Why Multi-State Employers Must Pay Close Attention to State Workplace Laws
As your business expands across state lines whether through remote hires, mobile teams, or regional offices staying compliant with local employment laws becomes more than a best practice. It’s essential.
Many employers are familiar with federal regulations, like the Fair Labor Standards Act (FLSA), but state-level rules can vary dramatically. Failing to comply with state specific workplace laws can result in costly fines, employee disputes, and even criminal penalties.
Let’s explore what you need to know to stay compliant as a multi-state employer.
Compliance Depends on Where the Work Happens
One of the most important rules to understand is this:
Your company must comply with the labor laws of the state where your employees physically work not just where your company is headquartered.
This creates particular challenges if you:
- Employ remote workers in different states
- Have staff who travel across state lines
- Operate in multiple office locations
You’ll need to stay informed of the specific requirements in each state (and in some cases, counties or cities) where employees are located.
Key Employment Law Differences Between States
While federal law sets a baseline, states often impose stricter or additional regulations. These can include:
- Minimum wage and overtime rules
- Notice requirements for layoffs or termination
- Meal and rest break mandates
- Paid leave policies (sick leave, parental leave, etc.)
If a state offers more generous protections or benefits than federal law, you must follow the higher standard.
Federal vs. State Law: Which One Do You Follow?
Here’s how it works:
- Federal law (like FLSA, FMLA, ACA) is the minimum requirement.
- If state or local laws go further, you must comply with them as well.
- If federal law addresses an issue and sets a higher standard, that law takes precedence.
This creates a patchwork of compliance obligations that every multi-state employer must actively manage.
Understanding Employee Classifications: Exempt vs. Non-Exempt
One major compliance area is how you classify your workers. Under the FLSA, employees are either:
- Exempt (not eligible for overtime or minimum wage)
- Non-exempt (eligible for overtime pay)
Misclassifying employees isn’t just a mistake—it can be a felony in some states.
✅ What Is an Exempt Employee?
- Paid on a salary basis
- Not entitled to overtime pay
- Must meet federal or state minimum salary thresholds
- Typically includes executives, professionals, and administrative roles
Employers have flexibility in deciding whether to compensate exempt employees for overtime, but they must still meet the salary and duty criteria.
✅ What Is a Non-Exempt Employee?
- Paid hourly
- Entitled to overtime pay for hours worked over 40 per week (or more than 8 per day in some states)
- Must have accurate time tracking
- Employers must retain detailed wage and hour records
Non-exempt rules can be especially tricky in states with more stringent requirements like California.
Spotlight: California’s Unique Labor Laws
California is known for having some of the strictest labor laws in the U.S. Here are a few key differences:
💼 Overtime Rules:
- Overtime kicks in after 8 hours per day, not just 40 per week.
- Any work over 12 hours in a single day qualifies for double time.
💰 Minimum Wage:
- As of January 1, 2024, the statewide minimum wage is $16.00/hour.
- Some cities and counties (e.g., Los Angeles) have even higher local minimums.
- This affects the minimum salary required for exempt status as well.
⚠️ Tax Nexus:
- Hiring in California may create nexus for state taxes, even if you don't sell goods or services there.
Employers operating in California must regularly review and adjust compensation, ensure accurate timekeeping, and update labor law postings.
Avoiding Common Mistakes
To stay compliant, watch out for these common pitfalls:
- Assuming federal law overrides state law — often, it doesn't.
- Using a one-size-fits-all employee handbook — tailor policies to each state.
- Misclassifying employees — ensure exempt/non-exempt designations are accurate.
- Neglecting local laws — cities and counties can set their own rules.
- Failing to track employee locations — especially important with remote teams.
Final Thoughts
Managing a workforce across multiple states is more complex than ever—but with preparation and awareness, you can avoid costly compliance issues.
Employers should invest in:
- Regular legal reviews
- HR systems that flag state-specific policies
- Updated onboarding and payroll practices
- Location-based employee recordkeeping
Remember: where your employees work determines the law. Whether you're hiring your first out-of-state employee or managing teams nationwide, keeping up with state workplace laws is essential for long-term success.
You can always avoid all this stress by engaging In2America as your EOR and or fully manager PEO provider!!
Need help navigating multi-state compliance?
We’re here to help you understand your obligations and create HR systems that scale with your growth. Reach out today for a compliance check or consultation. We are happy to perform a free audit and provide advice on steps to become compliant.