How to Determine the Appropriate Unemployment State

Overview

When employees work in more than one state, it can be challenging to decide which state’s unemployment insurance (UI) program applies for reporting wages or for filing benefit claims. Although each state administers its own UI program, federal guidance provides a consistent framework for determining the correct state.

Employers must report wages to the appropriate state’s UI system and pay contributions accordingly. Misreporting can lead to errors in tax liabilities, double coverage, or difficulties for employees filing unemployment claims. Employees must file claims in the correct state to avoid delays or denials.

General Principals

Unemployment insurance coverage and wage reporting using follows these principals based on the federal localization of work rules. For more information, review UIPL 291 Attachment.

If you have additional questions about UI reporting or claims in multi-state situations, reach out to your state’s unemployment insurance agency or federal workforce contacts.

1. Localization of Service (Where the Work is Performed)
   1. This is the primary factor: if all work is performed in a single state, wage and claims generally belong to that state
   2. If an employee works in multiple states, federal guidance considers whether the work is localized in one state. This means the out-of state portions of work are incidental or temporary relative to the in-state work.
2. Base of Operations
   1. If work isn't clearly localized based on the above, look at where the employee's base of operations is: the main office, shop, or headquarters where job duties are supported.
   2. If work is directed and controlled from a specific state, that state may be the reporting state.
   3. This applies especially to sales people, consultants, or telecommuters who travel to other states.
3. Direction and Control
   1. If the base of operations doesn't determine the state, use the state where the work is directed or controlled (i.e. where supervisors assign tasks or where work is coordinated)
   2. This is a common second test when work locations are evenly split across states.
4.  Residence
   1. As a final test, if none of the above clearly determine the appropriate state, som UI rules allow reporting to the state where the employee lives but only if hte employee performs some work there and the work can't other wise be localized