US multi-state hiring rules are increasing compliance risk for companies, with half of employers declining to hire a qualified candidate because of concerns related to that candidate’s state employment rules, according to a survey from US employer of record FoxHire.
The company’s inaugural Multi-State Hiring Compliance Burden Index found that in addition to 50% of employers telling candidates they wouldn’t be hired because of compliance concerns, 48% have also delayed hiring decisions or expansion into new states due to lack of clarity on state regulation. Another 44% said they had decided not to move ahead with a hire because compliance felt too risky or complex, without informing the candidate of the reason.
FoxHire said the survey data shows that state-by-state employment complexity is not just slowing hiring, it is actively narrowing where companies are willing to operate.
More than a third of respondents (36%) said they need at least a month to feel confident they are compliant in a new state, stalling new hires and risking job candidates finding alternative employment.
Almost 37% of respondents said that local employment rules have become a significant compliance challenge in the past year, with 35% of legal, risk and compliance professionals ranking California as the state with the most compliance friction due to the state’s detailed employment laws and aggressive enforcement regime.
A quarter of companies said they have paid a penalty, interest or fine related to multi-state compliance in the past 24 months, most commonly because of payroll issues such as payroll taxes and registrations. Some 30% of respondents said payroll mistakes are their biggest fear when entering a new state.
Over the same period, 24% of respondents said they had missed a registration, filing or reporting deadline, while 25% had to issue back pay or a wage correction.
Colin LaBeau, president of FoxHire, said: “Hiring has gone national, but employment law largely has not. Organisations are expanding across state lines faster than their compliance systems can keep up. This research reflects what we see every day: companies want to hire, but the regulatory patchwork is forcing difficult decisions about where they can do it confidently.”
The study was based on a survey of 1,000 business professionals, including HR, legal and compliance teams who hire across multiple US states.
A survey published by Littler earlier in March found that 71% of US employers had been affected by DEI policy changes and 65% by new immigration policy imposed by the Trump administration.
Email your news and story ideas to: [email protected]
