Remote Work and Employment Agreements: Jurisdiction, Taxes, and What to Watch

Remote work has changed the geography of the tech industry. Engineers hired by Seattle companies now work from Austin; San Francisco companies have employees in New York. The employment agreement often hasn't caught up to this reality — and the legal complexity that results is real and consequential. Here's what remote tech workers need to understand about how location affects their employment agreement.

The Choice-of-Law Question for Remote Workers

Most employment agreements include a choice-of-law clause specifying which state's law governs the agreement. A company headquartered in Washington state typically uses a Washington law clause. A Delaware-incorporated company often specifies Delaware or the state where operations are primarily conducted.

For remote workers, the choice-of-law clause creates a fundamental question: if you live and work in California but your agreement says "governed by Washington law," which state's non-compete law actually applies to you?

The general answer — particularly for California residents — is that California's law governs. California courts have consistently applied Business and Professions Code Section 16600 (California's non-compete ban) to California employees regardless of choice-of-law provisions pointing to other states. The rationale: Section 16600 reflects a fundamental public policy of California, and California's interest in protecting its residents' right to work overrides a contractual choice of another state's law.

The 2023 enactment of SB 699 in California reinforced this by making it unlawful for employers to even include unenforceable non-competes in agreements — regardless of where the employer is headquartered.

California Remote Workers: Strong Protections

If you live and work in California — whether your employer is headquartered there or not — you generally receive the benefit of California's employee-protective laws:

• Non-compete provisions are generally void.
• Labor Code protections (including Section 2870 on invention assignment limits) apply.
• California wage and hour law applies to your employment, regardless of where the employer is headquartered.

If your employment agreement's choice-of-law clause points to a state other than California, that clause likely doesn't override California law for the most significant employment protections. However, for less fundamental provisions — general contract interpretation, commercial terms — the chosen law may still apply.

This doesn't mean you can completely ignore the non-compete clause in your agreement. If you ever leave California, the landscape changes. And some provisions in your agreement that are void in California may be enforceable in other states if you're working there.

Moving States Mid-Employment

A significant number of remote tech workers have moved between states mid-employment — particularly the California-to-Texas migration and the Bay Area-to-Austin pipeline. When you move from California to a state with enforceable non-competes, several things happen:

The non-compete clause that was void in California may now be relevant. If you're now living and working in Texas, a Texas court will apply Texas law to your non-compete — and Texas does enforce non-competes if they meet the statutory requirements.

Whether your employer knows about the move matters too. Many employment agreements include a work location approval requirement — you're supposed to get written approval from your employer before changing your primary work location. If you moved without notice, you may have violated a contract provision, which could affect how a court treats other aspects of your employment relationship.

The intersection of changed circumstances, choice-of-law provisions, and state-specific non-compete rules is genuinely complex. If you've moved states mid-employment and have a non-compete, getting clarity on your current exposure is worth doing — particularly before taking a new position.

Work Location Approval Clauses

Employment agreements for remote workers increasingly include explicit work location provisions. These may:

• Require that you work from a specific state (the employer's state, or a state where the employer is registered as an employer)
• Require written employer approval before changing your primary work state
• Allow remote work "from any location" subject to continued at-will employment
• Restrict work from certain countries (for compliance, security, or regulatory reasons)

If your agreement requires approval for location changes and you've moved without getting it, that's a gap worth addressing with your employer. Many employers are flexible about remote work geography but may have compliance reasons (state employment tax registration, specific professional licensing, benefits plan structures) that make certain states problematic.

If you're negotiating a remote employment agreement and you anticipate potentially moving, consider asking for a flexible work location provision that allows domestic location changes with notice rather than approval.

State Tax Implications

Your state of residence and work determines your state income tax obligations — not where your employer is headquartered. If you live in California and work remotely for a Washington-based employer, you pay California state income tax. If you move to Texas (which has no state income tax) while continuing to work for the same employer, you may benefit significantly from the reduced tax burden.

The employer side also has tax implications. Employers must register as employers in any state where they have employees — including remote employees. If your employer isn't registered in your state, there may be payroll tax compliance issues. Some employers restrict which states they'll hire remote employees from specifically because of registration requirements.

What to Check in Your Agreement

For remote workers reviewing an employment agreement:

• Choice-of-law clause: What state governs? How does that interact with your state's non-compete law?
• Work location provision: Is there a specific location requirement? Is a location-change approval requirement included?
• Non-compete scope: Does it specify that it applies only in the states where it's enforceable?
• Tax withholding: Confirm with your employer which state's withholding will apply and that it matches your actual work location.
• Benefits: Some benefits plans have geographic restrictions. Confirm coverage applies in your state.

The Bottom Line

Remote work creates jurisdictional complexity that most standard employment agreements don't fully address. If you're a remote worker reviewing a new agreement, or if you've moved states mid-employment and are uncertain about your non-compete exposure, paste your employment agreement into dott.legal for a free AI risk analysis. For complex jurisdictional questions involving a potential career move or relocation, attorney-validated review is $349 with 24-hour turnaround.