The employment relationship
Country-specific laws
Which laws and regulations regulate the employment relationship?
A number of federal, state, and local laws and doctrines govern employment relationships in the United States, such as:
- the National Labor Relations Act;
- the doctrine of employment at will;
- Title VII of the Civil Rights Act of 1964;
- the law on age discrimination at work;
- the Americans with Disabilities Act;
- the Family and Sick Leave Act;
- the law on fair labor standards;
- Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA);
- the law on equal pay; and
- the Immigration Reform and Control Act.
Who do these cover, including categories of workers?
- National Labor Relations Act – This applies to union and non-union workers who lawfully engage in sheltered and concerted activities.
- Arbitrary Employment Doctrine – Without a collective agreement or individual employment contract, the employer can fire an employee at any time, with or without a reason. Several state courts have made exceptions to this rule.
- Title VII of the Civil Rights Act of 1964 – Employers with 15 or more employees are prohibited from hiring, firing, or otherwise discriminating against anyone based on race, color, religion, sex (including pregnancy), or national origin. Many state and local governments have mandated additional proprietary classifications such as marital status, AIDS, and sexual orientation.
- Age Discrimination at Work Act – This prohibits private employers with 20 or more employees from dismissing or otherwise discriminating against workers aged 40 and over based on their age.
- Americans with Disabilities Act – This prohibits private employers with 15 or more employees from discriminating against employees, or applicants with disabilities.
- Family and Sick Leave Act – This prohibits employers with 50 or more employees from discriminating or disturbing workers for exercising their vacation rights under the law.
- Fair Labor Law – This generally requires the payment of a statutory minimum wage to all insured workers except for certain younger workers who can be paid a minimum wage for up to 180 days for training. In addition, employers must pay all non-exempt employees overtime at one and a half times the regular rate of the employee for all hours worked exceeding 40 hours per week. Other federal and state laws may require a higher rate of overtime. The provisions of the Fair Labor Standards Act contain numerous exceptions to minimum wage and overtime requirements.
- USERRA is a federal law that establishes rights and obligations for uniformed service members and their civilian employers.
- Equal Pay Act – This requires male and female workers to be paid equal pay for work performed under similar working conditions that requires equal skills, effort and responsibility.
- Immigration Reform and Control Act – This makes it illegal for an employer to hire someone who is not legally entitled to work in the United States. All employers, regardless of size, must verify the identity and employment eligibility of each newly hired employee.
Misclassification
Are there special rules for classifying employees / contractors?
There is no bright line test to determine the classification of employees / independent contractors. The US Internal Revenue Service uses a 20-factor test, the US Treasury Department uses a 7-factor test, and other state tests vary. As in other areas of labor law, this test has recently been interpreted as somewhat more employer-friendly – that is, the classifications “employer” and “independent contractor” are more clearly defined by the courts.
contracts
Does an employment contract have to be in writing?
No – an employment contract can generally be oral, tacit and / or express.
Are there any conditions in employment contracts?
Legally enforceable employment promises may be contained in employment manuals or policy statements. However, in the United States, employment is generally ad libitum. The interpretation of contracts is generally a matter for the state courts under the contract laws of each state. Some states incorporate certain obligations into employment contracts (e.g. good faith and fair treatment between employees and employers).
Are mandatory arbitration / dispute settlement agreements enforceable?
Although labor dispute arbitration agreements are enforceable under the Federal Arbitration Act (FAA), whether or not there is an enforceable agreement is generally a matter of applicable state law that governs the conclusion of contracts or the enforceability of employer policies. A fundamental principle of contract law in most, if not all, states is that an employee’s promise to arbitrate is only enforceable if the employer has taken the promise into account. On May 21, 2018, the US Supreme Court ruled that arbitration agreements with class exemptions (which require individual arbitration of class action claims) are enforceable under the FAA.
How can employers change existing employment contracts?
The two basic approaches to changing existing employment contracts are the pre-existing customs rule and the approach to adapting contracts. The pre-existing mandatory rule is that what you already have to do is not taken into account. Consideration is required on both sides. Changes on both sides are therefore necessary so that both sides can be taken into account. That is, any change to an employment contract should involve some kind of consideration (e.g. additional wages or a signing bonus).
The restatement of contracts approach is more tolerant of one-sided changes. Section 89 of the Restatement (Second) of Contracts states: “A promise to change an obligation under a contract that is not fully fulfilled on both sides is binding if the change is fair and equitable …; or to the extent provided by law; or to the extent that justice requires enforcement ”. Such language would only apply to an agreement that has not yet been fully exercised and is still open to revision.
In particular, the rules for the adequate consideration of contracts vary from state to state, also with regard to niche areas (e.g. restrictive agreements).
Guest workers
Is there a distinction between domestic and foreign workers?
The 1986 Immigration Reform and Control Act requires employers to verify the identity and eligibility of each new employee using a completed Form I-9. All US employers, regardless of size, are subject to the provisions of this law. Employers must document and maintain all reviews and can face substantial fines if proper documentation is not kept. Employers are not allowed to knowingly hire unauthorized foreigners. Penalties for hiring unauthorized foreigners include heavy fines and, in some cases, imprisonment. The Immigration Reform and Control Act also penalizes employers for discriminating against workers or applicants based on their national origin or citizenship status.
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