Delaware compliance for outsourced teams

Summary of steps taken- Queried Delaware state sites for employer and business compliance: Division of Revenue (withholding/employer registration), Department of Labor (unemployment insurance, workers’ compensation, Paid Leave, contractor enforcement), Division of Corporations (franchise tax, annual reports, registered agent), Department of Insurance (workers’ compensation environment and vendor/breach notices). - Retrieved Delaware Information Security Policy (DTI) regarding vendor/security controls for third parties and offshore staffing. - Retrieved Practical Law / legal guidance summarizing Delaware statutory framework and enforcement (Del. C. Title 19 provisions cited in Practical Law) and other reputable HR/legal guides discussing classification, I-9, and federal guidance.Key state-specific findings (high-level)- Employer registration & payroll withholding (Division of Revenue): Delaware requires employers to register to withhold state income tax (Combined Registration Application, CRA). Withholding agents receive an ID tied to the FEIN. (See Division of Revenue employers guidance.)- Unemployment insurance, workers’ compensation & One Stop registration (Department of Labor): Delaware Department of Labor administers Unemployment Insurance and Workers’ Compensation; employers should register via Delaware One Stop to set up withholding, UI, and workers’ compensation accounts. Delaware is implementing a Delaware Paid Leave program (effective Jan 1, 2026) for employers meeting the statutory threshold (the Department of Labor site contains program details and employer registration info).- Independent contractor classification and enforcement (Delaware statutes & DOL enforcement): Delaware presumes an employment relationship exists for work done for compensation unless the employer satisfies statutory/exempt criteria. Multiple Delaware agencies enforce classification under different statutes (19 Del. C. sections for UI, workers’ comp, wage payment, workplace fraud). Employers should keep documentation supporting contractor classification (e.g., written notices, contracts, evidence of independence) to defend classification decisions.- Registered agent, franchise tax, annual report (Division of Corporations): Delaware entities must file annual reports/pay franchise tax (or alternative entity taxes for LLC/LP/GP), maintain a registered agent in Delaware, and keep good standing through the Division of Corporations filings.- Data protection, vendor/security obligations (DTI & DOI guidance): State policies require suppliers and third-party vendors handling personal or state data to implement comparable levels of protection; state guidance recommends NDAs, background checks for contractors accessing sensitive systems, and contractual clauses that assign responsibility for data protection and safeguards. The DOI and DTI pages emphasize vendor contractual protections and security controls (offshore staffing policy, security clearance recommendations).- Industry-specific licensing / contractor registration (Industrial Affairs): Certain trades (e.g., construction) require contractor registration and carry specific penalties for noncompliance; these registration and bonding rules also interact with classification and licensing compliance.- Federal overlays: I-9 and immigration verification, IRS/Department of Labor tests for FLSA/worker classification, OFAC/export controls for foreign contractors are federal requirements that overlay Delaware obligations. Employers must follow federal I-9 rules (USCIS) and IRS/DOL guidance on classification. (Federal guidance should be cited alongside state rules in the blog.)Practical compliance checklist for US business owners / LLC founders using outsourced teams in Delaware1) Employer & Tax Registration - Complete the Delaware Combined Registration Application (CRA) and register with Division of Revenue for withholding. - Set up accounts for unemployment insurance and workers’ compensation through Delaware One Stop (labor.delaware.gov/onestop) as applicable.2) Worker classification & documentation - Use federal IRS/DOL tests and preserve documentary evidence showing contractor independence (contracts, written notices required under 19 Del. C. §3511 when treating someone as an independent contractor). - Maintain detailed payroll/contractor records required under Delaware law (names, classification, rates, hours, copies of contractor notices and evidence).3) Payroll & benefits obligations - Withhold and remit Delaware withholding where required; consult Division of Revenue guidance for nonresident/remote worker withholding specifics. - Understand Delaware Paid Leave obligations effective Jan 1, 2026 (employer thresholds and registration). - Ensure unemployment and workers’ compensation coverage where employees (or misclassified workers) create coverage obligations.4) Contracts, IP & security - Use written contracts with clear IP assignment, confidentiality (NDA), security obligations, breach notification clauses, and audit/assessment rights for vendors handling sensitive data. - For vendors handling State data or accessing State networks, follow State of Delaware DTI policies (security clearance, NDAs, background checks) and include comparable protections in vendor contracts.5) Entity maintenance & filings - Keep registered agent current and file Delaware annual reports and franchise/alternative entity taxes on time (Division of Corporations). Consider implications for foreign qualification if the business operates across states.6) Licensing & industry compliance - Verify whether outsourced work requires Delaware contractor registration or professional licenses (construction, regulated services). 7) Federal compliance overlays - Complete and retain Form I-9s per USCIS/ICE guidance (consider remote I-9 procedures only if permitted by federal guidelines) and follow OFAC/export control checks for foreign contractors. 8) Consider operational mitigations - Use a PEO or Employer of Record (EOR) for Delaware hires when you do not want to maintain local payroll/benefit obligations directly. - Implement vendor security assessments, cyber insurance where appropriate, and incident response/breach notification playbooks.