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Must My Business In Manhattan Make Unemployment Insurance Contributions To New York With Respect To Out-Of-State Employees?

  • By: David Rich
  • Published: October 4, 2023

Unemployment insurance is temporary income for workers who lose their jobs through no fault of their own; are ready, willing and able to work; and have earned sufficient compensation during a specified period of time in covered employment.

When an individual performs all of his services within the Manhattan, NYC, that individual’s employer must make, to New York State, unemployment insurance contributions on wages paid by the employer to the individual. See N.Y. Labor Law §§ 511(2), 570(1).

When a person performs some of their services within Manhattan, NYC, and performs the rest of their services within one or more States other than New York, the person’s employer must determine which State to pay unemployment insurance taxes.

When an individual performs employment services both in New York and in another State or States, New York, in determining the State to which the employer must pay unemployment insurance taxes, uses four tests:

  • Localization;
  • Location of base of operations;
  • Source of direction or control; and
  • Employee’s residence.

In re Allen, 100 N.Y.2d 282, 287, 794 N.E.2d 18; 763 N.Y.S.2d 237 (N.Y. 2003); see N.Y. Labor Law § 511(2), 511(3). The employer must “appl[y]” these four tests “successively to an employee’s entire service performed for the employer both within and without the [S]tate [of New York].” Allen, 100 N.Y.2d at 287. If application of a test results in allocation of all of an employee’s services to one State, no further test may be applied. Otherwise, the employer must apply the next test.


Service is deemed localized within the state if it . . . is performed both within and without the state but that performed without the state is incidental to the person’s service within the state.” N.Y. Labor Law § 511(2). For example, service is incidental where it “is temporary or transitory in nature or consists of isolated transactions.” Id. § 511(2).

If the employee is an interstate telecommuter — that is, if the employee regularly works from his out-of-state residence by electronic linkup to his employer’s workplace in Manhattan, NYC — the employee’s service is localized in the State in which he is physically present. Allen, 100 N.Y.2d at 284, 287-288.

For example, in Allen, because the unemployment benefits claimant “was regularly Physically present in Florida when she worked for her employer in Manhattan, her work was localized in one state — Florida.” Allen, 100 N.Y.2d at 287-288.

Location of Base of Operations

“If a person’s service is not localized in any [one] state,” Manhattan allocates all services to the State where the person maintains his or her “base of operations.” N.Y. Labor Law § 511(3). “[A] ‘base of operations’ must involve something more than the place where an employee starts and finishes a business trip and receives occasional telephone calls from his employer.” In re Normyle, 161 A.D.2d 888, 890 (3d Dep’t 1990).

Source of Direction or Control

“[I]f there is no base of operations in any state in which some part of the [person’s] service is performed,” then Manhattan allocates all of the person’s services to the [State] from which such service is directed or controlled” by the employer. N.Y. Labor Law § 511(3).


If none of the above-mentioned tests results in allocation of the person’s services to one State, then Manhattan allocates all of the person’s services to the state where he resides. N.Y. Labor Law § 511(3).

If your company needs assistance or guidance on a labor or employment law issue and your company is located in the Manhattan, NYC area, call Attorney David S. Rich at (347) 941-0760.

David Rich, Esq.

David Rich David S. Rich is the founding member of the Law Offices of David S. Rich, LLC,
a Manhattan Employment and Business Litigation Law Firm, in New
York City and in Englewood Cliffs, New Jersey...View Profile