These days, geography has little to do with hiring or retaining the best employees. Many companies function well with a telecommuting or virtual workforce.

According to the site FlexJobs, telecommuting in the U.S. has grown 103 percent in the past decade. At this rate, half of all U.S. employees will work (or have the option to work) remotely by 2020.

If you’re already on, or plan to jump on, this bandwagon — congratulations on your forward thinking! Just be sure to note how the employee’s state handles matters such as:

• Vacation accrual and pay out – In Texas, accrued, but unused, vacation does not need to be paid out at termination if your written vacation policy so specifies. In other states, such as California, no matter what your policy says, accrued, but unused, vacation must be paid out at termination. Failure to do so in California will warrant the imposition of waiting time penalties on unknowing employers. These penalties quickly add up. So, look at the existing vacation or PTO policies to determine what is required under the laws of the states where your employees work.
• Final pay rules – If the employment relationship doesn’t work out, employers must also comply with the applicable state’s final pay rules. Some states require immediate payment of final wages. Other states provide a longer period to pay. Penalties can result from late payment, so double-check state rules before ending your relationship with an out-of-state employee.
• Overtime and exemption rules — In Texas, following and complying with the federal Fair Labor Standards Act (FLSA) is sufficient to ensure your company is complying with overtime laws. This isn’t true everywhere. States such as Colorado and California have different exempt status tests, as well as daily overtime rules. In some states, for example, overtime is not merely triggered by the number of hours worked in a week but on the number of hours worked consecutively or the number of total hours worked in a day. Running afoul of the overtime laws can be a costly mistake, so make certain to double check the specific state laws where your employee works.
• Meal and rest breaks – A number of states have required meal and rest periods. (Texas, however, does not have any state-law regulations that applies to employees in general.) Failure to comply with meal and rest period provisions can be quite expensive. For example, in California, an employee may be able to receive one hour of back pay for missed rest breaks and meal periods.
• Workers’ compensation insurance – Texas does not require employers to purchase workers’ compensation insurance, however, most other states do. Moreover, in some states, the failure to obtain and maintain workers’ compensation insurance can result in criminal violations.
• Invention assignment – Some states, such as Kansas, Washington, Illinois, and California, require companies to notify employees of their invention assignment rights. Be sure that the proprietary information agreement that your company is utilizing contains whatever required notification is necessary for that state. Incorporating the necessary language will help to make certain that your invention assignment is enforceable.
• Non-compete agreements – Many states permit non-compete agreements. Other states do not permit such agreements or require them to have particular limitations. It is vitally important to tailor non-compete agreements to the state where the employee is working. The failure to do so can result in the finding that the non-compete is unenforceable in whole or in part.
• Employment applications and background checking laws – Running a background check on an applicant out-of-state? Make sure your employment application only asks permissible questions for that state. Similarly, make certain you comply with that state’s applicable background checking laws, including the notice and authorization provisions. (Only using reputable background checking agencies – and getting forms from those agencies – is one way to protect your company against the risk of violating state law.)
• Leave laws – A number of states and cities have implemented paid sick leave laws for private employers, including California, Arizona, Massachusetts, and Washington. Several other states provide unpaid leave rights beyond the FMLA and ADA, including statutory family leave and school activities leave. Employers should ensure that they are complying with these leave laws and have provided whatever mandatory notice obligations may be required to their employees.

While telecommuting can be a wonderful way to expand your workforce, it is important to have a well-informed game plan that considers each of these aspects. It is likely you’ll need to call in legal, payroll, and HR help to navigate your way to a healthy (and legal) remote-worker relationship.

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