state wage and hour laws, employers are responsible for paying for all hours worked – whether authorized or not. Remote environments make it easier for off-the-clock work to occur and harder to detect. Without reliable timekeeping systems and consistent enforcement, employers face increased risk of wage claims. When supporting a multi-state remote workforce, employers should consider digital tools that track computer time/keystrokes, log phone calls etc. Supervisors need to “check in” with remote workers more frequently and set measurable expectations for productivity.

3. Home Office Expense Reimbursement

Several states require employers to reimburse employees for certain remote work business expenses. These may include internet and phone usage, home office equipment or supplies, and business-related software or tools. Employers may have broad expense reimbursement policies that require reimbursement or remote work expenses, which create an enforceable obligation. A uniform reimbursement policy that overlooks state-specific reimbursement laws can lead to underpayment of expenses, and sometimes the violation of statutory requirements. Regardless of state law or employer policy, the FLSA requires that employees’ wages cannot be reduced below the minimum wage by business-related expenses that are necessary for their job. For example, if a non-exempt employee earning near minimum wage is required to maintain home internet to perform their job, and the cost of that internet effectively brings their pay below the minimum wage, the employer must reimburse the expense to the extent necessary to ensure compliance with minimum wage requirements. This is true in any state; however, keep in mind that minimum wage requirements differ state to state, changing the threshold analysis for mandatory reimbursement under the FLSA.

4. Paid Leave & Notice Requirements

State and local governments continue to expand paid leave laws, and remote employees are typically covered based on where they work, rather than where the company is based. Employers must navigate different accrual rates and eligibility rules, carryover and usage requirements, and mandatory employee notices and postings. Although Pennsylvania does not have a statewide paid sick leave law, specific municipalities like Allegheny County, and the cities of Pittsburgh and Philadelphia all have mandatory paid sick leave requirements. The risk here is often administrative. An employer’s failure to provide the right notice, track sick leave correctly, or apply the correct accrual rates can trigger penalties.

5. Data/Network Security & Confidentiality

A remote workforce expands the number of access points to company data and increases the risk of breaches or misuse. Key areas of concern include use of unsecured home networks or personal devices, inconsistent application of security protocols, and confidential conversations or documents exposed in shared living environments. In addition to operational risks, employers may be exposed to data privacy law, contractual confidentiality requirements, and industry-specific regulations. A data security policy alone is not enough if it is not consistently enforced or supported with appropriate technology and training.

Conclusion:

Most employers do not set out to violate wage laws, misclassify employees, or ignore reimbursement obligations. The issue here is rarely intent, but rather execution. In a remote environment managers may apply policies inconsistently, systems may not account for state-specific rules, and compliance responsibilities may be diffused across teams. These gaps create risk not because policies are absent, but because they are not operationalized effectively across jurisdictions.

The greatest compliance risks in remote work are operational. Employers should focus on things like auditing classification decisions, implementing reliable timekeeping and enforcing usage, tracking and administering leave based on employee location, and strengthening data and network security protocols for remote access. Remote work doesn’t just change where employees work – it changes how compliance must function. The costliest mistakes for employers occur in the gaps between policy and practice. Managing those gaps is the difference between a flexible workforce and a significant source of legal exposure.

Look for our next installment on remote work for policy “must haves” and elements of a remote work agreement.

For more information related to employer obligations and remote workers, and other employment compliance issues, please contact Neva Stotler or Anna Truckley.