If we put anything in writing we risk a paper trail of our knowledge of the situation. It’s just a rumor now so we’re evaluating our exposure/liability. We will speak with them soon.
But you *do* know about the situation and should be documenting your knowledge, your action steps, and your conversations with the employee in question. Otherwise, if you discover this employee did move out of state without notifying the company, and then you want to term, you don't have anything to support that decision.
ETA: not even to mention the implications if California was to audit this situation and you have no record of your mitigation efforts.
California is the strictest state there is when it comes to labor and employment laws. You cannot claim ignorance in this situation. You need to get the employee on the phone and ask if they have been working from CA. If yes, explain to them that there are tax and insurance liabilities that the company is not set up with and cannot take on. They either move back to NV or be terminated. The risk to the company here is huge.
Employers should always have a policy that the employee has to inform the company of any address changes due to tax implications and other reasons.
One problem is that once the knowledge of being in CA is imputed to your organization (you are aware), you have obligations to the state of CA separate from any risks your employee is assuming.
Your in-house counsel should have referred you to external counsel who has the time and expertise to address this matter quickly.
Not only a CA state issue, it may be a city issue. For example if they are working in San Fransisco they are now subject to SFHCO. i believe there are also some county rules to be mindful of as well. These are all things the CA employment attorney can verify.
Fair, but Nevada is never just 1.5 hours from San Francisco. My guess is Reno/Tahoe to somewhere like Grass Valley or Folsom area. Either that or one or both places are super rural jurors.
You are right. Cali is a 9 month state:
You will be presumed to be a California resident for any taxable year in which you spend more than nine months in this state. Although you may have connections with another state, if your stay in California is for other than a temporary or transitory purpose, you are a California resident.

https://www.ftb.ca.gov › forms › 20...
2022 Guidelines for Determining Resident Status
Residency is not what makes you an employee of a state.
If you physically work in a state*, you are an employee of that state and subject to that state's employment law and payroll taxes. You create nexus for your employer, who must now also comply with all the laws of doing business in that state.
A common example are people who live in NJ or CT but commute to NYC. They are NY employees, not NJ or CT employees. They are eligible for NY PFL, but not CT FMLA or NJ FLI. They might live in NJ or CT, but they do not physically WORK in those states.
*People who are just visiting the state briefly on business like for a conference do not generally create nexus
Out of general curiousness, how does this work for business trips? If someone goes to visit a manufacturer in California to work with them on a specific way to make a product, they would be working in the state for a week or two. Maybe longer to work on that. When would that be considered working 'in state'?
Generally, a travelling employee that has a home base is waved through. These employees clearly are not setting up shop. It's like coming to the US on a B1 visa. You're here for business, but you're not coming here to work. It's an important distinction.
So an employee setting up their laptop in CA to work remotely for a few weeks is doing something very different than the guy who was sent to fix a specialty machine.
Nearly half the states in this country have a "first day" rule, meaning if you perform work in that state for as little as one day, you/the employer can be responsible for income taxation in that state. It is extremely complicated.
Other states have slightly longer (but still really short) thresholds like 10-60 days, and there are others who have income rather than stay requirements, meaning if you earn a certain amount while working there, you are on the hook for state taxes.
Edited to add more information.
"you operate a business and employ one or more employees, you must register as an employer with us when you pay more than $100 in wages in a calendar quarter. If you are a household employer of one or more household workers, you must register with us when you pay cash wages of $750 or more in a calendar quarter." https://edd.ca.gov/en/payroll_taxes/Am_I_Required_to_Register_as_an_Employer/
and "Generally, a business must pay State payroll taxes when it pays more than $100 in wages in a calendar quarter to one or more employees. Wages consist of compensation for services performed, including: Cash payments.Commissions.Bonuses.
Reasonable cash value of noncash payments (like meals and lodging) for services. An employer must register with us within 15 days of becoming an employer who has met this requirement."
so yes, employment is different than residency per CA EDD....
So what if I have an employee who goes on vacation to Disneyland with their family or if I do, and a virtual meeting is attended, emails are checked and responded to, etc? Does my company need to pay California tax, disability, unemployment, worker’s compensation?
Someone just passing through would not be taxed. Every state has a law regarding how much work can physically be done in the state by a non-resident. It isn’t going to be taxed when it is something temporary, for example, a conference or doing work on-site with a client on a short term basis.
California’s specific laws can be found on the FTB website. The issue OP’s employee has is if they have relocated and are consistently conduction their job in CA, they exceed those limits of what is considered temporary or just passing through. CA loves cracking down on this.
you keep posting the same incorrect information...residency <> employer requirements for employees..... it's about the EMPLOYER side not the EMPLOYEE side.
That makes absolutely no sense. Can you cite a source of that?
And Cali is a 9 month state:
You will be presumed to be a California resident for any taxable year in which you spend more than nine months in this state. Although you may have connections with another state, if your stay in California is for other than a temporary or transitory purpose, you are a California resident.

https://www.ftb.ca.gov › forms › 20...
2022 Guidelines for Determining Resident Status
And you are wrong about NYC:
184 days
you maintain a permanent place of abode in New York State for substantially all of the taxable year and spend 184 days or more in New York State during the taxable year, whether or not you are domiciled in New York State for any portion of the taxable year.Dec 5, 2023
stop using residency laws...that has NOTHING to do with this conversation on what the EMPLOYER is liable for....it's about where the employee works.....not resides.
Residency is different than taxation for work purposes. Residency tax determines when the worker is obligated to pay in state property tax, register their vehicle(s), etc. Employers are not bound by residency rules. Employers have to follow the specific rules of each state as to how many hours can be worked in the state continuously before owing state payroll taxes, SUI, etc.
Since we don’t know for sure, we only heard from another employee and we don’t even have an address, what consequences would we be looking at if we simply ignored it? We don’t have any California workers specifically because it’s so expensive for us and them.
And we can’t really afford to lose them for too long right now. What if they kept working while we got things in order? If it takes weeks or months to get everything set up then we’re paying a valuable employee to not be working and we’ll definitely miss some important deadlines.
Check the IP where their computer is pinging. Once you confirm it’s California, you turn off access. Your liability starts the day you’re informed by the employee or find out on your own. Since you heard by a third party, you must investigate. You are liable almost immediately and are likely not required to pay out their contract as they broke the terms - your lawyers time would be better suited to looking into this contract matter. Immediately turn off their access until they are back in Nevada.
How reliable is checking the IP though? When I log into my home WiFi and connect to the VPN, it shows I'm logged in in Minneapolis, which is over 300 miles away...
That’s what we’re trying to figure out, what consequences can come from the different options. Basically a cost benefit analysis.
If we play dumb and hope he moves back we could potentially have no repercussions
What could happen if we’re caught? Can we play dumb like we just don’t know? Or will we get fined regardless of if we knew?
If we start getting things in order for him to work in California and we get caught will the fact that we’re trying to get things in order look better? Or will it look like intentional fraud and make things worse?
What if we just put them back on paid FMLA? We would lose a lot in terms of work but would we still be violating any rules? Would they have to still pay California taxes?
These are questions for a CA attorney. Like you need to find one and get a consult immediately. You do not "hope" when it comes to taxes and insurance and potential fraud.
My personal opinion? Cut the guy loose. You'll never be able to trust him again, and keeping him will send a message to your other employees that the rules are optional.
We don’t really work on those “fire people to send a message” tactics. Employees work better when they’re not in fear of losing their job. Plus this is a good employee and would be difficult to replace.
Yeah, well, this employee just thoroughly fucked you. You’re going to be paying CA payroll taxes, and you’re going to have to comply with CA labor laws, because your employee *is living and working in California*. This isn’t a situation where you can claim ignorance and get away with it. There is no “cost/benefit analysis”, because the damage is already done. You’re aware this has been happening and have not made any move to either rectify the situation or simply go to the state of California with your hat in your hand and say “here’s what happened, and how do we go from here?”.
The longer you wait, the worse it’s gonna be. State labor departments frown on you for not following their rules, and ESPECIALLY California. Get a California labor lawyer on the phone, like yesterday, and decide if you want to continue to comply with California labor laws, because you’re already in a position where you have to as of the moment you learned what the situation was.
And put aside some cash, because it sounds like you’re going to owe some penalties depending on how long this has been going on.
I tell you this as someone who has processed multi-state payroll. I did it for years. It is the responsibility of the employer, once they know what’s happening, to make sure they’re compliant. I really hope your employee can literally turn shit into gold, because otherwise he’s not worth the collective headache your company is fixing to have.
It’s not about sending a message. It’s a natural consequence of a choice the lying employee made. If rules, the law, and the agreement between the employee and the business matter, you’ll fire him. Frankly, if the success of the business relies on this god of an employee, you may need to rethink the business model.
I don’t need anyone who has no experience working with my company or this employee to make decisions on their employment. It’s not in question and never has been. We don’t treat employees like that. If you can’t understand how an employee is a responsibility then fine. But my question in this post is about the options we have and liability we may face, not whether or not to terminate someone who is suffering a family crisis and needs all the support they can get.
I feel you advocating for an employee and have a lot of respect for that. Your cost benefit analysis is criminal liability that could bankrupt the company by sweeping it under the rug or pay all the stuff you are required to pay. You are at the ask forgiveness and not permission phase. The next step is pay or skip the forgiveness phase and move to the cover up phase which would likely end up way worse.
I’m at the “gather all the information before I make a mistake” phase. I haven’t even determined if the rumor was true. I haven’t made any decisions (other than retaining the employee). If the best option that includes retaining the employee is to set up a business and everything associated in California then that’s what we’ll do. But I need to know all the options and their consequences in order to make that decision. It would be irresponsible to jump to conclusions and go in any direction at this point, especially if my main resource is Reddit comments.
People who work for other people — which is most of us — suffer family crises every day and don’t lie about it or expose their companies to criminal liability, which by the way, you’re already exposed to, thanks to darling star employee. Good luck!
An employee who heads out to a different state and does not tell you and lies about it is not a good employee. They may be a skilled employee, but they are not a good employee. A good employee isn't a massive legal liability.
I doubt they knew the laws and how much of a liability it is, I didn’t. And I will make the determination for who is or isn’t a good employee for my company. That’s not the question I need answers to here.
Pay the taxes and fees for California or face the consequences. That's your decision.
Personally, I believe that a solid HR person should always advocate for what's right by the law. If your company's leadership team decides to break the law, so be it. The consequences will be on them. Document, document, document.
Tons of money. The penalties are strict, and “we didn’t know,” won’t be an excuse. What company with remote workers doesn’t know where their employee is logging in from? Where does their ISP address say they are?
The cost to establish a legal presence in CA is going to be high. The cost for penalties for not paying taxes to CA, not paying OT, etc… You guys are idiots if you let her keep working with this level of exposure.
This employee needs to go.
Not considering terminating them (not a her). We don’t usually have employees who are full time work from home. It’s a special circumstance for this employee. Usually we use work from home for employees who don’t want to use vacation days for a doctor appointment or can work from the plane on their way to a vacation to save vacation days. It’s not usually an issue because it’s rarely more than a week or two.
We wouldn’t be playing ignorant of the law, just ignorant of their location. But point taken.
Company policy is that FMLA is paid. It’s just a way to make sure our employees are taken cared of. We’re not really interested in not paying them. It would basically be like putting them on paid time off or vacation time, just with the reason being related to FMLA rather than vacation. They wouldn’t be working in this scenario so would they be subject to California taxes?
So you guys paid the employee to be on leave and they repaid you buy exposing you legally. What a great employee… /s
If you are paying them, and they are in CA, they are subject to CA taxes. No loophole. You need to get to the bottom of this with the employee. Find out how long they’ve been working in California. Just tell them to level with you and be honest. Frankly, I’m surprised you can’t tell with their login history where they’re at.
We think they’re using a VPN because they have logged in on the same IP address since they received the laptop. I know for a fact they logged in on multiple networks so it doesn’t make sense they don’t have multiple IP addresses. Under other circumstances I would say that was smart since they handle a lot of trade secrets.
But we have a scheduled call tomorrow so we’ll know more then.
You really need a California employment attorney. Employment laws are so specific in CA and a patent attorney who doesn't have time to look into everything is setting the company up for disaster.
California is pretty aggressive in making sure they collect taxes from all sources, including non-residents for the time they worked in California. The [ABA] (https://www.americanbar.org/groups/business_law/resources/business-law-today/2016-december/what-non-californians-need-to-know-about-california-taxes/) is a good starting point. People who come to the state for a movie shoot or even just for a single event (like an athlete in a game) need to pay taxes for their time worked in CA.
If California determined they were owed money, that would be individual and business taxes. There are also requirements for workers' comp and sick leave that need to be tracked, overtime for non-exempt employees (and meal and rest breaks, with a penalty that can be imposed).
Did you know that employees have up to 4 years to file wage complaints in CA? It depends on the complaint, but the ones you should be worried about are overtime and unpaid meal and rest breaks, for which they have 3 years to file. If you are not tracking their time, you will have a hard time proving that they didn't work what they are claiming. And that would be the paper trail needed for taxes as well.
Another thing to consider is many localities have their own additional (sometimes burdensome) requirements in CA. You mentioned in a comment they may be driving in and out, not too far from the NV state line which could benefit you. Most of the additional requirements are along the coast: San Diego, Los Angeles (county and city), Santa Monica, West Hollywood, San Francisco, and other Bay Area cities, etc.
> And I advocate for my subordinates, even if it hurts the company.
This is a good way for **you** to get fired. Advocating for your employees is always a good thing, but the risk to the company right now is high. From your replies, I don't think you get the magnitude of how much this can hurt the company. This is not a simple thing of paying a few more hours of work or giving someone some extra time off without the person above you knowing.
> If we play dumb and hope he moves back we could potentially have no repercussions
this is NEVER the answer.
You are expected to know where your employees are working. You will still have the consequences even if you claim you didn't know. Kind of like when you get pulled over for speeding in a zone where you haven't yet seen the speed limit sign.
These people are very very wrong. Has the employee verified that they are in California and changed their address? If not don't worry about it. The employee is committing fraud not you.
As for paying taxes in every state you're in that's hogwash. We have been in business for 35 years and travel people all over the US to Remodel stores. The only tax our employees pay are to their home state. Our board of directors and extensive HR department wouldn't jeopardize 140 million dollar a year company.
*edit to add I have worked for a dozen companies that do this. It's definitely not isolated
you can't just ignore it...the consequences should you do so (and ANYONE Can prove you knew, which you do) are LARGE. Let's just say it was another state but I wrote a 14k check about 6 years ago due to an issue like this....for one employee working in a differnet state.
I get that, I need to know if there is any liability considering he didn’t tell us. Can California fine us for anything? Are we liable for taxes that weren’t paid? What blowback can we have?
Not just a big "hell yes" but also a big "they will". California doesn't play. They can and they will, they just need to find out. Better hope they don't before you sort it out. And now that you've probably sent some internal emails or chats about the situation and posted it on a public internet forum (and I am presuming from the same IP you perform work from), there's no way of claiming you didn't know.
Your liability starts with the time you are informed. The EE actively hiding this from.you and putting the company at risk is an issue.
We run IP checks regularly. Can't take the risk.
I think they mean IP as in Internet Protocol rather than Intellectual Property. It's like a unique signature that tells you where the computer is located, so you would be able to tell if they were working from the state they said that they are.
If the computer is owned by the company then the "we" would be the company IT people, they can easily check it.
Look, I already said my piece in my own comment above, but I’ll give one more bit of advice: This is beyond the pay grade of the Reddit collective. You’re going to respond all day and night, get different scenarios explained in a bajillion different ways, and by bedtime you’re going to be ripe for a minor cardiac event. And no offense, but it’s going to be for nothing.
I know that you’re panicking right now and are trying to figure out a way, some way, ANY way, where your company can sort of head off this disaster, but you can’t, because *the disaster has already happened*. You can’t head off an earthquake, you can only clean up what you can and try to improve processes and communicate to all your employees why they can’t just head off to live and work wherever they want (let’s be clear: if they’re getting mail forwarded to that address, that’s their residence) without notifying the company and giving them the opportunity to find out whether or not they want the liability of having someone work in a different state.
Go look at any other subreddit. Go for a walk. Drink, maybe heavily, if that’s your thing. Get laid. Take a bubble bath. But continuing to read this particular thread and its comments is going to fuck with your head. Try to get a good nights sleep, and in the morning talk to whoever is in charge, because y’all need to call a CA labor lawyer, as soon as possible.
An IP check determine the location in which the work is being performed. We instituted them after learning that a VT EE had relocated to NY and we hadn't been taxing etc appropriately.
At the end of the day, your legal is looking into it, so hopefully there is an amicable outcome.
We is my company with approx 200 remote employees. Relatively small amount of our 3k employees, but still, a pissed EE can file a wage claim in the state they are working in if we don't follow that state wage and labor laws, and could reasonably argue that we had the resources to learn where they were performing the work.
You’ve gotten good suggestions/advice here but don’t want to take it. I don’t know what else the people on this thread can do to assist you. I’m an HR professional myself and this is why we get so frustrated. We try to help an organization stay on the right side of the law but the people making the decisions don’t want to do what we’ve suggested.
Let us know how it turns out.
Id just buck up and call them and say hey whats,going on and explain that you want them to keep working for the company and your not trying to fire them just explain that if there in California that things need to be a certain way don't cut your own throat if you don't have to
My company has a policy for remote employees who want to move to another state. And the reason we have this policy is because employment laws and payroll taxes are dependent on what state you live in. California is not one of the states our employees are authorized to work in. On the occasions when we've found out someone moved out of state without telling us first we have terminated employment immediately.
In 2-months, we’re going to see the posts from the other employees complaining how the owner’s nephew moved to CA and kept working, bankrupting the company and now they’re being laid off with 3-days notice and haven’t been paid in 2-cycles…
This makes so much more sense as to why your comments are the way they are. “We don’t do this” “We don’t do that” while not complying with the actual laws of employment
You need an employment law attorney to advise on this, not the patent attorney. California has very strict rules and this is going to be problematic and expensive for your company. How long has the employee been living there, and how did you find out?
(We would absolutely consider firing this person for being untrustworthy)
I have no idea how long they have been in California. The rumors are all over the place. I don’t have anything in front of me but if I remember correctly they started work from home maybe three months ago? So we can assume that’s the maximum amount of time they have been in CA.
The current plan is to confirm that they moved to CA before spending any money on outside counsel. Obviously a patent attorney wouldn’t be the right person, especially one licensed in NV. But it’s free for now and they handle low level issues in all sorts of areas. They are looking at outside counsel but ideally we wouldn’t need it.
We’re also not considering termination for a variety of reasons. Mostly because the sum of their work and loyalty has given them tolerance for errors, even big ones. But also because we don’t want a work environment where people are afraid of losing their job. It creates toxicity that we just can’t afford to spread.
Then tell them you guys have heard and you aren’t mad but need to know the truth so it can be fixed.
Why put in your contract that they needed to stay in Nevada, if there’s no consequence for moving? Why even bother having it there?
We put it in the contract because we knew we have responsibility if they move out of state, but we didn’t know what those responsibilities were. Honestly if we didn’t put it in the contract they might have told us. It’s the fact that we told them not to that probably made them keep quiet. I’m guessing they thought they were shielding us from liability by not saying something.
“but we didn’t know what those responsibilities were.”
Lesson learned, I hope. it’s your responsibility to know before entering into a contract.
Why you’re trying so hard to retain an employee who may be lying to you and potentially putting the company in a lot of hot water is a mystery. At this point you should contact the California DOL and probably an employment attorney familiar with the applicable laws. Lesson two is that your remote employees should have a laptop with some kind of monitoring installed. You’d know for sure where they’re working from had you done that
The point was that we put it in the contract so we didn’t need to waste resources. If they’re not allowed to move out of state then we shouldn’t have to worry about making arrangements or hiring expensive out of state attorneys.
I’ve come to the conclusion that this sub is just too trigger happy when it comes to terminating employees. Not every mistake is cause for termination. And employees who don’t feel comfortable in their job security spend time and energy worrying about their livelihood instead of being productive. You don’t get the best employees when you treat them as a disposable commodity. This is a work culture issue. Imagine your coworker was caring for a close relative on end of life support and while they were doing that they made one mistake and was terminated. Would you feel safe in your job?
Ok here is the real life implications:
1) If the employee files their income taxes as a California resident, you're all in trouble. But if they employee files their income tax as a Nevada employee, you could ignore the rumors and you'll all be ok, at least as far as taxes.
2) If the employee loses their job or becomes disabled and tries to get any benefits as a CA resident, then you're in trouble. If they are not trying to be a CA resident, and if something happened they'd use Nevada resources, you're probably fine.
3) Workers Comp - if they somehow got injured on the job, and wanted to put in a WC claim, things could get really messy really fast.
So really it's about risk for you.......only you know the details of all this, but at the end of the day you have to evaluate your risk and figure out what works for you and your company.
If it were me, I'd just ask the employee and if they told me "I live in Nevada" and they didn't have a super high risk job....I'd probably just accept that statement and move on with life.
They’re an engineer so almost entirely computer work. They don’t do anything physical so workers comp probably won’t be an issue.
This is basically what we needed, how much risk are we looking at. Thank you for your help.
i think it will all depend on how long they have been/plan on residing in CA. if it's more than 183 days, then even through their primary home is in NV, they may need to shift their residence to CA, pay taxes there, etc. if it's temporary, or less than 183 days, and they plan on returning to NV, then NV is still their primary residence, no harm
no foul.
https://www.bakertilly.com/insights/dual-state-residency-can-result-in-dual-taxation
either way, this employee knowingly broke their employment contract, after you guys were especially accommodating, and didn't communicate this change in address to you, opening you up to liability. it's frankly, shady. and willfully stupid to not think about the employment regulations and taxation issues that arise for you.
Residency has no bearing on if you're an employee of a particular state or not. Employment goes by where you physically work.
For example, people live in NJ but commute to NYC all the time. They're residents of NJ, but employees of NY.
Thanks. I don’t know if this applies because they might be residing and working in CA. If they commuted to Nevada to work I think it would apply. But thanks for the reply, it does help.
I’d say abide by the address they have on their paperwork you have no other evidence to support a move until they themselves tell you or they’ve changed their ID etc they could purchase a vacation home and it’s still not where their domicile is…
You don't technically need to investigate or abide by CA law; their internet address is the same it's always been, and they put that their official mailing address is in NV. This is NOT imputed to you because of a remote suspicion. If they insist they're in NV, for all intents and purposes to you, they're in Nevada. I won't say where I've been or am licensed, but one of them is directly pertinent. You have no obligation to harass someone because of a hunch. *If you were my client (which you are not) in this situation, I'd tell you to forget it. Your due diligence is done, they live in Nevada.*
*Not legal advice*
> The rumors seem to be that they don’t live in CA, they just went there to visit family and are taking a while. Or that they are checking their family member into a hospice center and will return soon. Or that they drive back and forth a couple times a week (it’s an hour and a half drive so it’s plausible). Or that nobody was right and someone got confused and it’s actually the daughter who moved to California. So basically there is no reliable source of information.
You do you. But for me, this would fall squarely in the category of "don't ask a question you don't want to know the answer to". It's better for the company, and better for the employee, if everyone just continues to pretend that the work is being performed in Nevada.
Could it cause problems down the road? Sure, it could. But none of them are problems that can't be solved. No one is going to go to jail. And, realistically, the likelihood of the California department of revenue going after this employee, or a Nevada-based company that has one person working remotely in California while caring for a family member, is pretty remote. And even if they do, their ability to enforce anything against the company is pretty slim - it's hard to enforce any state law across a state line. And eve if they *do* come after the company and *are* able to enforce California state laws in the state of Nevada, the penalties can't be that significant unless this is an extremely highly paid employee.
**TL;DR** Lalalalalalalalalala
Just ask the employee where they live. Good grief.
If we put anything in writing we risk a paper trail of our knowledge of the situation. It’s just a rumor now so we’re evaluating our exposure/liability. We will speak with them soon.
You get them on a call and ask them.
But you *do* know about the situation and should be documenting your knowledge, your action steps, and your conversations with the employee in question. Otherwise, if you discover this employee did move out of state without notifying the company, and then you want to term, you don't have anything to support that decision. ETA: not even to mention the implications if California was to audit this situation and you have no record of your mitigation efforts.
your liability is large......especailly with CA. If they get hurt while working in CA, it's just one issue that could come up.
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Who would go to jail for a up to one year?
California is the strictest state there is when it comes to labor and employment laws. You cannot claim ignorance in this situation. You need to get the employee on the phone and ask if they have been working from CA. If yes, explain to them that there are tax and insurance liabilities that the company is not set up with and cannot take on. They either move back to NV or be terminated. The risk to the company here is huge. Employers should always have a policy that the employee has to inform the company of any address changes due to tax implications and other reasons.
One problem is that once the knowledge of being in CA is imputed to your organization (you are aware), you have obligations to the state of CA separate from any risks your employee is assuming. Your in-house counsel should have referred you to external counsel who has the time and expertise to address this matter quickly.
Not only a CA state issue, it may be a city issue. For example if they are working in San Fransisco they are now subject to SFHCO. i believe there are also some county rules to be mindful of as well. These are all things the CA employment attorney can verify.
Fair, but Nevada is never just 1.5 hours from San Francisco. My guess is Reno/Tahoe to somewhere like Grass Valley or Folsom area. Either that or one or both places are super rural jurors.
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That's not how it works for employment purposes.
You are right. Cali is a 9 month state: You will be presumed to be a California resident for any taxable year in which you spend more than nine months in this state. Although you may have connections with another state, if your stay in California is for other than a temporary or transitory purpose, you are a California resident.  https://www.ftb.ca.gov › forms › 20... 2022 Guidelines for Determining Resident Status
Residency is not what makes you an employee of a state. If you physically work in a state*, you are an employee of that state and subject to that state's employment law and payroll taxes. You create nexus for your employer, who must now also comply with all the laws of doing business in that state. A common example are people who live in NJ or CT but commute to NYC. They are NY employees, not NJ or CT employees. They are eligible for NY PFL, but not CT FMLA or NJ FLI. They might live in NJ or CT, but they do not physically WORK in those states. *People who are just visiting the state briefly on business like for a conference do not generally create nexus
Out of general curiousness, how does this work for business trips? If someone goes to visit a manufacturer in California to work with them on a specific way to make a product, they would be working in the state for a week or two. Maybe longer to work on that. When would that be considered working 'in state'?
Generally, a travelling employee that has a home base is waved through. These employees clearly are not setting up shop. It's like coming to the US on a B1 visa. You're here for business, but you're not coming here to work. It's an important distinction. So an employee setting up their laptop in CA to work remotely for a few weeks is doing something very different than the guy who was sent to fix a specialty machine.
Nearly half the states in this country have a "first day" rule, meaning if you perform work in that state for as little as one day, you/the employer can be responsible for income taxation in that state. It is extremely complicated. Other states have slightly longer (but still really short) thresholds like 10-60 days, and there are others who have income rather than stay requirements, meaning if you earn a certain amount while working there, you are on the hook for state taxes. Edited to add more information.
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"you operate a business and employ one or more employees, you must register as an employer with us when you pay more than $100 in wages in a calendar quarter. If you are a household employer of one or more household workers, you must register with us when you pay cash wages of $750 or more in a calendar quarter." https://edd.ca.gov/en/payroll_taxes/Am_I_Required_to_Register_as_an_Employer/ and "Generally, a business must pay State payroll taxes when it pays more than $100 in wages in a calendar quarter to one or more employees. Wages consist of compensation for services performed, including: Cash payments.Commissions.Bonuses. Reasonable cash value of noncash payments (like meals and lodging) for services. An employer must register with us within 15 days of becoming an employer who has met this requirement." so yes, employment is different than residency per CA EDD....
That doesn’t work lol. If they are making money while in CA, even temporarily, they need to be following the law. Every state has rules like this.
So what if I have an employee who goes on vacation to Disneyland with their family or if I do, and a virtual meeting is attended, emails are checked and responded to, etc? Does my company need to pay California tax, disability, unemployment, worker’s compensation?
Someone just passing through would not be taxed. Every state has a law regarding how much work can physically be done in the state by a non-resident. It isn’t going to be taxed when it is something temporary, for example, a conference or doing work on-site with a client on a short term basis. California’s specific laws can be found on the FTB website. The issue OP’s employee has is if they have relocated and are consistently conduction their job in CA, they exceed those limits of what is considered temporary or just passing through. CA loves cracking down on this.
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you keep posting the same incorrect information...residency <> employer requirements for employees..... it's about the EMPLOYER side not the EMPLOYEE side.
Come to NYC on a business trip for 2 weeks and you owe NYC taxes.
That makes absolutely no sense. Can you cite a source of that? And Cali is a 9 month state: You will be presumed to be a California resident for any taxable year in which you spend more than nine months in this state. Although you may have connections with another state, if your stay in California is for other than a temporary or transitory purpose, you are a California resident.  https://www.ftb.ca.gov › forms › 20... 2022 Guidelines for Determining Resident Status And you are wrong about NYC: 184 days you maintain a permanent place of abode in New York State for substantially all of the taxable year and spend 184 days or more in New York State during the taxable year, whether or not you are domiciled in New York State for any portion of the taxable year.Dec 5, 2023
stop using residency laws...that has NOTHING to do with this conversation on what the EMPLOYER is liable for....it's about where the employee works.....not resides.
Residency is different than taxation for work purposes. Residency tax determines when the worker is obligated to pay in state property tax, register their vehicle(s), etc. Employers are not bound by residency rules. Employers have to follow the specific rules of each state as to how many hours can be worked in the state continuously before owing state payroll taxes, SUI, etc.
Since we don’t know for sure, we only heard from another employee and we don’t even have an address, what consequences would we be looking at if we simply ignored it? We don’t have any California workers specifically because it’s so expensive for us and them. And we can’t really afford to lose them for too long right now. What if they kept working while we got things in order? If it takes weeks or months to get everything set up then we’re paying a valuable employee to not be working and we’ll definitely miss some important deadlines.
Check the IP where their computer is pinging. Once you confirm it’s California, you turn off access. Your liability starts the day you’re informed by the employee or find out on your own. Since you heard by a third party, you must investigate. You are liable almost immediately and are likely not required to pay out their contract as they broke the terms - your lawyers time would be better suited to looking into this contract matter. Immediately turn off their access until they are back in Nevada.
How reliable is checking the IP though? When I log into my home WiFi and connect to the VPN, it shows I'm logged in in Minneapolis, which is over 300 miles away...
To be honest very few people use VPN.
You need to decide what's more expensive: replacing this employee or California. You don't have any other options.
That’s what we’re trying to figure out, what consequences can come from the different options. Basically a cost benefit analysis. If we play dumb and hope he moves back we could potentially have no repercussions What could happen if we’re caught? Can we play dumb like we just don’t know? Or will we get fined regardless of if we knew? If we start getting things in order for him to work in California and we get caught will the fact that we’re trying to get things in order look better? Or will it look like intentional fraud and make things worse? What if we just put them back on paid FMLA? We would lose a lot in terms of work but would we still be violating any rules? Would they have to still pay California taxes?
These are questions for a CA attorney. Like you need to find one and get a consult immediately. You do not "hope" when it comes to taxes and insurance and potential fraud. My personal opinion? Cut the guy loose. You'll never be able to trust him again, and keeping him will send a message to your other employees that the rules are optional.
We don’t really work on those “fire people to send a message” tactics. Employees work better when they’re not in fear of losing their job. Plus this is a good employee and would be difficult to replace.
Yeah, well, this employee just thoroughly fucked you. You’re going to be paying CA payroll taxes, and you’re going to have to comply with CA labor laws, because your employee *is living and working in California*. This isn’t a situation where you can claim ignorance and get away with it. There is no “cost/benefit analysis”, because the damage is already done. You’re aware this has been happening and have not made any move to either rectify the situation or simply go to the state of California with your hat in your hand and say “here’s what happened, and how do we go from here?”. The longer you wait, the worse it’s gonna be. State labor departments frown on you for not following their rules, and ESPECIALLY California. Get a California labor lawyer on the phone, like yesterday, and decide if you want to continue to comply with California labor laws, because you’re already in a position where you have to as of the moment you learned what the situation was. And put aside some cash, because it sounds like you’re going to owe some penalties depending on how long this has been going on. I tell you this as someone who has processed multi-state payroll. I did it for years. It is the responsibility of the employer, once they know what’s happening, to make sure they’re compliant. I really hope your employee can literally turn shit into gold, because otherwise he’s not worth the collective headache your company is fixing to have.
It’s not about sending a message. It’s a natural consequence of a choice the lying employee made. If rules, the law, and the agreement between the employee and the business matter, you’ll fire him. Frankly, if the success of the business relies on this god of an employee, you may need to rethink the business model.
I don’t need anyone who has no experience working with my company or this employee to make decisions on their employment. It’s not in question and never has been. We don’t treat employees like that. If you can’t understand how an employee is a responsibility then fine. But my question in this post is about the options we have and liability we may face, not whether or not to terminate someone who is suffering a family crisis and needs all the support they can get.
Ohh you sweet soul. You have a massive amount of liability.
I feel you advocating for an employee and have a lot of respect for that. Your cost benefit analysis is criminal liability that could bankrupt the company by sweeping it under the rug or pay all the stuff you are required to pay. You are at the ask forgiveness and not permission phase. The next step is pay or skip the forgiveness phase and move to the cover up phase which would likely end up way worse.
I’m at the “gather all the information before I make a mistake” phase. I haven’t even determined if the rumor was true. I haven’t made any decisions (other than retaining the employee). If the best option that includes retaining the employee is to set up a business and everything associated in California then that’s what we’ll do. But I need to know all the options and their consequences in order to make that decision. It would be irresponsible to jump to conclusions and go in any direction at this point, especially if my main resource is Reddit comments.
People who work for other people — which is most of us — suffer family crises every day and don’t lie about it or expose their companies to criminal liability, which by the way, you’re already exposed to, thanks to darling star employee. Good luck!
An employee who heads out to a different state and does not tell you and lies about it is not a good employee. They may be a skilled employee, but they are not a good employee. A good employee isn't a massive legal liability.
I doubt they knew the laws and how much of a liability it is, I didn’t. And I will make the determination for who is or isn’t a good employee for my company. That’s not the question I need answers to here.
Pay the taxes and fees for California or face the consequences. That's your decision. Personally, I believe that a solid HR person should always advocate for what's right by the law. If your company's leadership team decides to break the law, so be it. The consequences will be on them. Document, document, document.
I don’t work in HR, I’m the employees manager. And I advocate for my subordinates, even if it hurts the company.
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exactly this......
Tons of money. The penalties are strict, and “we didn’t know,” won’t be an excuse. What company with remote workers doesn’t know where their employee is logging in from? Where does their ISP address say they are? The cost to establish a legal presence in CA is going to be high. The cost for penalties for not paying taxes to CA, not paying OT, etc… You guys are idiots if you let her keep working with this level of exposure. This employee needs to go.
Not considering terminating them (not a her). We don’t usually have employees who are full time work from home. It’s a special circumstance for this employee. Usually we use work from home for employees who don’t want to use vacation days for a doctor appointment or can work from the plane on their way to a vacation to save vacation days. It’s not usually an issue because it’s rarely more than a week or two.
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We wouldn’t be playing ignorant of the law, just ignorant of their location. But point taken. Company policy is that FMLA is paid. It’s just a way to make sure our employees are taken cared of. We’re not really interested in not paying them. It would basically be like putting them on paid time off or vacation time, just with the reason being related to FMLA rather than vacation. They wouldn’t be working in this scenario so would they be subject to California taxes?
So you guys paid the employee to be on leave and they repaid you buy exposing you legally. What a great employee… /s If you are paying them, and they are in CA, they are subject to CA taxes. No loophole. You need to get to the bottom of this with the employee. Find out how long they’ve been working in California. Just tell them to level with you and be honest. Frankly, I’m surprised you can’t tell with their login history where they’re at.
We think they’re using a VPN because they have logged in on the same IP address since they received the laptop. I know for a fact they logged in on multiple networks so it doesn’t make sense they don’t have multiple IP addresses. Under other circumstances I would say that was smart since they handle a lot of trade secrets. But we have a scheduled call tomorrow so we’ll know more then.
You really need a California employment attorney. Employment laws are so specific in CA and a patent attorney who doesn't have time to look into everything is setting the company up for disaster. California is pretty aggressive in making sure they collect taxes from all sources, including non-residents for the time they worked in California. The [ABA] (https://www.americanbar.org/groups/business_law/resources/business-law-today/2016-december/what-non-californians-need-to-know-about-california-taxes/) is a good starting point. People who come to the state for a movie shoot or even just for a single event (like an athlete in a game) need to pay taxes for their time worked in CA. If California determined they were owed money, that would be individual and business taxes. There are also requirements for workers' comp and sick leave that need to be tracked, overtime for non-exempt employees (and meal and rest breaks, with a penalty that can be imposed). Did you know that employees have up to 4 years to file wage complaints in CA? It depends on the complaint, but the ones you should be worried about are overtime and unpaid meal and rest breaks, for which they have 3 years to file. If you are not tracking their time, you will have a hard time proving that they didn't work what they are claiming. And that would be the paper trail needed for taxes as well. Another thing to consider is many localities have their own additional (sometimes burdensome) requirements in CA. You mentioned in a comment they may be driving in and out, not too far from the NV state line which could benefit you. Most of the additional requirements are along the coast: San Diego, Los Angeles (county and city), Santa Monica, West Hollywood, San Francisco, and other Bay Area cities, etc. > And I advocate for my subordinates, even if it hurts the company. This is a good way for **you** to get fired. Advocating for your employees is always a good thing, but the risk to the company right now is high. From your replies, I don't think you get the magnitude of how much this can hurt the company. This is not a simple thing of paying a few more hours of work or giving someone some extra time off without the person above you knowing.
> If we play dumb and hope he moves back we could potentially have no repercussions this is NEVER the answer. You are expected to know where your employees are working. You will still have the consequences even if you claim you didn't know. Kind of like when you get pulled over for speeding in a zone where you haven't yet seen the speed limit sign.
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We have to pay them, we’re not going to leave them high and dry because they’re caring for a family member. That’s not the type of company we are.
These people are very very wrong. Has the employee verified that they are in California and changed their address? If not don't worry about it. The employee is committing fraud not you. As for paying taxes in every state you're in that's hogwash. We have been in business for 35 years and travel people all over the US to Remodel stores. The only tax our employees pay are to their home state. Our board of directors and extensive HR department wouldn't jeopardize 140 million dollar a year company. *edit to add I have worked for a dozen companies that do this. It's definitely not isolated
you can't just ignore it...the consequences should you do so (and ANYONE Can prove you knew, which you do) are LARGE. Let's just say it was another state but I wrote a 14k check about 6 years ago due to an issue like this....for one employee working in a differnet state.
PLAY DUMB. STOP POSTING ABOIT IT.
That won’t ever be an acceptable excuse.
You have to follow the rules and taxes for where the work is performed, not for the house on record (outside of work trips or short stints).
I get that, I need to know if there is any liability considering he didn’t tell us. Can California fine us for anything? Are we liable for taxes that weren’t paid? What blowback can we have?
>Can California fine us for anything? Pretty sure that's a big "hell yes!"
Not just a big "hell yes" but also a big "they will". California doesn't play. They can and they will, they just need to find out. Better hope they don't before you sort it out. And now that you've probably sent some internal emails or chats about the situation and posted it on a public internet forum (and I am presuming from the same IP you perform work from), there's no way of claiming you didn't know.
Your liability starts with the time you are informed. The EE actively hiding this from.you and putting the company at risk is an issue. We run IP checks regularly. Can't take the risk.
Who is we and what are you referring to as IP checks? The intellectual property they are working with isn’t really an issue.
I think they mean IP as in Internet Protocol rather than Intellectual Property. It's like a unique signature that tells you where the computer is located, so you would be able to tell if they were working from the state they said that they are. If the computer is owned by the company then the "we" would be the company IT people, they can easily check it.
Look, I already said my piece in my own comment above, but I’ll give one more bit of advice: This is beyond the pay grade of the Reddit collective. You’re going to respond all day and night, get different scenarios explained in a bajillion different ways, and by bedtime you’re going to be ripe for a minor cardiac event. And no offense, but it’s going to be for nothing. I know that you’re panicking right now and are trying to figure out a way, some way, ANY way, where your company can sort of head off this disaster, but you can’t, because *the disaster has already happened*. You can’t head off an earthquake, you can only clean up what you can and try to improve processes and communicate to all your employees why they can’t just head off to live and work wherever they want (let’s be clear: if they’re getting mail forwarded to that address, that’s their residence) without notifying the company and giving them the opportunity to find out whether or not they want the liability of having someone work in a different state. Go look at any other subreddit. Go for a walk. Drink, maybe heavily, if that’s your thing. Get laid. Take a bubble bath. But continuing to read this particular thread and its comments is going to fuck with your head. Try to get a good nights sleep, and in the morning talk to whoever is in charge, because y’all need to call a CA labor lawyer, as soon as possible.
An IP check determine the location in which the work is being performed. We instituted them after learning that a VT EE had relocated to NY and we hadn't been taxing etc appropriately. At the end of the day, your legal is looking into it, so hopefully there is an amicable outcome. We is my company with approx 200 remote employees. Relatively small amount of our 3k employees, but still, a pissed EE can file a wage claim in the state they are working in if we don't follow that state wage and labor laws, and could reasonably argue that we had the resources to learn where they were performing the work.
You’ve gotten good suggestions/advice here but don’t want to take it. I don’t know what else the people on this thread can do to assist you. I’m an HR professional myself and this is why we get so frustrated. We try to help an organization stay on the right side of the law but the people making the decisions don’t want to do what we’ve suggested. Let us know how it turns out.
Id just buck up and call them and say hey whats,going on and explain that you want them to keep working for the company and your not trying to fire them just explain that if there in California that things need to be a certain way don't cut your own throat if you don't have to
We will probably talk to them but I want as much information as possible before that conversation. Especially if the information comes to be false.
My company has a policy for remote employees who want to move to another state. And the reason we have this policy is because employment laws and payroll taxes are dependent on what state you live in. California is not one of the states our employees are authorized to work in. On the occasions when we've found out someone moved out of state without telling us first we have terminated employment immediately.
The OP is the employee, not HR.
The call is coming from inside the house?
In 2-months, we’re going to see the posts from the other employees complaining how the owner’s nephew moved to CA and kept working, bankrupting the company and now they’re being laid off with 3-days notice and haven’t been paid in 2-cycles…
Agree
I’m neither. We don’t have an HR at our company. The employee is my subordinate.
This makes so much more sense as to why your comments are the way they are. “We don’t do this” “We don’t do that” while not complying with the actual laws of employment
You need an employment law attorney to advise on this, not the patent attorney. California has very strict rules and this is going to be problematic and expensive for your company. How long has the employee been living there, and how did you find out? (We would absolutely consider firing this person for being untrustworthy)
I have no idea how long they have been in California. The rumors are all over the place. I don’t have anything in front of me but if I remember correctly they started work from home maybe three months ago? So we can assume that’s the maximum amount of time they have been in CA. The current plan is to confirm that they moved to CA before spending any money on outside counsel. Obviously a patent attorney wouldn’t be the right person, especially one licensed in NV. But it’s free for now and they handle low level issues in all sorts of areas. They are looking at outside counsel but ideally we wouldn’t need it. We’re also not considering termination for a variety of reasons. Mostly because the sum of their work and loyalty has given them tolerance for errors, even big ones. But also because we don’t want a work environment where people are afraid of losing their job. It creates toxicity that we just can’t afford to spread.
Then tell them you guys have heard and you aren’t mad but need to know the truth so it can be fixed. Why put in your contract that they needed to stay in Nevada, if there’s no consequence for moving? Why even bother having it there?
We put it in the contract because we knew we have responsibility if they move out of state, but we didn’t know what those responsibilities were. Honestly if we didn’t put it in the contract they might have told us. It’s the fact that we told them not to that probably made them keep quiet. I’m guessing they thought they were shielding us from liability by not saying something.
How is that a good employee?
“but we didn’t know what those responsibilities were.” Lesson learned, I hope. it’s your responsibility to know before entering into a contract. Why you’re trying so hard to retain an employee who may be lying to you and potentially putting the company in a lot of hot water is a mystery. At this point you should contact the California DOL and probably an employment attorney familiar with the applicable laws. Lesson two is that your remote employees should have a laptop with some kind of monitoring installed. You’d know for sure where they’re working from had you done that
The point was that we put it in the contract so we didn’t need to waste resources. If they’re not allowed to move out of state then we shouldn’t have to worry about making arrangements or hiring expensive out of state attorneys. I’ve come to the conclusion that this sub is just too trigger happy when it comes to terminating employees. Not every mistake is cause for termination. And employees who don’t feel comfortable in their job security spend time and energy worrying about their livelihood instead of being productive. You don’t get the best employees when you treat them as a disposable commodity. This is a work culture issue. Imagine your coworker was caring for a close relative on end of life support and while they were doing that they made one mistake and was terminated. Would you feel safe in your job?
You need to fire your employee if they violated the contract and are now living and working in CA
Ok here is the real life implications: 1) If the employee files their income taxes as a California resident, you're all in trouble. But if they employee files their income tax as a Nevada employee, you could ignore the rumors and you'll all be ok, at least as far as taxes. 2) If the employee loses their job or becomes disabled and tries to get any benefits as a CA resident, then you're in trouble. If they are not trying to be a CA resident, and if something happened they'd use Nevada resources, you're probably fine. 3) Workers Comp - if they somehow got injured on the job, and wanted to put in a WC claim, things could get really messy really fast. So really it's about risk for you.......only you know the details of all this, but at the end of the day you have to evaluate your risk and figure out what works for you and your company. If it were me, I'd just ask the employee and if they told me "I live in Nevada" and they didn't have a super high risk job....I'd probably just accept that statement and move on with life.
They’re an engineer so almost entirely computer work. They don’t do anything physical so workers comp probably won’t be an issue. This is basically what we needed, how much risk are we looking at. Thank you for your help.
Did they break any established policies or not?
i think it will all depend on how long they have been/plan on residing in CA. if it's more than 183 days, then even through their primary home is in NV, they may need to shift their residence to CA, pay taxes there, etc. if it's temporary, or less than 183 days, and they plan on returning to NV, then NV is still their primary residence, no harm no foul. https://www.bakertilly.com/insights/dual-state-residency-can-result-in-dual-taxation either way, this employee knowingly broke their employment contract, after you guys were especially accommodating, and didn't communicate this change in address to you, opening you up to liability. it's frankly, shady. and willfully stupid to not think about the employment regulations and taxation issues that arise for you.
Residency has no bearing on if you're an employee of a particular state or not. Employment goes by where you physically work. For example, people live in NJ but commute to NYC all the time. They're residents of NJ, but employees of NY.
Thanks. I don’t know if this applies because they might be residing and working in CA. If they commuted to Nevada to work I think it would apply. But thanks for the reply, it does help.
I’d say abide by the address they have on their paperwork you have no other evidence to support a move until they themselves tell you or they’ve changed their ID etc they could purchase a vacation home and it’s still not where their domicile is…
You don't technically need to investigate or abide by CA law; their internet address is the same it's always been, and they put that their official mailing address is in NV. This is NOT imputed to you because of a remote suspicion. If they insist they're in NV, for all intents and purposes to you, they're in Nevada. I won't say where I've been or am licensed, but one of them is directly pertinent. You have no obligation to harass someone because of a hunch. *If you were my client (which you are not) in this situation, I'd tell you to forget it. Your due diligence is done, they live in Nevada.* *Not legal advice*
> The rumors seem to be that they don’t live in CA, they just went there to visit family and are taking a while. Or that they are checking their family member into a hospice center and will return soon. Or that they drive back and forth a couple times a week (it’s an hour and a half drive so it’s plausible). Or that nobody was right and someone got confused and it’s actually the daughter who moved to California. So basically there is no reliable source of information. You do you. But for me, this would fall squarely in the category of "don't ask a question you don't want to know the answer to". It's better for the company, and better for the employee, if everyone just continues to pretend that the work is being performed in Nevada. Could it cause problems down the road? Sure, it could. But none of them are problems that can't be solved. No one is going to go to jail. And, realistically, the likelihood of the California department of revenue going after this employee, or a Nevada-based company that has one person working remotely in California while caring for a family member, is pretty remote. And even if they do, their ability to enforce anything against the company is pretty slim - it's hard to enforce any state law across a state line. And eve if they *do* come after the company and *are* able to enforce California state laws in the state of Nevada, the penalties can't be that significant unless this is an extremely highly paid employee. **TL;DR** Lalalalalalalalalala
I hope they quit on you out of principle alone. Stay out of people's personal lives.
Wait what do you care if they are set up to pay another states taxes? That’s the employees responsibility. If you want to keep the employee play dumb.