Second scenario. The California employee decides to work in Mumbai. Why not? Cost of living is lower and relatives are near. The employer then gets a tax bill because it is "doing business" in India. Or the ED VA. Or anywhere the employee decides to rent an apartment.
These issues have been put aside during the force majeure pandemic {in war and plagues the laws are silent, or at least, temporarily shut up} but a return to normalcy now means there is no more force majeure excuse.