Remote Hiring: Looking Farther Afield to Expand the Talent Base.

• Author: Nguyen, S. Andy
• Position: California Tax

It's an understatement to say that the job market has changed because of the ongoing COVID-19 pandemic. While some industries have seen their demand plummet and customer base shrink compared to pre-pandemic times, others have had the exact opposite issue.

The adoption of remote work across the country was previously something that perhaps had been anticipated, but many had considered to be years away.

With the number of vaccinations increasing and the pandemic showing signs of somewhat receding, employers and employees have begun to adapt to this new work environment. Many across the country have witnessed both the benefits and pitfalls of remote work.

Additionally, many employees and employers have seen benefits of such an arrangement, most notably with the expansion of the labor pool. Rather than getting caught up in or continuing the endless cycle of self-eannibalization from their direct competitors in the local area, firms have begun to look nationwide and abroad as a means of expanding their talent base.

With the new opportunities, however, come some potential pitfalls.

Here are a few things to keep in mind before you decide to hire remote workers.

Employment Status

As the result of the passage of AB 5, there have been clear rules and regulations dictating who can or cannot be classified as an independent contractor within the state of California.

Other states may not have any clear-cut rules, or may even have rules that conflict with your company's home state regarding the classification of workers as an employee versus an independent contractor. It's highly advisable to check the laws of the state of the worker's residence, as well as engage local labor counsel for confirmation before making an offer to a prospective candidate.

State Nexus

With a remote worker outside of your state, you may have created nexus between your business and the state of their residence. This is highly dependent on their employment status (see above) as well as the role that worker plays in the company. If the person is an employee for the company and either solicits sales or takes part in administration, there is a higher likelihood of creating nexus as opposed to if the worker was an independent contractor working on a support role.

Although the Multistatc Tax Commission has created rules to add consistency to state definitions regarding which activities create nexus, not all states arc in conformity and some states only partially...