Managing employees in several states brings a lot of legal headaches, even for seasoned HR folks.
Every state has its own employment laws, wage rules, and compliance standards—and they seem to change all the time.
If you handle employees in more than one state, you have to know and follow each state’s employment laws, wage rates, leave rules, and workplace safety standards. And it only gets trickier when you realize that over 55 employment law changes rolled out around July 1, 2025, including 25+ minimum wage updates across seven states and D.C.
If you don’t have good systems, your business could get slammed with audits, fines, or lawsuits from employees.
So, let’s look at what you actually need to keep track of—and how to avoid expensive mistakes.
Key Takeaways
- Employers with staff in more than one state have to track and follow different employment laws, wage rates, and leave rules for each location.
- Laws change often, so you need to keep an eye on updates and adjust payroll and policies quickly.
- A solid compliance plan and the right tools can help you steer clear of audits, fines, and legal claims.
Core Multistate Employment Compliance Requirements
If your company operates in multiple states, you have to keep up with wage rates, leave laws, tax rules, and privacy laws that change by location.
Each state sets its own standards for pay and how you handle employee info.
State-Specific Minimum Wage Updates
Minimum wage rates can be all over the map, and they change a lot.
In 2025, some states stick with the federal minimum of $7.25 an hour, while others have gone over $20.
States with higher minimum wages:
- California: $20.00 per hour
- New York: $18.50 per hour
- Massachusetts: $17.75 per hour
- Washington: $17.25 per hour
Most states bump up their rates every January 1st, but certain cities and counties set even higher minimums.
You need to check both state and local wage laws for every work site.
If you have remote workers, they usually follow the wage laws where they live, not where your headquarters sits.
Tipped employees? Their base pay varies by state too.
Some require full minimum wage, others let you take a tip credit.
Paid Leave and Absence Laws by Jurisdiction
Seventeen states and D.C. require paid sick leave, but the details differ.
Each state sets its own rules for accrual, usage, and carryover.
Typical paid sick leave rules:
- Accrual: 1 hour per 30–40 hours worked
- Annual caps: 40–80 hours
- Usage: Employee illness, caring for family, domestic violence situations
Some states go beyond the federal FMLA and offer partial wage replacement for family or medical leave.
California, New York, and Rhode Island fall into this group.
By 2025, twelve states run paid family leave programs funded by payroll deductions, helping employees who need time off for new children or family care.
You have to post notices about leave rights in every state where you have employees.
If you skip these postings, you could get penalized—even if you follow all the other rules.
Payroll and Tax Withholding Compliance
State income tax withholding is another maze.
Forty-one states tax income, each with its own rules.
Nine states don’t tax income at all, and some use flat rates while others use brackets.
No state income tax in:
- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
Some states have reciprocity agreements—so employees pay taxes only in their home state, even if they work elsewhere.
A few states (California, Hawaii, New Jersey, New York, Rhode Island) require payroll deductions for state disability insurance, covering non-work injuries and illnesses.
You’ll need to register with each state’s tax agency before you start withholding.
That means getting state tax IDs and setting up payment schedules.
Employee Privacy Laws Across States
Privacy laws change how you collect, store, and use employee data.
California’s CCPA often applies to employee info, not just customer data.
Privacy requirements you’ll run into:
- Background check disclosures and consent
- Social Security number protection
- Genetic info restrictions
- Biometric data collection notices
Twenty-five states restrict employers from asking for employee social media passwords.
These laws also limit how much you can monitor personal accounts.
Drug testing rules are all over the place—some states only allow testing for certain jobs, or limit what substances you can test for.
If there’s a data breach, you have to notify employees.
The timeline depends on the state, from right away to as long as 90 days.
Managing Ongoing Multistate Compliance Challenges
Staying compliant in several states is a constant job.
Laws change, HR policies need to flex for different locations, and you really need good tech to keep up. Plenty of real estate firms now use outsourced payroll services to handle multi-state operations, complicated pay, and compliance headaches.
Tracking Legal Changes Across States
You need a system to keep up with employment law changes in every state where you have employees.
States update minimum wage, overtime, and leave rules all year.
Set up alerts from state labor departments and trusted legal sites.
Many states send out updates every quarter or year.
Keep a spreadsheet with the basics:
| State | Last Updated | Minimum Wage | Overtime Rules | Leave Laws | Next Review Date |
|---|---|---|---|---|---|
| California | Jan 2025 | $18.00 | Daily + Weekly | CFRA, PDL | Apr 2025 |
| Texas | Jan 2025 | $7.25 | Federal Only | Limited | Apr 2025 |
Sign up for employment law newsletters from big legal firms—they’re handy for state-by-state comparisons and spotting new rules.
Check your tracking system every month.
Assign someone to look for legal changes and flag anything that affects your company.
Adapting HR Policies for Multiple Jurisdictions
Your HR policies need to fit the strictest requirements across all your states.
This way, you stay compliant and keep things consistent.
Build a master policy using the highest standard.
If one state says 40 hours of sick leave and another says 24, just go with 40 for everyone.
Make sure you clearly document any state-specific exceptions.
Sometimes you’ll need local tweaks if the laws conflict.
Where you’ll need state-specific rules:
- Meal and break times
- Timing of final paychecks
- Limits on background checks
- Whether non-competes are allowed
Train managers on what’s different in their states.
They need to know which rules apply where.
Update your employee handbook every year.
Add a section explaining that state laws might give more protection than company policies.
Utilizing Technology for Compliance Management
The right tech can automate compliance tracking and cut down on mistakes.
Modern HR systems handle multi-state rules without much manual work.
Pick payroll software that updates tax rates and labor laws on its own.
That way, you avoid manual errors and always have the latest info.
Look for these features:
- Automated tax calculations for all states
- Real-time legal alerts
- Policy templates you can tweak by state
- Audit trails
- Reporting dashboards
Set up time tracking that automatically applies state-specific overtime rules.
This helps you avoid expensive overtime mistakes, especially where daily overtime applies.
Centralize your employment law info in a compliance management platform.
These tools can send you alerts when laws change and help you figure out what needs to be updated.
Run regular audits of your systems to make sure they still meet your compliance needs.
It’s smart to review your tools every quarter and fix any gaps you spot.
Frequently Asked Questions
When you manage employees in several states, you’re bound to have tricky legal questions.
Remote work, unemployment insurance, and workers’ comp requirements all change depending on the state.
How do employers determine which state’s laws apply to remote workers?
You have to look at where your employee actually works and where your company operates.
Usually, the state where the employee physically works sets the rules.
If your company isn’t registered in that state, you might need to set up a business presence there.
Some laws follow the employee’s location, others follow your headquarters.
Tax withholding usually goes by where the work happens, but some states have reciprocity deals.
What are the key factors in the ‘four-factor test’ for state unemployment insurance for multistate employees?
The four-factor test checks where your employee’s work is based.
If it’s not all in one state, the test looks at their main base of operations.
If that’s still unclear, you consider where you direct and control the work.
If none of those work, you look at your company’s location.
You have to pay unemployment taxes in the state this test points to.
Sometimes, more than one state claims jurisdiction, so you’ll need to look closely at each case.
What steps should companies take to ensure compliance with workers’ compensation requirements for out-of-state employees?
Check that your workers’ comp coverage applies in every state where your employees work.
Many policies cover short-term out-of-state work, but not always permanent remote workers.
Talk to your insurance provider about adding states to your policy.
Some states want you to buy coverage directly from their fund, not through a private insurer.
Check each state’s coverage rules and benefit levels.
States all have their own rules for what injuries count and how much employees get.
How can businesses navigate differences in state employment laws effectively when operating in multiple states?
Start by finding the strictest laws among your states and use those standards for everyone.
This keeps you compliant everywhere and your policies consistent.
Make state-specific handbooks or policy add-ons.
Include local rules for meal breaks, overtime, and leave that differ by state.
You might want to work with top PEO service providers who know multistate compliance inside and out.
They’ll handle local law differences and take some admin work off your plate.
What considerations should be taken into account when drafting a ‘work from anywhere’ policy to ensure legal compliance?
Set clear rules about which states employees can work from.
Every new state brings new tax, workers’ comp, and employment law obligations.
Set up an approval process for employees who want to move.
Require advance notice so you can check legal requirements and update payroll.
Be clear about the difference between short trips and permanent moves.
A quick business trip usually doesn’t mean new state obligations, but a permanent move does require full compliance.
How can an employer maintain adherence to both state and federal employment laws when employing workers across state lines?
You’ve got to stick to both federal minimums and state rules, and pick whichever one gives workers more protection.
Federal laws set the floor, but states can always go above that.
Keep an eye on different state requirements for things like wage payments, overtime, and leave.
It helps to set up systems that automatically choose the right rules based on where each employee works.
Stay updated on legal changes in every state where you have employees.
Employment laws seem to shift all the time, so you really need up-to-date info to keep everything in line.