Staying in regulatory compliance and treating employees consistently are goals any employer would have. Continuing to do so as the organization grows and operates across multiple states, however, can present many challenges. How can an organization grow and continue to operate across state lines while minimizing risks and maximizing productivity?
First, let’s take a look at some of the common challenges of operating a business in multiple states:
- Individual states will have their own state and local laws that often differ from their federal-level counterparts, but employers must stay in compliance at all levels. For example, the Family and Medical Leave Act (FMLA) has state-level versions in some states—versions that are sometimes stricter than the federal equivalent. Wage and hour laws are another prime example of the type of law that is likely to vary by state—with expensive consequences for noncompliance. (Note: These are just a couple examples; there are many more laws that vary at the state level.)
- Having far-flung operations can make it even more difficult to maintain consistency in the way employees are treated. Inconsistencies can increase the risk of claims of wrongdoing.
- Some benefits, like health insurance, must be managed differently in different locations because the benefit itself is dependent on local offerings. (In this example, the benefit offered depends on which insurers cover the area.) This can make it challenging to ensure that employees in different locations have similar benefit plans.
- Operating costs may increase if the existence of multiple locations means that a lot of employees have to travel.
- Keeping consistent and thorough employee files can become more difficult when employees and their managers are more dispersed. There’s more of a risk of having important employee documentation scattered across various locations rather than in one central location.
- Employers must be sure to properly withhold state and local income taxes, which vary considerably. This can be further complicated if the employee is a resident of a different state than the one he or she works in.
- The work itself can get complicated. Any time you add new locations, you add complexity to the mix.
- Communication becomes more complex. More people means more communication. More communication means a higher chance for misinformation to be spread. This can be especially problematic if the rules or policies differ in different locales due to differences in state or local regulations.
- Lots of locations also means that there will an opportunity for variation in the company culture, which can present challenges when trying to implement new programs or when communicating with employees. It can be more difficult to have a cohesive message if differing groups have differing values.
To minimize the legal risks above, always do the work up front to research the differences in state laws (as well as how the state laws differ from federal laws). It’s a lot of work when you’re about to start business in a new state, but it will help you make decisions to ensure you stay in legal compliance wherever you’re operating. Consider having legal counsel knowledgeable at the local level.
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