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Managing Pay Practices In A Distributed Workforce

Distributed workforces can offer a number of advantages to employers, while also in many cases proving highly attractive to talented employees. These advantages can sometimes come with complications for pay practices, particularly but not exclusively in regards to wage and hour compliance. A conversation with a New York business attorney experienced in addressing the concerns of remote and multi-state business operations may help you to identify potential problems before they occur, and put plans in place for streamlining sometimes complicated multi-state reporting requirements. Call Schwab & Gasparini today to set up a consultation. You can find us in Albany at 518-591-4664, in Syracuse at 315-422-1333, and in Hudson Valley and White Plains at 914-304-4353.

What Is a Distributed Workforce?

A distributed workforce is one with employees in multiple physical locations. Distributed workforces often involve remote employees who are not tied to a particular hub or home office location. Usually, these are fully remote companies as opposed to “fully remote” positions for specific employees. However, a different type of workforce spatial distribution occurs in situations where an employer maintains a physical and regulatory presence in multiple states. These types of distributed workforces can sometimes overlap.

What Is the Difference Between Remote Work and Distributed Work?

Many employers and human resource management (HRM) professionals think of a distributed workforce as being virtually synonymous with fully remote work for an entire company. However, while remote work does not necessarily involve jurisdictional questions, the term distributed workforce emphasizes the often significant structural and procedural implications entailed in managing a workforce that is not only not operating from a single physical office, but may potentially be spread across multiple states.

Similarly, “remote work” is often used in reference to a single employee or position. Many job ads specify “remote” or hybrid in their descriptions, and some employees may negotiate for remote worker status to save the time and expense associated with commuting. Distributed work means the dispersal of company roles across multiple employees in distinct locations, a circumstance that can dramatically expand the talent pool, but which often comes with certain administrative challenges as well. Being aware of these potential challenges puts company leadership in a position to address them effectively

What Is Another Word for a Distributed Workforce?

Owing to the areas in which United States employers most often encounter administrative complexities in managing distributed workforces, you may sometimes hear these personnel referred to as “multi-state” workforces, or occasionally “interstate” operations. The essential point is that many distributed workforces in the United States are “distributed” across state lines. What this practical reality means for employers’ pay practices is that employers managing distributed workforces will often need to track and comply with multiple different employer obligations, particularly regarding employee compensation, depending on where in the country each employee is domiciled.

How To Manage a Distributed Workforce: Jurisdictional Considerations for Wage and Hour Compliance

Often, some of the most challenging administrative questions associated with managing a distributed workforce relate to wage and hour compliance. States and even municipal governments may set their own regulations for minimum hourly wages and overtime pay requirements, both of which can impact employers’ federal compliance obligations under the Fair Labor Standards Act (FLSA).

Jurisdiction for Wage and Hour Laws

For employers managing pay practices across a distributed workforce, this generally means that employee compensation must always meet at least the minimum that applies in the employee’s own jurisdiction. That the employee’s jurisdiction, and not the location of the employer’s home office, typically determines the standard for wage and hour compliance can have significant implications for how multi-state employers manage pay practices across their company rosters.

“Distributed” vs. “Multi-State”: Why and When It Matters for Employers’ Pay Practices

Many professionals in the HRM space use the term distributed workforce to refer exclusively to fully remote working conditions with no central “hub” or office location. They may even refer to these remote-only scenarios as “distributed” if the entire team is located within a relatively limited geographic area.

In many of these areas, the companies to which this definition of a distributed workforce applies may have very little in the way of jurisdictional complexities to consider. The same is not true, of course, for businesses whose distributed workforces are spread across state lines – or even for employers in many parts of New York, where a difference of address within the New York City metro can easily mean a difference in jurisdiction for determining state minimum wage requirements.

Minimum Wage Rules for Managing a Distributed Workforce

The FLSA sets requirements for hourly minimum wages at the federal level. Contrary to popular belief, the requirements do not apply solely to employees whose compensation is normally calculated and paid by the hour; salaried employees and those paid per work product completed are also entitled to wages whose hourly average (amount of compensation divided by time worked) meets or exceeds the minimum set for hourly workers. However, the federal minimum wage has not been updated since it was raised to $7.25 per hour in 2009, while the cost of living has increased by nearly 50% in the same time period, according to the American Institute for Economic Research (AEIR). The increase in cost of living has led some states, including New York, to institute their own minimum wage increases. The result has been a widening gap between the federal minimum wage and those set by state governments.

Where a state or local government sets a minimum wage that is higher than the federal standard, the highest rate prevails for federal as well as state and local enforcement. Moreover, guidance from the metropolitan government of New York City – where the complexity of the map for determining minimum wages often prompts compliance questions among employers – specifies that the minimum wage where the employer works, rather than the minimum wage where the employer has its office, determines jurisdiction for minimum wage rules. To maintain minimum wage compliance in their pay practices, employers managing distributed workforces must make sure that each employee’s wages meet or exceed the hourly minimum that applies in the jurisdiction where he or she works.

Overtime Pay Practices for Multi-State Employers

Multi-state employers will need to stay abreast of current overtime pay obligations in each jurisdiction where they have an employee, as well. Many states follow the federal standards, which, like minimum wage rates, fall under FLSA compliance and are overseen by the Wage and Hour Division (WHD) of the United States Department of Labor (DOL). Overtime pay rules can intersect with minimum wage requirements if an employee’s pay is set to the minimum for their jurisdiction, but overtime pay calculations apply to all employees whose job roles do not fall into one of the specified exempt categories. 

Misclassifying non-exempt employees as exempt for overtime pay calculations is one of the most common wage and hour violations to cause compliance issues for employers, and verifying hours worked per pay period can sometimes present particular complications for employers managing a large multi-state workforce, so do not hesitate to schedule a consultation with one of our business attorneys with Schwab & Gasparini to review your workplace pay practices and develop updated internal protocols to ensure you maintain compliance with wage and hour laws.

Beyond Compliance: Practical Considerations for Employers Managing Distributed Workforces

Wage and hour compliance issues tend to loom large for New York employers who are managing multi-state distributed workforces. Often, however, there may be additional factors that come into play as you consider employee compensation structures. On the one hand, establishing roughly comparable pay scales for employees with similar seniority and similar workloads is generally regarded as a form of “best practice” for minimizing the risk of discrimination complaints, as well as for simply maintaining a working environment – even a virtual environment – in which employees are motivated to perform at their highest levels because they recognize they are being rewarded fairly for their work.

On the other hand, as a practical matter, a $100,000 salary will go much farther in some small-town environments in the nation’s heartland than in the center of New York City. When it comes to recruiting and maintaining high-quality talent, this means that multi-state employers who do not need employees present at a physical location may want to consider how each employee’s location impacts the attractiveness of their compensation. Taking time to evaluate how well your pay scales are positioned to compete with those of other employers in various regions across the country can provide you with a valuable perspective when considering annual pay adjustments or listing a new position.

Discuss Your Multi-State Pay Practices With a New York Business Attorney

Multi-state employers managing distributed workforces are apt to encounter a number of complexities in their pay practices. Differences between jurisdictions in minimum wage laws and other considerations can lead to unanticipated compliance issues for the unwary. To take advantage of the recruiting possibilities of a distributed workforce while minimizing your company’s risk exposure, consider scheduling a consultation with a member of the New York business law team at Schwab & Gasparini. Reach us by calling 914-304-4353 in the White Plains or Hudson Valley areas, 315-422-1333 in the Syracuse metro, or 518-591-4664 to reach our office in Albany.

Mon Dec 8 2025, 12:00am