State, local, and other taxes

Most states have some sort of state or local tax requirements for employers. Agencies are responsible for determining which taxes might apply. Some taxes are assessed on the employee and may have employer withholding requirements, and some taxes are assessed on the employer. Consult with agency legal counsel as needed.

State agencies should plan to withhold income tax for out-of-state workers, since most other states have an income tax. Employers withholding income tax from employee wages are required to have an income tax withholding account and may be subject to a civil penalty of up to $100 for each day such employer should have, but did not have, such an account. Although it may be permissible for an employee to withhold and pay their own income tax in their state of residence, if the employee fails to pay the appropriate tax the onus will be on the employer to address the taxes due if a compliance issue arises. To avoid this complication and the risk of financial penalties, Washington state agencies should proactively withhold payroll taxes.

HRMS has been configured to support the calculation and collection of state and local taxes in Oregon and Idaho. Refer to the HRMS Data Definitions Resource Guide and HRMS user procedures found on the HRMS Support Hub for more information on managing Oregon and Idaho taxes in HRMS. Agencies will continue to manually meet reporting requirements for all applicable tax entities in Oregon and Idaho.

Other state's taxes will not be configured in HRMS; refer to the Out of State Processing in HRMS resource on the HRMS Support Hub for more information.

Unemployment insurance (UI)

If an employee is teleworking for the State of Washington but living in another state, the state agency should:

• Contact the UI agency for the state in which the employee is physically located to see if an employee of Washington is covered by the state’s unemployment insurance laws.
  • If the answer is YES: agencies should comply with the other state’s employment insurance laws.
  • If the answer is NO: agencies should report and cover the employee here in Washington.

Employees can be covered in Washington if the state of their physical presence will not cover them pursuant to RCW 50.04.110(3), which says employees are covered by Washington’s unemployment laws if:

1. The employee is working in the United States, the Virgin Islands, or Canada
2. The employee’s service is not covered by the unemployment laws of that other state; and
3. The place from which the service is directed or controlled (which in this context is the equivalent to place where the employer’s headquarters are located) is in Washington

Scenarios where an employee teleworks in another state less than full time

1. Claimant only occasionally works in a second state

This could be an employee that primarily telecommutes from Oregon or Idaho, but on occasion, comes into Washington for a meeting or training. This could also be an employee that primarily works in a Washington office but will occasionally work in their Oregon or Idaho home. The key legal language is that the work in the second state outside of their core/primary work location is “temporary or transitory in nature or consists of isolated transactions.” RCW 50.04.120(2). In this scenario, their work is “localized” wherever the employee is primarily working. So, the person primarily working at the Washington office would be covered in Washington, and the person primarily working in their Oregon or Idaho home would be covered in Oregon or Idaho

2. Claimant works more than occasionally in a second state

If the work is not “localized” in any one state because the transactions in a second state are not temporary, transitory, or isolated, then the next step in the process is to determine the claimant’s “base of operations.” A claimant’s “base of operations” can be difficult to discern in some circumstances. Federal guidance issued in 2004 defines the “base of operations” as:

“the place, or fixed center of more or less permanent nature, from which the individual starts work and to which the individual customarily returns in order to receive instructions from the employer, or communications from customers or other persons, or to replenish stocks and materials, to repair equipment, or to perform any other functions necessary to exercise the individual’s trade or profession at some other point or points.”

It is possible that an employee may have no “base of operations” in any one state.

This is going to be a highly fact-specific, employee-by-employee, individualized test. If an employee receives instructions and communications electronically, that can either occur in Washington, Oregon, or Idaho, depending on which state the employee is in at the time they log in. Whether the employee visits the Washington office to restock equipment or supplies or has equipment shipped to them at their Oregon/Idaho home office also has an impact on where their “base of operations” is located. Employees who can and do bounce back and forth regularly between the Washington office and their non-Washington home may not have a “base of operations” for purposes of this test. Employees who have a fairly clear and consistent work location may end up with a “base of operations” at that location.

3. If there is no “base of operations,” choose Washington

If work is not “localized” in any one state, and if there is no “base of operations,” then the next legal step is to determine the state from which the employee’s service is directed or controlled. Federal guidance interprets this to mean “the place of basic authority,” or in more colloquial terms, the home/main office. The home/main office for any Washington agency is going to be located in Washington. As long as some service is performed physically in Washington, Washington will win on this test. An example of this is a truck driver that spends roughly equal time in many different states, but whose company or headquarters is located in Washington.

Oregon

• The state of Washington as an employer is not required to remit unemployment insurance taxes to Oregon for an employee working in Oregon in most cases (Oregon will default state government employers as reimbursing employers). However, Washington state agencies will likely need to meet Oregon UI reporting requirements. 

Idaho

• The state of Washington agencies should choose to be a cost-reimbursing employer, which means that Idaho will send a bill for the state's share of the employee's benefits based on their earnings during the base period. A cost-reimbursing employer will likely need to meet Idaho UI reporting requirements.

Workers' compensation

Workers’ compensation jurisdiction is determined using the same laws and analysis regardless of the reason a worker is teleworking in another state. It is important to know that coverage determinations are made on an individual basis for each worker, based on their circumstances.

This applies to all employees (employees of public agencies or private sector businesses). The Extraterritorial Coverage statute that governs these decisions is RCW 51.12.120, with specific sections cited below.

• Generally speaking, Washington accepts incoming workers’ compensation coverage from the eight states that Washington has agreements with (OR, ID, MT, NV, ND, SD, UT, WY). Those agreements vary by state and can be found in WAC 296-17-31009. For example, the agreement with Montana and Nevada excludes construction work and the agreement with Wyoming is limited to 6 months. No other agreements have a specified time limit.
  • The reciprocal agreements cover temporary work in the other state. Where each worker should be covered is determined by the specific circumstances of each worker, and not by the state where the employer is based. For example, a Washington employer may need to have Washington workers’ compensation coverage for their Washington workers and Oregon workers’ compensation coverage for their Oregon workers. The Washington workers’ compensation coverage would also cover temporary work in Oregon that is performed by Washington workers, and the Oregon workers’ compensation coverage would also cover temporary work in Washington that is performed by Oregon workers.
  • Washington state is not looking into reciprocity with any other states.
  • Washington can also accept incoming workers’ compensation coverage from non-reciprocal states for non-construction work in some circumstances, according to RCW 51.12.120(4). These requests would need to be reviewed on a case-by-case basis. Washington workers' compensation coverage extends benefits for Washington workers injured outside of our state because that coverage is required by statute (RCW) regardless of whether there is a reciprocal agreement or not. However, non-reciprocal states may require separate coverage there, or they may accept Washington coverage on a case-by-case basis for temporary work in their state. Washington workers will retain their right to file a claim with Washington, regardless of whether they have additional coverage in the other state, per RCW 51.12.120(1,2) and RCW 51.04.060.
  • Washington extends workers’ compensation coverage and benefits outside of Washington for Washington workers that are temporarily working in reciprocal states or non-reciprocal states, per RCW 51.12.120(1).

• Whether the employee is a full-time or part-time employee is not a critical consideration, but where they spend their time working is. It must be determined where the worker usually works, and whether the work in the other state(s) is ‘temporary’. There are a number of questions that must be answered, including:
  • Where is the work “principally localized”? “Principally localized” is defined in RCW 51.12.120(5), and it is simply the business address where the worker regularly works, or if the worker does not work at a physical business address, it is the state where the worker lives if they also work a substantial amount of time in that state.
  • If the work is not “principally localized” in any one state, are there other factors (according to RCW 51.12.120) that require providing Washington benefits, even for work outside of Washington?
  • What does the work pattern look like, so that it can be determined which exposure is ‘temporary’ in nature? (For example, does the worker work from home in another state on a regular schedule, and then work in a business location the other days? Do they pick up supplies, materials, vehicle, etc. or otherwise start/end their day at a designated location?)

• From a workers’ compensation perspective, the same analysis would be used to determine workers’ compensation coverage requirements regardless of whether the worker is teleworking, working at customer locations, or attending conferences in another state. For more information, go to www.Lni.wa.gov/OutofState or email OutofState@Lni.wa.gov.

How does L&I handle a situation if there is an employee teleworking out-of-state for our agency and they get hurt on the job?

For workers’ compensation purposes, if they are a Washington worker who is temporarily teleworking in another state then they would still be entitled to file a claim with us for their Washington workers’ compensation benefits, and there would be no difference in the claim process. However, if the worker is NOT a Washington worker, but is regularly working in the other state, then they would be under that state’s workers’ compensation coverage.

Washington workers who temporarily work outside of our state are still entitled to their Washington workers’ compensation benefits, per RCW 51.12.120(1). Their hours would still be reported as usual on their Washington workers’ compensation policy/L&I quarterly report. Employers should also check with Department of Occupational Safety and Health (DOSH) on the requirements for reporting serious injuries such as hospitalizations if they happen outside of Washington.

What are the steps to follow for out-of-state teleworkers?

• Confirm to which state the worker(s) should be reported. Contact OutofState@Lni.wa.gov for assistance.
• Check with the other state to verify if they will accept WA L&I coverage for Washington workers temporarily working in their state. Work with L&I on any requirements, such as an extraterritorial certificate. Contact OutofState@lni.wa.gov for assistance.
• Inform workers on where they are covered and where they can file claims if they are injured.
• DES administers a Workers' Compensation Insurance program for state workers. If your employee works outside of Washington in a single other state for more than 30 days (240 hours consecutively and non-consecutively) estimated deposit payroll each year, your agency must work with DES to insure your out-of-state employee.  This policy is also audited and it requires the submission of audited payrolls for those employees who are working in a single state for more than 30 days (240 hours consecutively and non-consecutively) during an annual period. For more information, refer to the contact information included in the DES Workers Compensation Insurance for Out-of-state Employees FAQ.

Is the liability different if the employee working out-of-state is doing manual work rather than telework? If so, what should agencies do prior to agreeing to telework and/or to prepare for that liability?

For workers' compensation purposes, there is no difference whether the worker is performing manual labor or clerical telework. What is important is whether the work outside of Washington is temporary. Washington workers would still be entitled to file claims in Washington for temporary work in another state, regardless of the type of work performed. However, if a worker is performing construction work in another state, the employer should contact OutofState@Lni.wa.gov to receive additional information for construction, based on the state the work is performed in.

See these webpages for more information from Washington State's Department of Labor and Industries (LNI):

• Washington workers traveling out of state
• Out-of-state supplemental reporting

Paid Family Medical Leave (PFML)

Several states, including Washington and Oregon, have paid family and medical leave programs. Typically, participation and eligibility for the program will be determined by each state’s laws. Washington and Oregon utilize the same localization test used for unemployment insurance. If an employee’s work is determined to be localized in Washington, then the employee and employer will pay premiums into Washington’s PFML program. If an employee’s work is determined to be localized in Oregon, then the employee and employer will pay premiums into Oregon’s Paid Leave program. If an employee’s work is localized to a state without a PFML program, then they would not pay any PFML premiums.

If agencies have policy questions they are asked to email Washington Employment Security Department at esddlpfmlpolicy@esd.wa.gov.

Registering as an employer in other states

Oregon

• An employer that pays wages or other compensation to employees for services performed within Oregon is required to register with the State of Oregon Department of Revenue and acquire a Business Identification Number (BIN).

• Oregon considers each agency of the State to be a separate employer for registration and applicable tax withholding and payment purposes.

• There are several local transit districts in Oregon that assess payroll taxes on employers who have employees working within the district boundaries. Agencies should register with each local tax entity when applicable.

Idaho

• An employer that pays wages or other compensation to employees for services performed within Idaho is required to register with the State of Idaho and acquire an Idaho state account number. Idaho considers each agency of the State to be a separate employer for registration and applicable tax withholding and payment purposes. 

Other States

• Employers will likely need to register in each state where wages or other compensation is paid to employees for services performed. Refer to each state's or local tax entity's laws and requirements.

Wage and hour laws

Each state likely has its own wage and hour laws, to include topics such as minimum wage, meal, and rest periods, and paid sick leave. There also may be separate laws governing cities and counties; for example, a city may have a different minimum wage than the rest of the state. Refer to the laws and requirements that apply to out-of-state workers and consult with your agency’s legal counsel when needed.

Non-discrimination laws

Discrimination law

This area of policy can include laws related to gender, pregnancy, gender identity, disability, religion, race, ethnicity, and any other category protected by state law. State laws can vary in the list of categories; however, many states have a threshold number of employees working in the state in order to be covered employers, and some states have laws that apply to private employers but not public.

Washington public employers are covered under Federal anti-discrimination laws, under Title 7, and Federal pregnancy disability laws, including FSLA laws related to breaks and breastfeeding.

Pay equity: Employers should assume that they must comply with pay equity laws of other states

Examples (not all inclusive) of some state pay equity laws:

• California Equal Pay Act and California Fair Pay Act
• Idaho Wage Discrimination Law
• Oregon Pay Equity Act

There also may be separate laws governing cities and counties; for example, a city ordinance in San Francisco prohibits employers from disclosing salary information of current or former employees without their consent. Employers may need to look at county and/or city requirements since there may be specific laws governing the location where the employee is working.

Technology of accounting and HR systems

Information on processing out of state employee data in Washington’s payroll and HR system for general government agencies is found on the HRMS Support Hub. Please note that HR and/or payroll staff will need to research the correct withholding requirements. Refer to the Out of State Tax Processing in HRMS Guide for more details on the wage types available for processing out of state taxes. Please note that these wage types can be used for other items such as local taxes as well.

For further questions, employers should contact their agency’s payroll administrator or OFM Statewide Accounting.

How to handle time-zone differences

There are a variety of issues that can arise when employees work in different time zones. Employers should consider the business needs, any potential wage and hour impacts, and pay considerations when reviewing requests to telework in a different time zone.

Business needs

• The agency will need to determine if business and service needs can be met across expanded hours.
• The agency will need to determine which time zone the employee lives in and which time zone the business is done and document this information on the telework agreement along with an attestation to their work schedule.
• The agency will need to determine whether and how employee expectations and hours worked can be tracked.

Wage and hour issues for overtime eligible employees

• Agency will need to ensure overtime eligible staff are following the standard practice/agency policy of tracking hours, working only their scheduled shift, not working in excess of their scheduled hours, and taking appropriate breaks. Employees not taking required breaks or otherwise working outside of their hours may lead to legal risk and potential financial liability due to wage and hour complaints. Requirement for prior authorization of overtime should be addressed in the out-of-state telework agreement with the employee and employer.
• Agency will need to closely monitor OT eligible employees’ work hours to. Supervisors still need to monitor work hours of employees with alternate schedules (e.g. convey expectations around hours, address if the employee appears to be working beyond shift by sending e-mails outside of work time, etc.). Supervisors will need to monitor employee schedule change requests that may cause an overlap in workweeks. If an overtime-eligible employee requests a change that might result in them working in excess of forty hours in either the previous or current workweek due to a schedule overlap, the employee must receive overtime compensation.[1]

WAC 357-28-255(3): (3) When an overtime eligible employee experiences a schedule change which causes an overlap in workweeks and requires work in excess of forty hours in either the previous or current workweek, the employee must receive overtime compensation.

Potential need to pay a shift differential (represented) or shift premium (non-represented)

• An agency would typically be required to pay a shift differential (represented) or shift premium (non-represented civil service) if an employee works between 6 pm and 6 am. The differential or premium would be paid for whole shift if any hours are worked between 6 pm and 6 am. Represented employees may not waive shift premium; only the Union can waive the shift premium.
• Agencies may need to contact OFM Labor Relations to explore whether an MOU is an option to allow more flexibility. Absent an MOU, employees would be entitled to shift premium if the Collective Bargaining Agreement provides for it, even if the employee is asking for the change.
• WAC 357-28-190 clarifies when a non-represented employee requests a schedule change that falls within 6 pm and 6 am, they are not eligible for shift premium.
• For represented employees, notice may be required. It is recommended that agencies review the applicable CBA and work with OFM Labor Relations on this issue.

PEBB, medical insurance, and dental

Most of the plans within the Uniform Medical Plan (UMP) and Uniform Dental Plan (UDP), in which most PEBB members are enrolled, have a worldwide network of providers. If a subscriber is enrolled in a medical plan that is specific to a certain geographic area (UMP Plus is an example) and the subscriber moves out of the area, they are entitled to (and often must) use a Special Open Enrollment to choose a plan that is available to them in their new location. Please refer to Health Care Authority’s Addendum 45-2A, which outlines Special Open Enrollment events.

Data privacy

Certain states have robust data privacy protections in place, most notably California. It is the employer’s responsibility to ensure compliance with the other state’s laws. It is recommended that the agency consult with their agency Privacy Officer or AAG on questions related to data privacy for out-of-state workers.

International telework

Currently, employees teleworking outside of the United States are required to have a U.S. permanent address and a U.S. bank account. Employees working outside the country should be strongly advised to ensure the safety and security of any physical technology tools (laptops, agency mobile phones) when working abroad to minimize risk to state systems and avoid the cost and challenges of replacing the equipment.

This guidance does not address the issues involved for out-of-country telework. It is strongly recommended that the agency consult with their AAG prior to approving telework outside of the United States. It is possible to support employees working from Canada or other international locations – but just like out-of-state telework, it requires research specific to each case in order to ensure compliance with the laws and rules of the out-of-country location where the employee will be performing their work such as the SSA tax treaties: U.S. International SSA Agreements | International Programs | SSA.

Travel to Washington

A telework agreement can – and should – document the approved location(s) for the employee to work remotely. Employers should review Chapter 10 in the State Administrative & Accounting Manual when defining an employee’s official duty station. If the employer and employee have agreed that the out-of-state teleworking employee will work set days within a state office, the telework agreement should include those details; including the official station designation for travel purposes for those set days. The out-of-state telework agreement that the agency creates with out-of-state teleworker will establish who covers the cost of travel after a review of SAAM requirements, and any other necessary details. A template Out of State Telework Agreement is available for agencies to use on the HR forms webpage.

The SAAM does not require payment of mileage or travel time for a set "split" schedule or occasional pre-designated travel as described above, unless unanticipated or unplanned travel is required without sufficient notice. If the out-of-state telework agreement has the employee scheduled to come into the office for certain dates, that travel into the office is a commute. The first and last trip within the employee’s Official Residence/Official Station is not reimbursable. Employers may still want to consider virtual meetings instead due to cost considerations.

Agencies are advised not to imply verbally or in writing to the employee that they will never be asked to return, even if the out-of-state telework agreement is approved. If the agency cannot confirm when establishing the agreement the exact dates when an employee might be asked to return to Washington for meetings or other business needs, the employee and the employer should establish a clear process for providing notice, and document that in the agreement. The employer should adhere to that process when asking employees to return.

If after reviewing this guidance and the SAAM you have more questions about travel and reimbursement, contact OFM Statewide Accounting.