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With a GDP of $20 trillion and a population of 325 million
people, the United States is the world’s largest consumer
market. Household spending is the highest in the world, accounting
for more than a quarter of global household consumption, and free
trade agreements with 20 countries provide enhanced access to
hundreds of millions of additional consumers. In short, the United
States is easily one of the best countries in the world in which to
do business.
At the same time, the United States is a complex and highly
regulated place. The U.S. Department of Labor (DOL) administers and
enforces more than 175 employment-related federal laws in areas
such as recruiting, hiring, background checks, compensation and
benefits, workplace conduct and termination. Employers in the
United States are also governed by an extensive set of state and
local laws, which are often more favorable to employees than
federal laws.
International business managers will understand that every
country – and every jurisdiction – is different. It is
also true that local employees are far more conversant with their
rights than in previous eras (thanks, Google!), and in many cases
far more willing to stand up for those rights. An additional
consideration is that employees in the United States tend to be
more litigious than their counterparts in most other countries, and
courts (and especially juries) in the United States are known to
award employees damages far exceeding those typical in most other
jurisdictions.
It follows, therefore, that companies looking to establish
operations in the United States need to abide by the laws and
regulations governing employment, at the federal, state and local
levels.
What follows is a brief overview of employment law
considerations for foreign companies establishing U.S. operations.
Of course we recommend retaining professional counsel to ensure
compliance with the federal, state and local laws that are relevant
to your specific situation.
The Hiring Process
In hiring employees, companies are required to be transparent
about job requirements, and are not permitted to discriminate on
the basis of gender, race, age, marital status or religion. In
addition, the federal Americans with Disabilities Act (ADA) and
similar state statutes prohibit employers from discriminating
against candidates with disabilities who are otherwise qualified to
do the job, and also require that employers reasonably accommodate
the special needs of disabled applicants during the application
process. Employment decisions must be made on job-related criteria
such as education, years of experience and skills, and hiring
managers should be well-trained in lawful (i.e. non-discriminatory)
interviewing parameters. Questions such as “Are you
married?” or “Are you a Christian?” or “How old
are you?” can generate good grounds for expensive civil
lawsuits and regulatory actions.
Job descriptions should describe the position being offered,
outlining salary and benefits, job requirements and qualifications,
and the terms of employment, e.g. “6-month contract” or
“full-time position”. Applicants should be informed of
any requirements for employment, such as a drug screening,
availability to work overtime, training/probation period or
physical agility requirements.
Finally, privacy laws govern not only the hiring process but
also every aspect of the employment journey, through
resignation/termination. And during the hiring process, state and
federal laws govern employers’ obligations when conducting
background checks either directly or via third-party agencies.
These laws require employers obtain consent from
candidates/employees and provide certain notices to
candidates/employees.
Companies seeking to hire or transfer foreign nationals to work
in the United States must apply for visas for those employees, and
the continually changing political environment governing U.S.
immigrant and non-immigrant work visas means employers often must
pursue a variety of strategies to achieve their staffing
objectives.
There are a number of non-immigrant visas available to foreign
workers, including business travel, trainee and intracompany
transfer visas, in addition to specialty occupation visas; and
immigrant visas, which though they generally take longer to obtain,
can lead to permanent resident status, which can be beneficial to
both employer and employee.
Eligibility, requirements, processing times and benefits for
accompanying family members vary by visa classification, and
perhaps needless to say, companies are advised to assign a high
priority to compliance with immigration laws.
Managing Your Workforce
Much of U.S. labor law is designed to protect employees from
exploitation, and parameters for wages, working hours, leave,
pensions and workplace safety are set out in laws at both the
federal and state levels. The law also governs the work environment
in ways that may not appear to directly relate to the
employer-employee relationship, for example in cases of
discrimination or harassment between employees.
Federal and (often more stringent) state laws impose
requirements for minimum wage and overtime payments and they also
govern how much overtime can be requested of and worked by
employees. The laws incorporate exceptions for “white
collar” workers, contractors and others, but correct
interpretation of the law is vital to avoiding possible regulatory
and/or civil liability.
Discrimination and Harassment
Federal law prohibits discrimination against employees and
applicants based on an individual’s race, color, religion, sex
(including pregnancy), national origin, age (for those aged 40 or
older), disability or genetic information. Again, most of the 50
states have anti-discrimination laws that mirror federal law, or go
farther in protecting employees, e.g. some jurisdictions have laws
barring discrimination on the basis of political affiliation or
sexual orientation.
Federal and state laws also protect employees from harassment
based on the anti-discrimination categories. Sexual harassment in
particular has increased as an issue for companies to monitor as
social mores have changed in relation to appropriate (and
inappropriate) workplace behavior.
The law protects employees not only from top-down harassment by
supervisors, but also from inappropriate behavior by colleagues and
even clients, customers and suppliers.
For employers, protection against liability for harassment
complaints should begin with a personnel policy that clearly
defines and prohibits discrimination and harassment, outlines
procedures for making complaints, and authorizes disciplinary
action against violators of anti-discrimination and anti-harassment
policies.
Leave Policies
The United States is notably ungenerous in its support of
federally mandated paid vacation, sick leave and
maternity/paternity leave. That said, if paid leave is awarded in
some/all of these categories, it may be subject to state or
municipal regulation. Thirteen states and Washington, D.C. have
enacted laws to require paid sick leave, and cities that require
employees provide paid sick include San Francisco, Seattle,
Chicago, Philadelphia and New York.
Though the United States does not mandate paid leave in most
circumstances, a number of federal and state laws require that
employers provide their employees with unpaid leave if they request
it. Examples are leaves of absence for pregnancy, childbirth,
military service, disability, jury duty, voting and religious
observance.
Company personnel policies should clearly articulate employee
rights to paid and unpaid leave, and the procedures for requesting
leave.
Employee Benefits
The United States requires employers provide employees with
federal Medicare benefits (health benefits for retired or active
workers aged 65 or older and disabled persons), federal Social
Security benefits (pensions for retired workers) and unemployment
compensation. Employers and employees split the cost of Medicare
and Social Security benefits.
Many U.S. employers also provide some form of pension plan
(including 401k plans) and offer medical, dental and vision
insurance, life insurance, and disability income plans. Again, the
costs for funding most of these plans are generally shared by the
employer and employee.
And though the federal Affordable Care Act of 2010 established a
federally mandated health care system that does not require that
employers offer group health plans to employees, the law does
impose penalties on companies that do not offer their employees
affordable healthcare coverage.
Workplace Safety
The Occupational Safety and Health Act of 1970
(“OSHA”) went into effect with the mandate to provide
“every working man and woman in the Nation safe and healthful
working conditions.” Around half the U.S. states have enacted
their own occupational safety and health legislation as well.
Three categories of business are covered under OSHA –
construction, agriculture and general industry – with
employers obligated to provide a workplace “free from
recognized hazards that are causing or are likely to cause death or
serious physical harm.”
OSHA has the right to conduct workplace inspections during
working hours, and employers are entitled to request a search
warrant prior to allowing access. The inspection process
incorporates meetings with the inspectors before and after a
facility walkthrough that allow employers to understand and limit
the scope of an inspection and to understand the nature of any
alleged violations.
When OSHA inspectors believe they have identified violations,
they provide formal notification by certified mail with a citation,
giving employers time to either take corrective action or contest
the citation. Penalties for OSHA violations vary according to the
severity of the offense.
Employees injured on the job are entitled to workers’
compensation, which every state requires employers to provide.
Coverage requirements vary by state, and employers may provide
coverage through an insurance company or they may self-insure;
premium costs are based on the number of employees, their job
duties and the level of risk.
Workers’ Unions
The National Labor Relations Act (“NLRA”) establishes
the right of workers to engage in collective activity, including to
form, join, and assist unions. Though less than 15% of U.S.
workers, and less than 10% of private sector workers, are
unionized, the NLRA not only regulates what employers can and
cannot do in response to employee collective activity and in terms
of bargaining with unions, but also affords rights and protections
to non-unionized employees in non-union workplaces. In practice,
this means the law can protect the right of non-unionized employees
to raise group concerns relative to pay, hours, or working
conditions, and prohibits employers from taking adverse action
(e.g. termination) against employees undertaking collective
activities.
Employee Monitoring, Data Protection and Privacy Rights
Many employers, especially in “white collar” working
premises, can easily monitor employee communications, but this
monitoring is governed by federal, state and local laws designed to
protect employee privacy. Restrictions on monitoring vary widely by
jurisdiction, but in general, employers are required to inform
employees about monitoring, and obtain consent. Employers generally
obtain this consent through equipment use policies that explicitly
state the company may monitor employee communications and
activities on company systems and equipment. Organizations that
operate in more than one jurisdiction should check and comply with
the laws and regulations applicable in each premises in which
employees are performing work or where company systems or
electronic devices are located.
Noncompete Agreements
Most states allow employee noncompete agreements, but some do
not. California not only does not enforce employee noncompete
agreements, but employees can sue an employer that seeks to require
they sign one.
States that allow employee noncompete agreements generally will not
enforce an agreement that too greatly limits an employee’s
future job prospects. An employee noncompete agreement is most
likely to be enforced if it is limited in:
- Time. The shorter the time for prohibited
competition, the more likely the noncompete agreement will be
enforced. - Geographic Area. The smaller the geographic
for prohibited competition, the more likely the noncompete will be
enforced. The geographic area will largely depend on the geographic
reach of the industry and the business. - Definition of competition. The more limited
the prohibited nature of competition, the more likely the
noncompete will be enforced.
A noncompete that prohibits an employee from working for one of
three direct competitors in the same state for one year is a lot
more likely to be enforced than a noncompete that prohibits an
employee from working for any company in an entire industry for
three years.
Termination and Resignation
Much of American employment operates under an “at
will” hiring model, which makes termination relatively
straightforward compared to some countries. Yet it is worth
remembering that American society is relatively litigious, and that
anti-discrimination laws and regulations may give terminated
employees am opportunity to pursue claims against their former
employers. More than 80% of the employment-related lawsuits in the
United States stem from employee terminations.
The best advice to employers that must terminate employees is
universally applicable: be fair and be transparent. Expectations of
employee behavior and performance should be set out at the
beginning of the employee’s service and any shortcomings in
performance should be thoroughly documented and communicated to the
employee. How to handle an actual termination tends to be so
situation- and location-specific that there is little point in
discussing that here.
Conclusion
“Be fair and be transparent” is our best advice for
companies looking to establish operations in the United States.
Prepare thoroughly by consulting professional counsel to ensure
compliance with the federal, state and local laws, as well as
industry-specific regulations, relevant to your specific
situation.
Prepare thoroughly by establishing a comprehensive human
resources infrastructure setting out the rights, responsibilities
and avenues of recourse in a universally available handbook.
Prepare thoroughly by ensuring that executives, managers and
supervisors are well-versed in the laws governing employment issues
(e.g. anti-discrimination, workplace safety) and well-trained in
how to maintain compliance.
And finally, good luck!
U.S. Employment Law For Foreign Companies
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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