ICLG - Employment & Labour Laws and Regulations - USA Chapter covers common issues in employment and labour laws and regulations – terms and conditions of employment, employee representation and industrial relations, discrimination, maternity and family leave rights and business sales.
1.1 What are the main sources of employment law?
Federal, state and local governments all have the power to implement statutes governing labour and employment. The primary federal employment laws are: Title VII of the Civil Rights Act; the Americans with Disabilities Act; the Equal Pay Act; the Fair Labor Standards Act; the Family and Medical Leave Act (“FMLA”); the Immigration Reform and Control Act; the National Labor Relations Act (“NLRA”); the Occupational Safety and Health Act; the Pregnancy Discrimination Act; and Executive Order 11246. In addition to statutory law, case law is a significant source of employment law.
1.2 What types of worker are protected by employment law? How are different types of worker distinguished?
Workers are generally protected against discrimination on the basis of race, colour, religion, sex, sexual orientation, pregnancy, national origin, age, disability, genetic information, retaliation, union activity and gender identity. Employees are separated into categories, such as at-will employment, union-based employment, hourly worker, or salaried worker.
1.3 Do contracts of employment have to be in writing? If not, do employees have to be provided with specific information in writing?
Written employment contracts are not a legal requirement. Employers do have to provide by law certain information, such as workers’ rights and benefit information.
1.4 Are any terms implied into contracts of employment?
Generally, a duty of good faith and fair dealing is implied.
1.5 Are any minimum employment terms and conditions set down by law that employers have to observe?
Employers are required to pay every worker a federally-mandated minimum wage. State laws vary and many states give additional required employment conditions, such as family leave, sick leave and mandatory breaks. In addition, most workers are entitled to job-protected family leave.
1.6 To what extent are terms and conditions of employment agreed through collective bargaining? Does bargaining usually take place at company or industry level?
Collective bargaining is industry-specific and not all industries have unions. In industries that are heavily unionised, bargaining often occurs at company level; however, in certain circumstances it is industry-wide.
1.7 Can employers require employees to split their working time between home and the workplace on a hybrid basis and if so, do they need to change employees’ terms and conditions of employment?
Since the Covid-19 pandemic, many workplaces have begun offering hybrid work arrangements. These arrangements are workplace specific. There is no requirement to change the terms and conditions of employment.
1.8 Do employees have a right to work remotely, either from home or elsewhere?
Employees do not have a right to work remotely. Remote-work arrangements are individualised and vary between employers.
2.1 What are the rules relating to trade union recognition?
The NLRA governs labour relations and provides for union recognition when the majority of employees vote for the union. These elections take place with secret ballots. In addition, the employer may recognise a union when the majority of employees have signed authorisation cards.
2.2 What rights do trade unions have?
Unions have the right to organise, collectively bargain, represent employees in disputes with their employers, and strike in certain circumstances.
2.3 Are there any rules governing a trade union’s right to take industrial action?
The NLRA, as interpreted by the National Labor Relations Board (“NLRB”) and federal courts, governs the right to strike. Collective bargaining agreements also may outline when taking industrial action is appropriate. A strike is typically allowable under the NLRA for either unfair labour practices or an economic strike.
2.4 Are employers required to set up works councils? If so, what are the main rights and responsibilities of such bodies? How are works council representatives chosen/appointed?
There are no “work councils” in the U.S.
2.5 In what circumstances will a works council have co-determination rights, so that an employer is unable to proceed until it has obtained works council agreement to proposals?
This is not applicable in the U.S.
2.6 How do the rights of trade unions and works councils interact?
This is not applicable in the U.S.
2.7 Are employees entitled to representation at board level?
No, employees are not entitled to representation at board level.
3.1 Are employees protected against discrimination? If so, on what grounds is discrimination prohibited?
Employees are protected against discrimination based on race, colour, religion, sex, sexual orientation, pregnancy, national origin, age, disability, genetic information, retaliation, union activity and gender identity.
3.2 What types of discrimination are unlawful and in what circumstances?
Discrimination is unlawful based on the categories set forth in question 3.1 in all circumstances. In addition, employees are protected from sexual harassment at their workplaces.
3.3 Are there any special rules relating to sexual harassment (such as mandatory training requirements)?
There is no federal law requiring mandatory training specific to sexual harassment. However, many states and localities have instituted mandatory anti-harassment training. The Equal Employment Opportunity Commission (“EEOC”) has issued guidelines regarding harassment prevention training to ensure that all employees are aware of their rights and responsibilities. In sexual harassment claims, federal courts have ruled that in order to avoid punitive damages and to raise certain affirmative defences, employers must show proof of anti-harassment training.
In New York, recent rules have limited the scope of confidentiality clauses in settlement agreements relating to sexual harassment claims.
3.4 Are there any defences to a discrimination claim?
Yes. If an employer can establish that the contested employment action had a legitimate, non-discriminatory basis, the employer will not be found liable for discrimination. There is also a general bona fide occupational qualification defence. Some states and localities provide additional affirmative defences.
3.5 How do employees enforce their discrimination rights? Can employers settle claims before or after they are initiated?
Employees can enforce their rights by filing a discrimination charge with the EEOC or a state or local agency. An employee can sue in state or federal courts. Employers may settle claims before they are initiated or during the litigation process.
3.6 What remedies are available to employees in successful discrimination claims?
Typical remedies include an injunction, compensatory damages (back and front pay), liquidated damages, punitive damages, court costs and attorneys’ fees. In some cases, attorneys’ fees are statutorily mandated to be paid by the employer.
3.7 Do “atypical” workers (such as those working part-time, on a fixed-term contract or as a temporary agency worker) have any additional protection?
Generally, temporary workers are provided the same protections as permanent workers.
3.8 Are there any specific rules or requirements in relation to whistleblowing/employees who raise concerns about corporate malpractice?
Both federal and state laws specifically protect whistleblowers against employer retaliation for their whistleblowing activities and allow for whistleblowing lawsuits.
3.9 Are employers required to publish information about their gender, ethnicity or disability pay gap, or salary or other diversity information?
The EEOC requires private employers with 100 or more employees and federal contractors with 50 or more employees to report the number of individuals they employ by sex, race and ethnicity to the EEOC. However, these reports are not required to be made available to the public.
4.1 How long does maternity leave last?
Under the FMLA, eligible employees are afforded up to 12 weeks of unpaid, job-protected leave per year. The FMLA requires that the employee’s health benefits be maintained. Some state and localities have expanded employee rights. For example, in July of 2023, Maine instituted 12 weeks of paid family leave.
4.2 What rights, including rights to pay and benefits, does a woman have during maternity leave?
See response to question 4.1 above.
4.3 What rights does a woman have upon her return to work from maternity leave?
The employer must reinstate the employee to the same or equivalent position. Employers are prohibited from retaliating against employees for requesting FMLA leave, exercising their FMLA rights or interfering with the rights afforded by the FMLA.
4.4 Do fathers have the right to take paternity leave?
The FMLA is gender neutral and allows for any parent to request and take leave.
4.5 Are there any other parental leave rights that employers have to observe?
Under the FMLA, eligible employees may take up to 12 weeks of leave for the care of an adopted or foster child within one year of placement, for the care of an employee’s spouse, child or parent with a serious health condition, or to recover from a serious health condition that prohibits an employee from performing essential job duties. Eligible employees may also take leave for any qualifying exigency arising out of the fact that the employee’s spouse, child or parent is a covered military member on active duty.
4.6 Are employees entitled to work flexibly if they have responsibility for caring for dependants?
Employees may request flexible work arrangements; however, they are not guaranteed the same by law.
5.1 On a business sale (either a share sale or asset transfer), do employees automatically transfer to the buyer?
The only circumstance in which employers transfer to a buyer is through a share sale, because the employing entity remains the same. Collective bargaining agreements may have additional provisions pertaining to the sale of a business.
5.2 What employee rights transfer on a business sale? How does a business sale affect collective agreements?
In a stock sale, employee terms and conditions remain the same. In an asset sale, the buyer can set new terms and conditions. However, a legal “successor” employer will have to bargain with a union about initial terms and conditions of employment.
5.3 Are there any information and consultation rights on a business sale? How long does the process typically take and what are the sanctions for failing to inform and consult?
There are no consultation rights, except a unionised employer will have to consult (bargain) with the union. There may be informational rights under the Worker Adjustment and Retraining Notification Act (“WARN Act”) or a state equivalent if the sale results in a mass layoff or shutdown of an employment site.
5.4 Can employees be dismissed in connection with a business sale?
In an asset sale, the buyer does not need to hire the seller’s employees, but collective bargaining agreements may have certain protections. In a stock sale, the employing entity remains the same, so the employees are not dismissed.
5.5 Are employers free to change terms and conditions of employment in connection with a business sale?
See response to question 5.2 above.
6.1 Do employees have to be given notice of termination of their employment? How is the notice period determined?
At-will employees do not have to be given notice of termination. Unionised employees’ notification obligations depend on the collective bargaining agreement in place. If there is an employment site shutdown or mass layoff, employees must be given 60 days’ notice under the WARN Act.
6.2 Can employers require employees to serve a period of “garden leave” during their notice period when the employee remains employed but does not have to attend for work?
“Garden leave” is not common in the U.S.
6.3 What protection do employees have against dismissal? In what circumstances is an employee treated as being dismissed? Is consent from a third party required before an employer can dismiss?
Generally, employment in the U.S. is at-will unless an employment or collective bargaining agreement protects against dismissal under certain circumstances. All employees are protected against dismissal due to unlawful discrimination or a protected activity, such as union activity or whistleblowing. An employee is considered to be dismissed when employment is formally terminated or there is a constructive termination (the inability to continue working due to a hostile working environment). An employment agreement may have provisions for employee termination for good reason. Consent from a third party is not required before an employer can dismiss an employee.
6.4 Are there any categories of employees who enjoy special protection against dismissal?
Employees in protected classes may not be dismissed because of their classification. Individual employment and collective bargaining agreements may have provisions protecting against improper dismissal.
6.5 When will an employer be entitled to dismiss for: 1) reasons related to the individual employee; or 2) business-related reasons? Are employees entitled to compensation on dismissal and if so, how is compensation calculated?
An employer can dismiss an employee for individual or business reasons, as long as those reasons do not violate federal, state or local laws, and/or no agreement to the contrary exists. Upon dismissal, employees are entitled to receive their final pay and accrued benefits. If the dismissal is proper, a dismissed employee is eligible for certain continuation of healthcare benefits and if the dismissal is not for misconduct, an employee is eligible for unemployment insurance benefits.
6.6 Are there any specific procedures that an employer has to follow in relation to individual dismissals?
There are no specific provisions, unless an employment or collective bargaining agreement contains them.
6.7 What claims can an employee bring if he or she is dismissed? What are the remedies for a successful claim?
An employee can bring a claim before an administrative agency, a court or an arbitrator if the employee believes the employer has violated a federal or local law, or an employment contract. The employee may be entitled to statutory, compensatory and/or punitive remedies.
6.8 Can employers settle claims before or after they are initiated?
Employees can settle claims before or after they are initiated.
6.9 Does an employer have any additional obligations if it is dismissing a number of employees at the same time?
Under the WARN Act, certain employers have an obligation to provide 60 days’ notice if there is a mass layoff or employment site shutdown.
6.10 How do employees enforce their rights in relation to mass dismissals and what are the consequences if an employer fails to comply with its obligations?
The WARN Act, and parallel state laws, are enforced by the courts. Employees may bring either an individual or class action civil lawsuit. An employer who violates the WARN Act by closing an employment site or ordering mass layoffs without providing adequate notice, as defined under the law, are liable for back pay and benefits for each aggrieved employee. Employers who fail to provide the required notice to the local government are subject to civil penalties.
For other employment law violations, employees may file either an individual or class action claim with the appropriate court and/or employment agency. The consequences depend on the statute that was violated.
7.1 What types of restrictive covenants are recognised?
The enforceability of restrictive covenants is determined by state law and varies depending on the jurisdiction. Restrictive covenants include non-compete agreements, non-solicitation of customers, non-solicitation of employees and confidentiality agreements. There is a continuing trend of limiting the enforceability of non-compete agreements, particularly for lower income workers.
7.2 When are restrictive covenants enforceable and for what period?
Restrictive covenants are generally enforceable in the U.S. In 2023, the Federal Trade Commission proposed a rule to ban most non-compete clauses; however, that rule has not yet become law. Individual states impose certain bans and restrictions on restrictive covenants.
7.3 Do employees have to be provided with financial compensation in return for covenants?
Covenants may be supported by consideration, which may be financial or promotion or, in some jurisdictions, continuation of employment.
7.4 How are restrictive covenants enforced?
Restrictive covenants are enforced by lawsuits, arbitrations and, in certain circumstances, continuation of employment.
8.1 How do employee data protection rights affect the employment relationship? Can an employer transfer employee data freely to other countries?
In the U.S., there are federal and state laws and regulations that regulate the collection, use and transfer of personal data of employees, as well as independent contractors and third parties. The primary federal laws that govern data protection are the: Fair Credit Reporting Act; Federal Trade Commission Act; Genetic Information Non-Discrimination Act; and Health Insurance Portability and Accountability Act. Most states have enacted some form of privacy legislation, most of which require notification of security breaches involving personal information.
8.2 Do employees have a right to obtain copies of any personal information that is held by their employer?
There are no federal laws requiring employers to provide employees access to their personal information; however, some states do have local laws. State laws often address who can have access to the information, how often the information can be accessed, whether copies can be made and whether third-party disclosure is permitted.
8.3 Are employers entitled to carry out pre-employment checks on prospective employees (such as criminal record checks)?
Employers are permitted to conduct pre-employment checks. Employers must comply with the Fair Credit Reporting Act and federal laws that protect applicants from unlawful discrimination when compiling background information. Most states have laws governing how employers can evaluate this information. For example, New York prohibits employees from inquiring about a prospective employee’s criminal record until after a conditional offer of employment is made.
8.4 Are employers entitled to monitor an employee’s emails, telephone calls or use of an employer’s computer system?
An employer has the right to monitor its own property. Employers are entitled to monitor computers, servers and other electronic devices owned by the employer. Under the Electronic Communications Privacy Act of 1986, employers are permitted to monitor employee communications if there is a legitimate business purpose or if the employee has consented. States have also enacted regulations concerning the monitoring of employee activity.
8.5 Can an employer control an employee’s use of social media in or outside the workplace?
Although an employer may limit an employee’s use of social media during working hours and the way in which social media is used as it relates to the employer’s business, the employer’s control is limited by the NLRA and applicable state laws. The NLRA protects employee rights to engage in “protected concerted activity”, which includes social media postings.
8.6 Are there any restrictions on how employers use AI in the employment relationship (such as during recruitment or for monitoring an employee’s performance or productivity)?
There are currently no federal laws specifically regulating the usage of AI. However, some states have enacted laws surrounding employer use of AI. For example, in 2023, New York passed a law prohibiting the use of automated employment decision tools unless the tool has been audited for independent bias, and employers must provide notice of its use to potential candidates.
9.1 Which courts or tribunals have jurisdiction to hear employment-related complaints and what is their composition?
Federal courts have jurisdiction to adjudicate employment-related cases arising out of federal employment law and employment cases where the parties are citizens of different states or are non-citizens. State courts have a broad jurisdiction to hear cases arising out of state or federal law claims. Federal agencies, such as the EEOC, Department of Labor and NLRB have jurisdiction over employment-related claims arising out of violations of federal law.
9.2 What procedure applies to employment-related complaints? Is conciliation mandatory before a complaint can proceed? Does an employee have to pay a fee to submit a claim?
The procedures depend on the forum in which the complaint is brought. Some courts require mandatory conciliation; otherwise, it is voluntary. The EEOC is required by federal statute to attempt to resolve findings of discrimination through conciliation. If a civil lawsuit is filed, applicable fees will apply. There are no fees for filing a claim with an administrative agency.
9.3 How long do employment-related complaints typically take to be decided?
There is no uniform length of time.
9.4 Is it possible to appeal against a first instance decision and if so, how long do such appeals usually take?
Yes, decisions are appealable. Typically, there must be a final ruling before a decision can be appealed, but interlocutory appeals are permitted in limited circumstances. There is no uniform length of time to process an appeal.
This chapter has been written by a member of ICLG's international panel of experts, who has been exclusively appointed for this task as a leading professional in their field by Global Legal Group, ICLG's publisher. ICLG's in-house editorial team carefully reviews and edits each chapter, updated annually, and audits each one for originality, relevance and style, including anti-plagiarism and AI-detection tools. This chapter was copy-edited by Melissa Braine , our in-house editor.