States have varying legal requirements for conducting business within that particular state. For example, some states have more expansive paid leave rights or require employee reimbursement for home office expenses. But the biggest obstacle for employers is the tax ramifications of workers now situated in a different state than the employer’s home office. For example, when an employee originally working in a New York City office is now sitting in his living room in New Jersey, employers are left to ponder whether they pay income taxes to the state of New York or to New Jersey. States are now suing each other over this mystery, but until the Supreme Court divulges a clear rule, accountants and tax lawyers will merely be providing educated guesses.
Hybrid working, a mixture of working from home and working at the office, raises a number of its own questions. The first step in tackling the income tax problem is understanding where the employees are working, which is obviously debatable for an employee splitting their time. Many local requirements are triggered only after a business reaches a threshold number of employees working in that state. Accounting firms attempt to provide guidance where they can, but again, until the Supreme Court tells businesses how and where to count their employees, everyone is simply playing a guessing game.
Despite the legal uncertainty, employers should welcome at least a hybrid form of remote work. Contrary to many employers’ grievances, productivity and engagement levels are often higher for remote workers. While that cannot be said for every employee, the hybrid models allows the employee to choose for herself where she is most productive, rather than being told when and where to work. Moreover, employees consistently report higher job satisfaction due to flexible working conditions, leading to stronger employee retention rates. If the lower burnout rate is not enough, employers should acknowledge that the health of the population as well as the planet improves when employees have the option to do their work from home when they feel under the weather.
Notwithstanding the laundry list of issues and questions surrounding the work from home dilemma, it is here to stay. Employers should be wary of tax and other liability stemming from their remote workers, but they should also welcome the opportunity for employee flexibility. The pandemic forced technological and ideological change surrounding employee working conditions, and employers will either learn to adapt or they just might be left behind.
Claire Thompson is a second-year law student at Wake Forest University School of Law. She holds a Bachelor of Science in Business Administration and a minor in Spanish from The Ohio State University. Following law school, she plans to practice employment litigation.