America Wasn’t Ready for Remote Work, and now Small Businesses are Paying the Price.

My name is Chris Walker. I’m the CEO of Refine Labs, a B2B marketing consulting firm that currently employs 15 immensely talented humans as full-time W2 employees as of the date of publication with an average employee salary of $120,864. Following the start of the COVID-19 pandemic and subsequent lockdown in March 2020, some of our employees moved to a different state to be with their family, to stay safe, to avoid paying the high cost of living in a city, or to care for a loved one. 

In addition to these employee relocations, our business grew throughout 2020, driven by happy customers, strong marketing, and a differentiated product offering. Since March 2020, we were able to hire 11 more people from around the country, several who had been laid off by their previous employer without notice or severance pay. 

We now employ 15 full-time employees across 13 US states. This multi-state remote structure for a small business like ours is all but essential given the current global situation.

But America wasn’t ready for remote work. And now small businesses like Refine Labs are paying the price. 

You see, when an employee is working from outside of the state or states where the employer operates, it creates physical nexus, subjecting the employer to the tax regimes of that jurisdiction. Employers could be subject to state income taxes, gross receipts taxes, and sales and use taxes, he explained. Tax requirements imposed at the city or county level could come into play.

In addition to taxes, employers are subject to local state labor laws, which includes purchasing worker’s compensation insurance and unemployment insurance in each individual state where an employee is physically located. 

Big businesses were prepared for this - they already employed remote employees in multiple states, have an established finance/legal department, and likely had already established nexus in most states by surpassing state thresholds for economic nexus. Furthermore, big businesses have received large amounts of government financial assistance and many responded by laying off hundreds or thousands of employees. 

Since March 2020, Refine Labs has been fined more than $20,000 across 8 states for unknowingly being in non-compliance, including Washington, California, and New York. None of the states have provided adjustments or relief despite the current global situation. Additionally, we’ve been required to absorb a variety of additional expenses, such as unemployment insurance and workers compensation insurance policies in each of 13 states we have physical nexus, which will add tens of thousands of dollars in unplanned annual costs. 

Most recently, we received a fine from the State of New York for $4,500 for not having Worker’s Compensation Insurance specific to New York state in 4Q20 for the 1 work-from-home remote employee we employed there beginning in August 2020. 

Our business, like many other small businesses that have moved to a multi-state remote workforce out of pure necessity, will take a major hit from this form of antiquated state/federal bureaucracy, restricting our ability to grow and create more new jobs for talented employees.

I refuse to fire someone because they moved from Texas to California to be with their family during this unprecedented era. And I refuse to not hire the best person for the job, regardless of which US state they reside in. I'm deeply disappointed that current state & federal laws in the United States directly conflict with fulfilling on these morally-sound employer principles.

We are a small business with 15 talented employees. 67% of our leadership team is women, more than 3x the US average. We received a negligible amount of financial assistance from the government ($14k PPP loan in May 2020). We’ve laid off 0 employees. And we pay our employees more than 2x higher than the national median income. 

It’s sad that a small business like ours that does everything right for their employees gets penalized by the government with fines, taxes and expenses, while big businesses pay employees unlivable wages, receive massive bailouts, lay off employees, and see stock prices skyrocket.