The legal compliance and liability that comes with placing contractors is no treat no matter where you are located, but in some states, employment regulations are getting so complicated that recruiters are turning down contract business in those areas.

Let’s take a look at the three hardest states in which to place contractors:

California

You are probably best off assuming that California will have its own laws for just about everything, so tread carefully with all employment issues there. For starters, they have what is probably the most complex wage and hour code that is particularly generous to employees when it comes to overtime.

Where most American employees only get overtime when they work over 40 hours in a week, overtime in California is based on the number of hours worked per day and the number of workdays in a workweek. The state also has its own laws for minimum wage and for how and when employees are to be paid. 

They have state-specific laws governing E-Verify, credit checks, and more, and the state was recently named the worst one for employment tax laws on XpertHR’s Payroll Misery index. A number of California localities have their own employment laws as well. San Francisco, for example, is among a growing number of localities that have established their own paid sick leave (PSL) laws.

These laws are complex and vary by locality, leaving recruiters and employers to figure out if they must comply, how to track the leave, and how to administer the program.

New York

New York was also named one of the worst states for employment tax laws by XpertHR, and  it has its own minimum wage law as California does.   And like San Francisco, New York City has its own PSL law. NYC was also the first city to pass legislation to prohibit the discrimination of the unemployed. Employers in the state are required to notify newly-hired employees in writing of their hourly rate, overtime rate, and payday. For contractors, this requirement is fulfilled through the  New York LS51 Form.

New Jersey

New York's neighbor is the third worst state for employment taxes, according to XpertHR. It's also one of the most popular for paid sick leave laws - two cities within the state (Jersey City and Newark) have them. It was also the first state to ban discrimination of unemployed applicants.

Only you can determine if it's worth the extra time, money, and frustration to accept contract placements in these and other difficult states. You have to figure out if the amount of business you can pick up and the profit margin offset the liability and frustration.  

But in general, turning down business is usually not a great move for your profits or your reputation. Instead, you may want to consider outsourcing the employment of your contractors (or at least those in particularly difficult states) to a contract staffing back-office provider that will handle all of the employment tasks and legal compliance for those contractors.

That way, you can enjoy the additional revenue from taking placements in these states WITHOUT the state compliance frustration.