Hire in United States

Employment contracts in the US can be indefinite, fixed-term, full-time or part-time. The individual terms will vary according to the state the employee is being hired. The employment relationship in the US is subject to markedly less regulation than in other countries. Except for some protections on wage and hours and a prohibition on discrimination, the parties to an employment relationship in the United States are generally free to negotiate and set the terms and conditions of their relationship

To be considered “exempt,” an employee must satisfy all three of the following requirements:

• Exempt employees must be paid a salary as opposed to being paid on an hourly basis. This means the employer pays the employee for any week in which they perform work, regardless of the quality or quantity of the work.
• On a federal level, exempt employees must earn $684 per week or $35,568 annually. Some states have higher thresholds.
• The nature of an exempt employee’s work must fall into one of the categories as defined by the FLSA, which includes exemptions for those performing executive, administrative or professional duties. It also exempts computer employees and those in outside sales.

Exempt employees are not covered by the FLSA and are, therefore, not entitled by law to overtime pay. In theory, exempt employees receive compensation for their overtime work from their salary or from other benefits offered by the employer. Salaried employee overtime law has no provisions protecting these employees from long hours. If they find they are regularly working overtime, they must negotiate with their employer for a higher salary, time in lieu or a more reasonable workload.

To make sure they are complying with salaried employee overtime laws, employers must become familiar with federal and local regulations. They should track the hours of employees, whether exempt and nonexempt. If not, they may be responsible for paying claims of mistakenly treating employees as exempt when they are nonexempt and failing to identify, record and compensate “off-the-clock” hours (e.g. taking work home, working through lunch, etc). Employers may also be liable to include “wage augments” when calculating an employee’s overtime rate.

Non-Exempt employees must be paid minimum wage plus overtime pay if they work more than 40 hours in a workweek. Overtime must be paid at 1.5 times the regular pay rate. Employers must also consult the state labor laws in the state where the employee is working for additional requirements. Employees are considered non-exempt unless they qualify for an exemption under federal or state law.

Employers and employees should check with federal and state regulations to determine exemption status. Before classifying and treating any employee as exempt, employers should verify that the employee satisfies all applicable tests for overtime exemption under federal and state laws. If an employee is covered by both federal and state law but doesn’t satisfy both sets of tests, employers should consult with counsel to determine how they should classify the employee in that particular circumstance.

No legal provision governs a formal “trial period.” However, some employers prefer, from a business perspective, to have an internal policy on trial periods. This is often referred to as “introductory periods” or “probationary periods,” which generally provide for a formal performance evaluation after an initial stated period of employment (typically 90 days).

Federal law regulates wages, working hours and overtime pay for non-exempt employees. However, employees in executive, administrative or professional positions are exempt, as are outside sales employees, certain skilled computer professionals, employees of certain seasonal amusement and recreational businesses.

Under federal law, non-exempt employees must generally be paid 1.5 times the regular rate of pay for all hours worked above 40 hours per week. An exemption from the overtime pay requirement applies to certain categories of employees (e.g., executive, administrative and professional provided the requirements are met. States and localities have additional regulations on overtime pay and requirements and may require overtime pay for exceeding a daily hour threshold. In some instances, the regulation may require an overtime rate of two times the regular rate of pay

The FLSA does not offer specifics for how data should be collected and managed nor whether a time and attendance app should be used. However, it does state that it is mandatory to keep a record of employee working hours for hourly, non-exempt employees as well as exempt and non-exempt salaried employees.

The Occupational Safety and Health Administration (OSHA) is responsible for protecting worker health and safety in the US. Employers are required to provide employees with a safe and healthy place of employment that is free from recognized hazards (death or serious physical harm). Employers are obliged to remedy known workplace hazards, limit the amount of hazardous chemicals workers can be exposed to, use certain safe practices and equipment, monitor hazards and keep records of workplace injuries and illnesses. Regarding the COVID-19 pandemic, the U.S. Center for Disease Control (CDC) has issued its guidance with detailed instructions on cleaning and disinfecting public spaces, workplaces, businesses, schools and homes.

For home office situations where the employee performs office work activities (e.g. filing, computer research or work, reading, writing, etc.), employers have little responsibility. In fact, OSHA has issued guidance stating that it will not conduct inspections of employees’ home offices, it will not hold employers liable and it does not expect employers to inspect an employee’s home office.

Additionally, employers who are required to keep records of work-related injuries and illnesses under the OSH Act are responsible to do so even when the injury or illness happens in an employee’s home. However, for an injury sustained at home to be considered a “work-related” injury, it must have 1) occurred while the employee is being paid to work, and 2) be directly related to the performance of the employee’s work duties (as opposed to the general home environment).

In the United States, bonuses and 13th month pay are not required. A bonus is a considered payment made in addition to an employee’s regular earnings. Under the FLSA, all compensation for hours worked, services rendered or performance is included in the regular rate of pay. However, the FLSA provides a list of payments that may be excluded from the regular rate of pay, including certain bonuses. Unless specifically noted, payments excluded from the regular rate may not be credited towards overtime compensation.

Discretionary Bonuses:

A bonus is discretionary only if all the statutory requirements are met: a) The employer has the sole discretion – until at or near the end of the period that corresponds to the bonus – to determine whether to pay the bonus. b) The employer has the sole discretion to determine the amount of the bonus and c) the bonus payment is not made according to any prior contract, agreement or promise causing an employee to expect these payments regularly.

Nondiscretionary Bonuses:

A nondiscretionary bonus is considered any bonus payment that fails to meet the statutory requirements of a discretionary bonus. Nondiscretionary bonuses are to be included in the regular rate of pay, unless they qualify as excludable under a separate statutory provision.

Grounds

Generally, workers employed on an “at-will” basis may be terminated – with or without cause or grounds – provided it is not for an illegal reason. Notably, an illegal reason would be discrimination on grounds of a category protected by law or termination because of protected “whistleblowing” activity. Whistleblowing is the reporting of certain activities where the employee reasonably believes that the information he or she provided relates to potential violations of specific laws by the employer. For terminations of at-will employment, no cause is required although it is always preferable to have sufficient cause when terminating an employee. If the cause is not provided (and there is no legal requirement to do so), the former employee may consider pursuing legal action charging that (a) the employer did not provide a valid reason for the termination and (b) the termination was done for an impermissible reason, such as discrimination.

Notice tendered by Employer

Except in certain mass dismissals, U.S. law does not impose a formal “notice period” to terminate an individual employment relationship. Most employees in the US are employed “at-will.” Either party can terminate the employment relationship without notice. However, the general practice is to provide at least two weeks of base pay and medical benefit continuation in lieu of notice. Each employer will select an appropriate period of time and then generally maintain a consistent approach for subsequent terminations.

Notice tendered by Employee

Similarly, employees are not required to provide a formal notice period, as there is no statutorily required minimum length of notice. However, the general practice is to provide at least two weeks’ notice.

Payment in Lieu

Pay in lieu of notice is permitted in cases where the employer chooses to apply a notice period. Garden leave, a period during which an exiting employee is paid his or her salary but is not allowed to work, is not a common concept in the US. Because it is not a common arrangement in the U.S., the federal and state laws regarding garden leave are nominal and each situation will be examined independently. Unlike in many countries, however, it should not be assumed that an extended garden leave (beyond a period reasonable for normal transition) is valid in the U.S. if it otherwise does not satisfy restrictive covenant requirements.

Many employers use separation agreements, which provide additional money and benefits to terminating employees in exchange for an agreement to waive any claims related to their employment or termination as well as an agreement not to sue the employer for any reason. These are very common in the US and they can come in many forms. These agreements are highly variable and unique to each employer. Employers also may utilize a severance payment plan. These plans are prepared well in advance of a termination and generally apply to any terminations issued by the employer, although there can be exceptions.

Generally, US courts hold that a covenant restricting the activities of an employee following his or her employment will be enforced if it protects the employer’s legitimate business interests, is reasonably limited (in scope, time and place), is supported by consideration and is reasonable. The following restrictive covenants are recognized and may be enforceable under the law: i) non-compete clauses; ii) non-solicitation of customers and iii) non-solicitation of employees.

Collective bargaining agreements are highly variable but usually provide specific termination protections beyond the normal discrimination or public policy prohibitions. The termination process is often time-consuming and subject to arbitration or unfair labor practice claims, which are initiated by the union on behalf of the member (if the procedural steps are not followed properly). Unions are likely to challenge terminations on substantive grounds as well so additional care must be taken by the employer when selecting a member for termination.

In general, wages must be paid by cash or check. Most states permit payment by direct deposit or by debit card but only with the written consent of employees and only if the employees are not subject to a fee to withdraw their pay. Most states regulate the frequency at which employees must be paid. It can be either weekly, bi-weekly or monthly, varying by state.

A statement of wages (often known as a pay stub) must be issued on or before the day of the related salary payment. The information included on the pay stub may vary as states have specific requirements for the information that must be provided to employees each payday. Thi typically requires regular hours, regular pay, overtime hours and overtime pay.

There is no requirement for paid time off for annual leave or vacation time under federal law. An exception applies for employers with fewer than 500 employees, who are absent for reasons connected with COVID-19. In practice, most employers provide employees with paid vacation time. It may range from one week per year during the first few years to three weeks or more for long-serving employees. Employees represented by a union may receive more generous vacation time.

The Federal Family and Medical Leave Act (FMLA) entitles eligible employees of covered employers (those with fifty (50) or more employees within a seventy-five (75) mile radius) to take unpaid, job-protected leave for certain family and medical reasons. Group health insurance coverage will continue under the same terms and conditions as if the employee had not taken leave. Under the FMLA, employees may be entitled up to 12 weeks’ unpaid medical leave in a 12-month period for a serious health condition that prevents the employee from performing the functions of his or her job. Though there is no national law guaranteeing paid sick leave, several states, counties and cities require employers doing business within their boundaries to offer paid sick leave.

Under the FLSA, there is no specific, mandated provision for paid bereavement leave. However, the FMLA allows employees to take up to 12 weeks of unpaid leave for family-related matters. Given the emotional nature of such occasions, most organizations are understanding enough to grant unpaid time off to the employee.

Under the FMLA, employers with 50 or more employees within a 75 mile radius are required to provide employees with 12 weeks’ unpaid leave in a 12-month period for the birth or placement of a child. Some state laws provide for maternity leave for employees who are not covered under the FMLA. In addition, several US states provide workers with partial pay during a period of parental leave. In general, it seems there is a trend toward state family leave laws.

Although the US government recognizes several “national holidays,” the Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as holidays (federal or otherwise). These benefits are typically a matter of agreement between the employer and the employee (or the employee’s representative). However, it is customary for employers to provide employees with paid time off to observe nationally and locally recognized holidays.