The Employment Law Review: USA


There are numerous federal, state and local employment laws, which are enforced by a variety of administrative agencies and courts. At the federal level, these agencies include the Department of Labor, which oversees federal wage and hour laws, worker health and safety standards, family and medical leave, and federal contracts; the Equal Employment Opportunity Commission (EEOC), which enforces laws prohibiting discrimination against job applicants or employees; the Occupational Safety and Health Administration, which regulates workplace safety and health conditions; and the National Labor Relations Board, which oversees key laws applicable to employers and labour unions.

The numerous federal employment laws include the Fair Labor Standards Act (FLSA), the Immigration and Nationality Act, the Occupational Safety and Health Act, the Americans with Disabilities Act, the Family and Medical Leave Act (FMLA), the Employee Retirement Income Security Act and the National Labor Relations Act (NLRA). In addition to seeking enforcement of these and other federal laws by government agencies, employees may also file civil lawsuits in federal court, though in some instances employees must first file a complaint with the applicable agency prior to commencing litigation (for example, an employee alleging age discrimination in violation of the federal Age Discrimination in Employment Act must file a charge with the EEOC prior to filing a lawsuit in federal court).

Many states and municipalities have enacted their own employment laws, and in some jurisdictions have substantially expanded employees' rights and protections under federal law. These state and local statutes and regulations address a wide array of job-related matters, including hiring practices, pay equity, minimum wage, paid sick and family leave, harassment, discrimination, off-duty social and recreational activities, drug testing, access to personnel files, unemployment benefits and workers' compensation (in respect of job-related injury). Some of these laws are enforced by state or municipal agencies while others allow employees to seek redress in the state courts.

Federal employment laws generally pre-empt state and local employment laws. However, state and local employment laws on matters not encompassed by federal law are not subject to pre-emption.

Year in review

The pandemic has continued to dominate employment law in the United States during the past year. Although the arrival of covid-19 vaccines during the first half of 2021 was a welcome relief to many, it gave rise to a national political debate regarding their compulsory use and created corresponding conflicts in the workplace. Federal and state laws and regulations seeking to impose employee vaccination and testing requirements have further complicated the debate. In November 2021, the federal Occupational Safety and Health Administration issued a national Emergency Temporary Standard (ETS), requiring employers with 100 or more employees to mandate covid-19 vaccinations or to test employees weekly, but the ETS was subject to immediate legal challenges. In December 2021, the United States Supreme Court issued an order granting a review of the legal challenges to the ETS and will hear oral arguments in early 2022. Several states and some municipalities have adopted laws concerning covid-19 vaccines, which include permitting employers to ask for proof of immunisation or agreement by employees to submit to regular testing, and in some cases, such as in Florida, banning employers from mandating covid-19 vaccines unless employees are offered exemptions to the requirement. Also in December, New York City was the first city in the United States to issue a covid-19 vaccine mandate for all private employers.

Regardless of any applicable laws, employers who have required their employees to be vaccinated have been met with legal challenges across the country, and an increasing number of workers are claiming entitlement to exemptions from the covid-19 vaccine on medical and religious grounds, based largely on the federal Americans with Disabilities Act and Title VII of the Civil Rights Act of 1964. Other employers have refrained from imposing covid-19 vaccine mandates and have instead provided incentives to employees to be vaccinated, such as bonuses, in an effort to immunise their workforces.

Employers across the United States instituted or expanded existing policies regarding remote working at the outset of the pandemic, and these policies largely remained in place during 2021, particularly with the advent of the Delta and Omicron variants of the virus. Although some employers have brought a substantial proportion of their employees back to working on-site during the past year, and continue to do so, many employers have instituted policies for either permanent remote working or hybrid working (remote and on-site), which allow employees the flexibility to work from home on a certain number of days each week.

According to the Bureau of Labor Statistics, the unemployment rate in the United States dropped significantly in 2021, having reached 14.7 per cent in April 2020 – the highest rate since the Great Depression. In November 2021, the unemployment rate was 4.2 per cent, which is still higher than the pre-pandemic jobless rate of 3.5 per cent in February 2020. Workers in the United States have quit their jobs in record numbers during the past year, leaving a large number of open employment positions.

There were increases to minimum wages at both federal and state levels during 2021. President Biden signed an Executive Order increasing the minimum hourly wage for federal contractors to US$15 beginning on 30 January 2022 and several states passed laws to increase the employee minimum wage, including some that will raise the hourly rate to US$15 during the next three to four years. Additional state laws that have been passed include legislation addressing non-compete agreements, anti-discrimination, family leave and independent contractors.

Significant cases

i Van Buren v. United States (decided 3 June 2021)

The Supreme Court has limited the ability of employers to use the federal Computer Fraud and Abuse Act (CFAA) to pursue civil claims or to file criminal charges against employees who access sensitive electronic information and use it for an improper purpose.

The CFAA makes it a crime to intentionally access a computer without authorisation or to exceed authorised access. Nathan Van Buren, a former Georgia police sergeant, had used his patrol car computer to access information about a licence plate number from a law enforcement computer database in exchange for money, and was charged with a felony violation of the CFAA. The Supreme Court held, in a 6-3 decision, that the CFAA does not cover individuals who misuse information they are entitled to access. Rather, an individual violates the 'exceeds authorized access' provisions of the CFAA when 'he accesses a computer with authorization but then obtains information located in particular areas of the computer . . . that are off limits to him'.

The decision narrows the remedies available to employers against employees who download, destroy or misappropriate information. Employers can still enforce contractual obligations requiring employees to return information upon request and at the time of termination, and may also be able to invoke federal or state trade secret laws if the information constitutes a trade secret under the applicable law.

ii Cedar Point Nursery v. Hassid (decided 23 June 2021)

In a 6-3 decision, the Supreme Court held that a California Agricultural Labor Relations Act regulation requiring agricultural employers to allow labour organisers regular access to their property for the purposes of union recruitment constituted a per se physical 'taking' under the Fifth Amendment to the United States Constitution.

The case arose out of attempts by agricultural union organisers to recruit workers at a strawberry nursery and a fruit packing company to join a collective bargaining organisation. A California state regulation allowed labour organisers to enter private agricultural property at certain times and on certain days to solicit support for unionisation. The agricultural property owners challenged the regulation, arguing that the access violated the Takings Clause of the Fifth Amendment, which states that private property shall not 'be taken for public use, without just compensation'. The Supreme Court agreed that the access regulation constituted a per se physical taking in violation of the Fifth Amendment, noting the right to exclude is a fundamental element of the right to own private property, and reversed and remanded the case for further proceedings consistent with its opinion.

iii TransUnion LLC v. Ramirez (25 June 2021)

The Supreme Court held that only a plaintiff who has been concretely harmed by a violation of the federal Fair Credit Reporting Act (FCRA) has standing under Article III of the United States Constitution to seek damages under that law.

In its 5-4 decision, the Supreme Court concluded that more than three-quarters of the members of a class lacked standing to bring claims pursuant to the FCRA. The case began in 2011, when Sergio Ramirez went shopping for a car. The car dealership ran a credit check on Mr Ramirez and the credit report that was generated included an alert that wrongly indicated that Mr Ramirez's name matched the US Department of Treasury's Office of Foreign Assets Control (OFAC) list of terrorists, drug traffickers and other serious criminals. As a result of the credit report, Mr Ramirez's wife had to buy the car for him instead. Mr Ramirez then requested a copy of his credit report from TransUnion and received that and a letter from TransUnion regarding his name potentially matching the OFAC list. After retaining a lawyer, Mr Ramirez filed a putative class action against TransUnion alleging violations of the FCRA.

The district court certified a class of all people in the United States to whom TransUnion had sent a letter similar to the one sent to Mr Ramirez regarding his name being on the OFAC list, even though fewer than a quarter of the 8,185 individual class members had their credit reports sent to third parties. The case was tried to a jury and Mr Ramirez and the other members of the class were awarded more than US$60 million in statutory and punitive damages (reduced to approximately US$40 million on appeal). The Supreme Court reversed and remanded the case to address class certification, holding that only the 1,853 people whose personal information was given to a third party had the right to bring a claim under the FCRA.

Basics of entering an employment relationship

i Employment relationship

Most employment relationships in the United States are presumed to be 'at will', which means an employer can dismiss an employee at any time and for any reason, provided the reason is not illegal. In an at-will employment relationship, an employee is likewise free to quit his or her employment at any time and for any reason.

An employment relationship may be established with or without a written employment agreement. US employers generally limit their individual written employment agreements to executive-level employees, though other employment relationships may be covered by collective bargaining agreements.

Written employment agreements typically include provisions addressing the employment term, salary and other compensation (such as bonuses), benefits, job duties, ownership of work product (work for hire), termination, dispute resolution processes and the manner in which the employment contract may be renewed or amended. These agreements may also include restrictive covenants, which are provisions that prohibit the parties from taking certain actions during the employment term or for a period following termination (see Section V).

ii Probationary periods

There is no law requiring employers to provide probationary periods to new employees. However, many employers choose to use probationary periods for new employees to determine whether they can meet the requirements of the job for which they have been hired. During this probationary period, an employee may not be eligible for all benefits available to regular employees unless otherwise mandated by applicable state or local law.

iii Establishing a presence

Foreign companies doing business in the United States must comply with all applicable laws, which generally includes registering with federal, state and local authorities and paying business and payroll taxes. Federal taxes include Social Security and Medicare, and state law may require, in addition to tax obligations, employer payments to unemployment insurance and workers' compensation funds. Certain states may also require employer contributions to paid family and medical leave funds.

Employers are required to withhold each employee's share of certain taxes, such as Social Security, and to submit those withholdings to the applicable government organisation. Employers are not required, however, to withhold taxes from independent contractors. Rather, these workers, who are not employees, are paid according to the terms of a contractual agreement and are responsible for remitting their own taxes to the appropriate government agencies.

Restrictive covenants

Restrictive covenants, which include non-competition and non-solicitation clauses, are generally permitted in US employment agreements. State law governs the scope and enforceability of restrictive covenant agreements as there is no federal law regulating them.

Non-competition agreements generally prevent or restrict employees from accepting employment with or providing services to their current employer's competitors for a specific period and within a defined geographical area. Relatedly, non-solicitation covenants typically prohibit employees from soliciting their former employer's employees or customers for a specific period.

Some states have statutes explicitly addressing restrictive covenant agreements, while in other states judicial decisions (case law) govern non-competition and non-solicitation covenants. Although most states permit restrictive covenants in an employment contract with varying limitations, certain states, such as California, generally ban non-competition agreements in the context of employment relationships.

In those states where non-competition and non-solicitation agreements are allowed, the restrictions typically must relate to the protection of legitimate interests, such as trade secrets, confidential information and customer relationships, in order to be enforceable. In addition, restrictive covenants must be reasonable both in time and geographical scope.


i Working time

Employees are entitled to a minimum hourly wage under both federal and state law. The current federal minimum wage is US$7.25 per hour, though many states have higher minimum wage requirements. When an employee is subject to both federal and state minimum wage laws, the employee is entitled to receive the higher of the two hourly wages.

The FLSA does not limit the number of hours an employee may work in a week unless the employee is under age 16 years, nor is there a limit on the amount of night work that may be performed. Some states, including New York and Illinois, have laws limiting the number of days that may be worked in a week to six.

ii Overtime

Any employee covered by the FLSA who works more than 40 hours in one week must be paid a minimum of one-and-a-half times his or her regular rate of pay for each hour worked in excess of 40. Some states, including California and Colorado, have their own overtime laws. If an employee is subject to both federal and state overtime laws, the employee is entitled to overtime pay at the higher of the two rates.

Certain employees are exempt from federal and state overtime laws. Whether an employee is exempt is determined by tests that examine the employee's duties and salary.

Foreign workers

Foreign workers must meet applicable visa and immigration requirements to work in the United States. Within three days of hiring, employers are required to verify that all their employees are authorised to work in this country. All new employees must complete a Form I-9, Employment Eligibility Verification, which must be retained by employers for up to three years after hire or for one year following termination, whichever date is later.

Prior to employing a non-US citizen, employers must generally obtain an appropriate work authorisation for that individual unless he or she is a US permanent resident or has another form of independent or non-employer sponsored work authorisation. Work authorisation may be a non-immigrant visa, such as an H-1B Specialty Occupations visa, an L-1A visa for intracompany management or executive transferees, an O-1 visa for workers with extraordinary ability or achievements in the sciences, arts, education, business or athletics fields, who is coming temporarily to the United States to continue to work in the area of extraordinary ability, or a free-trade-based visa for workers from certain countries. The length of time a foreign worker may be permitted to work in the United States depends on the type of visa issued and the nature of the foreign worker's immigration status.

Foreign workers are protected by federal law, including Title VII of the Civil Rights Act of 1964, which applies to employers with 15 or more employees and prohibits employment discrimination on the basis of national origin and other protected characteristics, and further prohibits employers from retaliating against employees who oppose workplace discrimination or who participate in an equal employment opportunity complaint process. The federal Americans with Disabilities Act also covers foreign workers who are employed by US employers with 15 or more employees. In addition, the federal NLRA covers employees regardless of immigration status.

Employers who employ foreign workers must comply with applicable tax laws, which may be affected by whether the worker is a resident of a country that has a tax treaty with the United States.

Global policies

Employers in the United States are not legally required to have an employee handbook, though there are numerous federal and state laws requiring employers to notify their employees of certain laws and rights. Many employers, therefore, choose to have an employee handbook for the purpose of providing employees with information that legally must be communicated in writing, which handbook generally also includes workplace-specific policies.

While not legally required, as a best practice employers should obtain a signed acknowledgment from employees when they are first hired that they have received and understand the employee handbook. Employers should also obtain a signed acknowledgment from employees any time an employee handbook is revised or updated.

There is no legal requirement for employers to adopt internal discipline policies or rules, nor are employers required to obtain employee approval for any policy or rule (unless they are subject to a collective bargaining agreement that governs terms or conditions of employment).

Where and how mandatory employee notices must be communicated depends on applicable law. Employers covered by the federal FMLA, for example, must display a poster in plain view to all applicants and employees that notifies them of the FMLA provisions and provides information regarding how to file a complaint with the Wage and Hour Division. Many states have their own notification requirements, such as Colorado's mandate that employers provide written notice to employees of their right to take paid leave under the Colorado Healthy Families and Workplaces Act (HFWA), and to display an informational poster about the HFWA in a conspicuous and accessible place in each establishment where employees work.

Several states require employee notifications to be in Spanish if a certain percentage of an organisation's employees use English as a second language. Other states have regulations allowing employers to obtain versions of required employee notifications in Spanish and any other needed language.

Parental leave

There is no federal law in the United States that provides paid parental leave or that requires employers to provide paid parental leave. However, the FMLA entitles eligible employees to take unpaid, job-protected leave for up to 12 weeks during any 12-month period to care for a new child, to care for a seriously ill family member, to recover from a serious illness or for qualifying military exigencies.

Several states have enacted family and medical leave laws that expand on the federal FMLA leave. Several states and the District of Columbia have also enacted paid family and medical leave laws in recent years, though some of these will not take effect until 2023 (Oregon) and 2024 (Colorado). In addition, the City of San Francisco, California, has enacted a paid parental leave ordinance.


Under federal law, employers in the United States are not generally required to provide mandatory labour and employment law notices in a language other than English, with a few exceptions. If an employer has a workforce that includes a significant number of employees who are not fluent or literate in English, the employer must provide the following federal law notices in a language in which the employees are proficient: the FMLA poster; the Migrant and Seasonal Agricultural Worker Protection Act poster; Executive Order 13496: Notification of Employee Rights Under Federal Labor Laws poster, to be provided by contractors and subcontractors; and the Immigration and Nationality Act (Employee Rights Under the H-2A Program) poster. Where 20 per cent or more of an employer's workforce is not proficient in English, the federal National Labor Relations Board requires employers to provide mandatory labour and employment law postings in the language employees speak.

In addition to federal notice requirements, a few states, including California and Texas, have passed laws requiring that certain labour and employment law posters be displayed in both English and Spanish. Other states and some cities require that employment-related information, such as wage notices and anti-harassment training, be communicated in an employee's first language.

Regardless of any federal, state or municipal requirements, as a best practice employers should provide employees with offer letters, employment agreements, compensation and benefit information, handbooks, policies and any other employment-related documents in a language in which those employees are fluent.

Employee representation

Pursuant to the federal NLRA, employees have the right to form or join labour unions, to engage in protected, concerted activities to address or improve working conditions, or to refrain from engaging in such activities. Most private sector employees are covered by the NLRA, though this law does not cover government employees, agricultural workers, independent contractors, managers or supervisors.

To form a labour union, a group of employees must either have their employer voluntarily recognise a union as their representative or a majority of workers in a proposed bargaining unit must vote for union representation. The National Labor Relations Board will then certify the newly formed labour union, after which time the employer cannot reduce wages or modify working conditions without first negotiating with its employees through their union representatives. The employer is also legally required to bargain with the union in good faith. After engaging in settlement negotiations and reaching an agreement, the employer and the labour union must sign a collective bargaining agreement, which is a written contract that sets forth the terms of employment and may include provisions regarding wages, working hours and conditions, health insurance benefits and vacation time. It also typically provides a grievance and arbitration process through which the union can challenge adverse employment actions.

According to the Bureau of Labor and Statistics, in 2020 nearly 11 per cent of wage and salary workers in the United States were members of labour unions. New York and Hawaii had the highest rates of labour union membership, with each exceeding 20 per cent of workers, while North Carolina and South Carolina had the lowest rates, with approximately 3 per cent of workers belonging to labour unions.

Data protection

Numerous federal and state laws address data protection in the United States. The Federal Trade Commission has broad power under the Federal Trade Commission Act to enforce federal privacy and data protection regulations, while other federal laws protect specific types of data. Among these are the Health Information Portability and Accountability Act, which protects information regarding an individual's health status, healthcare treatment or payment for healthcare; the FCRA, which promotes the accuracy, fairness and confidentiality of information in consumer reporting agency files; and the Gramm-Leach-Bliley Act, which regulates the protection of personal information by financial institutions, including banks, financial services providers and insurance companies.

In addition to federal laws aimed at protecting data privacy, several states have enacted data privacy laws. For example, the California Consumer Privacy Act, which provides extensive protection to consumers, includes requirements for employers to provide privacy notices and to implement adequate and reasonable measures to safeguard employees' personal information, and the Illinois Biometric Information Privacy Act includes comprehensive rules for companies collecting, storing and using employee biometric data.

Employers are generally permitted to enquire into a job applicant's background or to require a background check, subject to restrictions imposed by applicable federal or state law. An increasing number of states have adopted 'ban the box' laws, which prohibit employers from enquiring about an applicant's criminal history on an initial job application.

Discontinuing employment

i Dismissal

Most employment relationships in the United States are presumed to be 'at will', meaning an employer can dismiss an employee at any time and for any reason, provided the reason is not illegal, and an employee is likewise free to quit his or her employment at any time and for any reason. Therefore, an at-will employee may be dismissed without cause and, conversely, is not required to provide notice prior to quitting.

Individual employment contracts and collective bargaining agreements can alter the at-will nature of the employment relationship and impose various legal obligations, such as delineating the grounds on which an employment relationship may be terminated, requiring an employee to provide notice in advance of resigning, and requiring employers to pay severance to dismissed employees. Severance pay is not required by federal law, though a few states mandate severance under certain circumstances.

Absent a contractual agreement, employees do not have rehire rights. In addition, employers are not legally required to offer suitable alternative employment to employees who have been dismissed.

ii Redundancies

Employers with 100 or more full-time employees, or 100 or more employees who work a combined minimum of 4,000 hours per week, are generally required by federal law to provide advance notice of covered plant closures and mass lay-offs. Under the federal Worker Adjustment and Retraining Notification (WARN) Act, employers must provide written notice at least 60 calendar days in advance of covered plant closures and mass lay-offs, to allow workers time to seek alternative jobs or to enter skills training programmes.

There are exceptions to the 60-day notice requirement under the WARN Act, including (1) when a company is faltering, (2) a plant closure or mass lay-off is caused by business circumstances that were not reasonably foreseeable at the time the 60-day notice would have been required, and (3) a plant closure or mass lay-off is the direct result of a natural disaster, in which case notice may be provided after the event.

Several states have their own lay-off notice or 'mini WARN' laws, including California, Illinois, New Jersey and New York. The City of Philadelphia, Pennsylvania, has its own WARN Act.

In addition to federal and any applicable state or municipal law, additional notice requirements may be imposed on employers by the terms of an employment contract or, in the case of employees belonging to a labour union, a collective bargaining agreement.

Transfer of business

There is no federal business transfer law in the United States that mirrors the Transfer of Undertakings (Protection of Employment) Regulations in the United Kingdom, which protect employees affected by a merger, acquisition or outsourcing transaction. However, if a business transfer will result in a plant closure or mass lay-off covered by the federal WARN Act, as discussed in Section XIII, the seller (employer) must provide employees with 60 days' advance notice of the closure or lay-off.

Business transfers may also be subject to applicable state law governing lay-off notices or, in the case of employees belonging to a labour union, notice requirements imposed by an employment contract or collective bargaining agreement. In addition, the seller (employer) may be required to bargain with the labour union prior to attempting to alter any terms or conditions of employment.


Although it appeared the United States might finally enact paid family leave legislation in 2021, that did not come about. The federal Build Back Better Act, a US$1.75 trillion social spending and climate change bill introduced in 2021, includes a provision for 20 days of paid family leave that would apply to all employers. Although a paid family leave law has long been a priority for many members of Congress, it is not clear the Build Back Better Act will pass in the Senate despite its passage in the House of Representatives in November 2021. Negotiations among lawmakers are expected to continue, however, and a federal paid family leave law of some kind may be passed in 2022.

Several cases coming before the United States Supreme Court could have a significant impact on employment law in the year ahead. Among these are an employee benefits claim under the federal Employee Retirement Income Security Act, a disability discrimination case under the federal Rehabilitation Act and the Patient Protection and Affordable Care Act, a claim for emotional distress damages in a discrimination case brought pursuant to the federal Rehabilitation Act and the Americans with Disabilities Act, and cases involving employee arbitration agreements.

As employers near the end of the second year of the pandemic, and its attendant workplace disruptions and transformations, they are expected to continue to remain fluid in their approach to working models and to formalise the hybrid working arrangements spawned by covid-19. Many employers will likely be forced to grapple with continuing labour shortages in 2022 and to continue to develop creative recruiting strategies in an effort to overcome this deficit. Wage growth is likely to be robust in the coming year.


1 Jill Zender is counsel at Faegre Drinker Biddle & Reath LLP. The author wishes to thank attorneys Sarah Kilibarda and Ryan Funk for their assistance in the preparation of this chapter.

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