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Employment in United States

EMPLOYMENT IN THE USA

According to XpertHR, state and federal legal requirements can address the same subject matter but set varying levels of obligation on the employer. For example, federal law may impose a higher minimum wage rate than state law. Or, state law may require employers to retain certain records for a longer time period than federal law. In general, employers must comply with both state and federal law, which basically means following the law that offers the greatest possible rights or benefits to the employee.

Often, there are areas that are not explicitly outlined in either federal or state law. In such a case the terms will depend more upon the employment contract. HR Daily Advisor comments that in these areas, employers must be careful to set out the terms clearly to avoid ‘implied agreements’. For example, having a probationary period may be an implied agreement that there will be an increased level of job security after the period ends.

allBusiness states that because laws regulating the employment relationship can come from different federal, state, or local sources, and it can be confusing to figure out which ones are applicable to employers. It depends on a range of factors such as where offices are located, how many people are employed, annual revenue, and the minimum number of employees specified in the particular employment law statute. Claims made and lawsuits (or arbitrations) brought by employees against their employers or former employers are among the most prevalent types in the USA—-maybe number one, according to GBD Law. Thus, before entering any employment contract with an employee, the employment law of the particular U.S. state(s) concerned should also be considered before any agreement should be drafted by a state lawyer.

Key points on employment in United States

There are several key areas to be aware of within the USA’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department.  These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contracts

    Contracts are not required for employment, but may be offered to senior level employees or specialists with specific compensation requirements.

  2. Probation Periods

    There is not a clear preference towards laws on probation in federal laws, and a probation period would only apply if written into the employment contract.

    In Delaware, there appears to be no specific rules on probation periods.

  3. Termination Procedures

    a.  Notice Period

    The U.S. Department of Labor states that the Federal Fair Labor Standards Act (FLSA) has no requirements for notice to an employee prior to termination or layoff. However, for businesses closing down, that meet certain requirements, the Worker Adjustment and Retraining Notification Act (WARN) requires such employers to provide 60 days’ notice in advance of covered plant closings or mass layoffs.  The exact requirements for eligibility vary depending on a range of factors.

    While there is no US-wide rule on notice periods for general termination, information on CiteHR notes that generally, a notice period of 1 month is used, or payment-in-lieu of notice.

    In Delaware, there does not appear to be any minimum notice requirement, apart from situations where the federal WARN Act applies.

    b.  Procedure

    Many USA states, the common law ‘at will’ rule provides that an employee can be terminated at will by the employer without cause, and without liability, unless the employment agreement or employer’s policies specify otherwise. The employment agreement should clearly state the grounds for termination for cause, which can also include events like the closing of the U.S. company, its sale etc.

    However, it depends on the state and a UK guide on establishing a business in the USA reports that some USA states do prohibit an employer from terminating an employee without cause except where parties reach written agreement at the time of termination or thereafter on additional compensation to the employee. According to free advice site Employment-Law, states will generally have at least rules protecting an employee from being fired “in violation of public policy”, such as on grounds of discrimination.

    BLR reports that Delaware is an “employment-at-will” state. This means that an employer or employee may generally terminate an employment relationship at any time. However, employees may sue for “retaliatory discharge “, for example where evidence such as a string of good evaluations followed by a sudden turnaround, can cause problems. Thus it is still essential to show with both testimony and documentation that termination had no connection to personal conduct or potentially discriminatory aspects of the employee.

    Interestingly and somewhat confusingly, the Delaware Employer Handbook on Unemployment Insurance states that the burden of proof is on the employer to show that it was for just cause, despite other reports indicating Delaware is an “employment-at-will” state. The guide recommends that employers should clearly state the policies of business regarding acceptable employee behavior in writing and give each employee a copy to avoid misunderstanding, and should be given reasonable warnings before termination, unless committing acts of gross misconduct.

    c.  Severance Pay

    There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay, and instead is up to agreement between employer and employee.

    In Delaware, XpertHR reports there is also no severance pay requirement, and additional pay, such as accrued and unused vacation days depends on the terms of the employer’s policies or employment agreement – if the policy or agreement does not specify then the employer is not obligated to pay any benefits such as accrued and unused vacation days upon separation. However, any wages earned up until termination must still be paid on the next regularly scheduled payday.

  4. Statutory Leave

    a.  Annual Leave

    According to HR site, BLR, In Delaware, the law does not require private sector employers to provide employees with vacations, paid or unpaid, However, if employers “promise” vacation terms, they are legally bound to provide it as promised. Employers are free to devise their own system for vacation accrual. Most employers offer employees some form of vacation leave.  The standard annual leave in the USA is two-weeks (10 work days), plus national holidays.  Longer leave may be given to long-term employees or senior management.

    b.  Maternity Leave

    According to the US Department of Labor the Federal law stipulates that an employer may not discriminate against an employee over pregnancy-related conditions. The employer must treat her the same as any other temporarily disabled employee. An employer also may not have a rule that prohibits an employee from returning to work for a predetermined length of time after childbirth. Employers must hold open the employee’s position during any pregnancy-related absence for the same length of time they would hold jobs open for employees on sick or disability leave. If an employer provides any benefits to workers on leave, the employer must provide the same benefits to those on leave for pregnancy-related conditions.

    The Federal Family and Medical Leave Act (FMLA), requires employers with 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave for the birth or adoption of a child.

    For example, in Delaware, XpertHR reports that Delaware law requires accommodations for pregnant employees, which may include time off to recover from childbirth

    c.  Sick Leave

    The Federal law for Sick Leave is the Family and Medical Leave Act (FMLA), and requires employers with 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave for serious illness of the employee or a spouse, child or parent, to eligible employees.

    For example, in Delaware, XpertHR reports that In Delaware, private employers are not required to provide employees with sick or vacation leave, either paid or unpaid. However, while Delaware law does not currently require employers to provide a state family and medical leave, employers with 50 or more employees will likely be required to adhere to the federal FMLA

  5. Pensions and Benefits

    a.  Statutory Pension

    According to the UK guide on establishing a business in the USA, USA law does not require enterprises to offer pension plans, profit sharing plans, medical, disability or life insurance coverage to employees. Employers may however optionally choose to offer employee benefits packages to attract talent. The recent Affordable Care Act does require employers with more than 50 employees to offer health insurance, or pay a penalty.

    Delaware has a state pension plan that applies to public employers and schools, in which the State and employer contribute 9.56% of payroll into the Pension Trust Fund. Private employers are free to choose whether to include pension packages to attract employers.

    b.  Workers Compensation Insurance

    Workers compensation insurance is mandatory. It insures the employer from its employee’s claims for job related injury and illness.  However, the U.S. Department of Labor, Office of Workers’ Compensation Programs does not have a role in the administration or oversight of state workers’ compensation programs.  This means that you must use a lawyer, accountant or insurance broker to contract it, or have your payroll company arrange appropriate insurance it at the local level.

    In Delaware, the Delaware Code states that employers must insure the payment of compensation to the employees, or their dependents, but holding appropriate insurance to cover medical reimbursements or death benefits.

     

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in the USA. For companies which intend to employ their staff directly through their incorporated USA entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in the USA.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into the USA.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in the USA

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in the USA

– the company needs help with tax, employment, immigration and payroll compliance in the USA

Shield GEO can contract directly with the company to employ and payroll their staff in the USA. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

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