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Supervisors' discussion guides
Decisions Regarding Remote Work Outside Michigan
Even when working from their own residence, if an employee is working remotely outside the state of Michigan, the University may be responsible for following that state or country’s employment and tax laws. This means MSU could be subject to a myriad of requirements related to tax, benefits, wage and hour, labor, employment contracts, unemployment, workers’ compensation, safety, and other employment laws. The risks are relatively low for a temporary employment situation. Thus, this guidance pertains to longer term arrangements.
Cost of Compliance
The cost of compliance is difficult to project because it depends on several factors, including the number of employees in any given state or country, the nature of the work, the specific coverage provisions of each employment or state tax statute, whether the complexity or nature of the issue requires hiring local attorneys, and the evolving nature of remote work. Adding to this difficulty is the unique nature of MSU as a public entity and a constitutional corporation. Finally, MSU is unique in its self-insured status for items such as workers’ compensation and unemployment, which may mean different things under different state statutes. This, with a very fluid and changing workplace and compliance structure in the U.S., means it is difficult to accurately assess the potential cost of employing individuals outside the state of Michigan. However, it is important to know that there is a risk and there may be cost when determining whether to approve such an arrangement.
Numerous states and municipalities have their own employment laws. These laws may, but do not necessarily, cover remote MSU employees. There is no way to determine this without engaging in an in-depth analysis of each employment statute in each relevant state. This could include workers’ compensation, unemployment and/or insurance coverage gaps that the University will have to rectify. Finally, income tax withholding is required, generally, if an employee is working in another state.
- Workers’ compensation
- Unemployment compensation
- Employee benefits including employee leave and family and medical leave
- Employee minimum wage and overtime laws and related employee classifications
- Income tax
- Travel time pay
The risks associated with employees working in other countries is even greater. The consequences of employing individuals in other countries may be significant. MSU may be required to comply with local employment and tax laws in countries where it employs individuals on a long-term or permanent basis, including where an employee is performing work remotely from their residence. Penalties for non-compliance may include monetary or criminal penalties, which will differ in each country and may differ in certain localities. Although there may be mitigating factors including the existence of a tax treaty or a totalization agreement between the U.S. and such country, some foreign laws and treaties do not provide for such risk mitigation. Identifying risks of employing individuals abroad requires a case-by-case analysis based on the laws of each country and can be costly.
Specific additional risks for international employment include:
- Data Security
- Data Privacy
- Intellectual Property
- Export Control
- Purchasing/Procurement Internationally
When determining whether to approve an individual to work outside Michigan, consider the benefit to the University versus the potential cost, outlined above. Consider the difficulty in quantifying the risks and the business need/benefit in approving the remote work outside of Michigan. When considering these things, note that the risks to international employment are even higher than those with employment within the U.S.
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