What are the rights of the employer and the employee in the United States?

American labor law is complex due to the diversity of legal sources: federal, state, and case law. Employee lawsuits in the United States are rife, and courts do not hesitate to order companies to pay damages up to hefty amounts. How to protect the employer and employee?

1 – Labor law in the United States: a real “millefeuille”

Labor law in the United States is characterized by its interweaving between federal laws and the laws of the federal states. Generally speaking, federal laws establish minimum standards and state laws set higher standards. In the event of a conflict between federal and state laws, the law most beneficial to the employee is deemed to apply. Article 29 of the United States Code (USC ) is the benchmark for labor law in the United States. 

2 – The employment contract: an oral agreement 

In the United States, the relationship between employer and employee is considered to be “at-will”: this means that the employer can terminate the professional relationship at any time, without notice or reason – except illegal (eg: discrimination). The employment relationship is generally started for an indefinite period. Recently, more and more employers are offering a written contract, in particular, to protect themselves from possible lawsuits by employees, and the tendency of US courts to respond favorably to claims for damages brought by employees on the basis of unjustified dismissal.

Advice – The hiring decision must be made after the candidate’s information has been verified ( background check, I9 & W4 forms) in order in particular to avoid prosecution for negligent hiring.

The American labor market is characterized by its great flexibility, in particular in terms of dismissals. If there is no dismissal procedure, in practice, a dismissal is prepared and managed with as much precision as hiring. The risks of unfair dismissal lawsuits are significant and an employer should take precautions to protect themselves, such as communicating clear rules of conduct and work, as well as applying the rules fairly, or establishing a performance appraisal system.

3 – Weekly working hours – no limit in the USA

In the United States, there is no legal working time. In practice, Americans are hardworking workers, able to handle a huge workload. It is not unusual to work 50 hours a week. People with low incomes often combine several jobs to ensure sufficient income. However, beyond 40 hours of work per week, the employee is remunerated at 150% of his base salary ( overtime pay ). Remuneration for hours worked on weekends, at night and on public holidays are not subject to increased rates.

4 – The minimum wage – no indexation to inflation

In 1938, as part of the New Deal, President Franklin Roosevelt passed the Fair Labor Standards Act establishing a minimum wage. As of 2009, the federal minimum hourly wage has stood at $ 7.25. The federal minimum wage is not indexed to inflation, Congress must pass a specific law each time it wants to increase it. The state minimum wage, which is generally higher, is the one retained by employers. Certain categories of workers receive wages below the minimum wage, such as certain students, apprentice workers with disabilities, and staff paid tips. 

5 – Leave in the USA – yes but without pay!

The law does not set compulsory vacation periods ( Vacation pay ). Leave with pay is subject to an agreement between the employer and the employee. In practice, large companies offer 2 weeks of paid vacation per year after the first year of employment.

The law allows employees who have family or medical reasons (birth of a child, adoption, serious illness) to take 12 weeks of sick leave ( Sick pay ). Employees must have worked for at least one year for an employer to qualify for this leave ( Family and Medical Leave Act of 1993 (FMLA )

6 – Safety standards: apply to all employers

American law aims to prevent workplace accidents. Employers must take all necessary measures to ensure the safety and protect the health of employees in the workplace from occupational risks related to toxic products, excessive noise, mechanical hazards and working conditions that do not comply with legislation in matters of hygiene ( Occupational Safety and Health Act 1970)
The Department of Occupational Health and Safety (OHSA) enforces the regulations through inspectors with broad powers to review and demand compliance with the established criteria. If they believe that their working conditions present risks, employees can approach the department to request an investigation.

7 – Protection against discrimination – lawsuits are common

American law protects many categories of employees from discrimination in hiring and in the course of their working lives:
1.  Executive Order Act 8802 of 1941 prohibits racial discrimination in the national defense sector. This regulation was the first to prohibit discrimination.
2.  The Equal Pay Act of 1963 requires all employers to provide equal pay for work of equal value for men and women.
3.  The Civil Rights Act of 1964 prohibits discrimination on the basis of skin color, religious beliefs, national origin, or sex.
4.  The Age Discrimination in Employment Act of 1967 prohibits discrimination against people over 40. 
5.  The Americans with Disabilities Act of 1990 prohibits discrimination against persons with disabilities. It also requires employers to reserve certain workstations compatible with the capacity of disabled employees, and access to public places.

The Equal Employment Opportunity Commission (EEOC ) is the independent government body responsible for the application and enforcement of these laws. It investigates workers’ complaints. Sanctions against people who make complaints of discrimination are prohibited: the Whistleblower Protection Act of 1989 protects employees against possible reprisals.

Tip: Communication in writing of rules regarding discrimination, harassment, time off, tobacco and drug use, absenteeism, punctuality, violence or theft at work, as well as the protection of confidential information, should be done by setting up the Employee Handbook which is given to candidates when they are hired. This establishment of clear rules will help to avoid misunderstandings and the lawsuits that follow.

If you are an employer in the United States, is strongly advised to take out liability insurance to cover damages ( General liability ), and keep up with the latest federal and state laws on labor. Do not hesitate to contact Karine Bauer at Kbauer Financials LLC to obtain the checklist of documents to obtain and keep to protect yourself in the event of an audit.
As always, the data presented in this file is not intended to replace the tax advice of a professional. For advice specific to your situation, contact Karine Bauer, EA, CCA at Kbauer Financials LLC now.