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The Compliance Checklist: US Labor Laws Every Foreign Employer Should Know

Expanding your business into the United States presents a world of opportunities, but it also demands a deep understanding of the intricate web of US labor laws. As a foreign employer, ensuring compliance with these regulations is not just a legal necessity; it's a strategic imperative for long-term success. This comprehensive guide will equip you with the knowledge to navigate the US labor landscape confidently. We'll delve into crucial regulations, explore compliance strategies, and provide practical insights to help you establish a successful and sustainable presence in the American market.
Gavel and US flag, US labor law guide.

Introduction

Understanding and complying with US labor laws is crucial for success as an international company expanding into the United States. At Foothold America, we specialize in helping businesses like yours navigate the complexities of the US market, from recruitment and onboarding to ensuring full compliance with local regulations. This comprehensive guide will walk you through the essential US labor laws that every foreign employer should know when operating in the United States.

Introduction: The Importance of Compliance

For international companies expanding into the United States, compliance with US labor laws is not just a legal necessity—it’s a fundamental aspect of successful business operations. The US has a complex web of federal, state, and local labor laws that can seem daunting to mployers. However, understanding and adhering to these regulations is crucial for several reasons.

  1. Legal Protection: Compliance shields your company from costly lawsuits and legal penalties.
  2. Reputation Management: It helps maintain a positive reputation in the US market, essential for attracting customers and top talent.
  3. Employee Satisfaction: Following labor laws ensures fair treatment of employees, leading to higher job satisfaction and productivity.
  4. Competitive Advantage: Demonstrating a commitment to compliance can set you apart from competitors and build trust with US partners and clients.

As experts in US market expansion, we at Foothold America understand foreign employers’ challenges. This guide will comprehensively overview the most critical US labor laws.

 

Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act is a cornerstone of US labor law, establishing fundamental employment standards that affect most private and public employment. Understanding the FLSA is crucial for foreign employers as it governs many day-to-day aspects of employee management.

Key provisions of the FLSA include:

  1. Employee Classification:

The Fair Labor Standards Act (FLSA) establishes a fundamental distinction between exempt and non-exempt employees, crucial for determining overtime pay eligibility. This classification system is often confusing for foreign employers but is essential to the right to ensure compliance with US labor laws.

Exempt Employees:

  • Generally salaried workers in executive, administrative, professional, or outside sales roles
  • Must meet specific salary and job duties tests as defined by the FLSA
  • Not entitled to overtime pay for hours worked beyond 40 in a workweek
  • Examples: managers, administrators, lawyers, doctors, software engineers (in many cases)

Non-Exempt Employees:

  • Usually, hourly workers, but some salaried workers may also qualify
  • Entitled to overtime pay (1.5 times regular hourly rate) for hours worked over 40 in a workweek
  • Examples: retail workers, construction laborers, customer service representatives

Key Considerations:

  • Job titles alone do not determine classification; actual job duties are what matter.
  • Salary threshold: As of 2024, employees must earn at least $684 per week ($35,568 annually) to qualify for exempt status potentially
  • Misclassification risks: Incorrectly classifying employees as exempt can lead to significant legal and financial consequences, including back pay, penalties, and lawsuits
  1. Minimum Wage: As of 2024, the federal minimum wage is $7.25 per hour. However, many states and cities have higher minimum wage requirements, and employers must comply with the highest applicable rate.
  2. Overtime Pay: Non-exempt employees must receive overtime pay at least 1.5 times their regular rate for hours worked beyond 40 in a workweek.
  3. Child Labor Restrictions: The FLSA sets strict rules on employing minors, including limitations on working hours and prohibited occupations for workers under 18 years of age. Specifically, it restricts work hours for those 14-15 years old and prohibits certain hazardous occupations for those under 18.
  4. Record Keeping: Employers must maintain accurate records of employees’ wages, hours worked, and other conditions of employment.

 

For international companies, it’s crucial to note that these standards apply to all employees working in the US, regardless of their citizenship or the company’s country of origin. Foothold America can assist in ensuring your payroll practices and employee classifications align with FLSA requirements.

Worker’s Compensation Laws

Worker’s compensation laws benefit employees who suffer work-related injuries or illnesses. While these laws are primarily state-based, understanding their general principles is essential for all employers operating in the US.

Critical aspects of worker’s compensation laws include:

  1. No-Fault System: Benefits are generally provided regardless of who was at fault for the injury or illness.
  2. Exclusive Remedy: In most cases, workers’ compensation is the exclusive remedy for work-related injuries, protecting employers from most lawsuits by injured employees.
  3. Coverage Requirements: 49 out of 50 states require employers to carry workers’ compensation insurance. Texas is the only state where it’s not mandatory, but it is highly recommended.
  4. Benefits: Typically include medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits, and death benefits.
  5. Reporting Requirements: Employers must report work-related injuries and illnesses to their insurance carrier and, in some cases, to state authorities.

For foreign employers, worker’s compensation requirements can vary significantly by state. Foothold America can help you understand your obligations in each state where you operate and ensure you have appropriate coverage and practices in place.

 

Americans with Disabilities Act (ADA)

The Americans with Disabilities Act prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places open to the general public. The ADA has significant implications for employers regarding hiring practices, workplace accommodations, and treating disabled employees.

Key provisions of the ADA for employers include:

  1. Reasonable Accommodations: Employers must provide reasonable accommodations to qualified employees with disabilities unless doing so would cause undue hardship to the business.
  2. Non-Discrimination in Hiring: It’s illegal to discriminate against qualified individuals with disabilities in job application procedures, hiring, firing, advancement, compensation, job training, and other terms, conditions, and privileges of employment.
  3. Medical Examinations and Inquiries: The ADA restricts when and how employers can inquire about an applicant’s or employee’s disability status.
  4. Accessibility: Employers must ensure their facilities are accessible to employees with disabilities.
  5. Confidentiality: Information about an individual’s disability must be kept confidential and maintained in separate medical files.

For foreign employers, it’s crucial to understand that the concept of reasonable accommodation may be more extensive in the US than in other countries. Foothold America can guide you in developing ADA-compliant policies and practices, ensuring your US operations are inclusive and accessible to all qualified individuals.

 

Title VII of the Civil Rights Act

Title VII of the Civil Rights Act of 1964 is a federal law that prohibits employment discrimination based on race, color, religion, sex (including pregnancy, sexual orientation, and gender identity), or national origin.  

This law applies to all employers in the United States, regardless of size or location. Understanding and implementing its provisions is essential for creating a fair and inclusive workplace.

Here’s a breakdown of some critical aspects of Title VII:

  • Protected Characteristics: Employers cannot discriminate against employees based on these characteristics in any aspect of employment, including hiring, firing, promotions, layoffs, compensation, training, and benefits.
  • Hiring and Firing Practices: Decisions about hiring, promotions, layoffs, and terminations must be based on objective qualifications and job performance, not on an employee’s protected characteristics.
  • Workplace Policies: Company policies, including dress codes and leave policies, must not unfairly disadvantage employees based on their protected characteristics. If a policy disproportionately affects a particular group, there must be a legitimate business reason for it.
  • Harassment: Employers are responsible for preventing and addressing harassment based on protected characteristics. This includes stopping unwelcome conduct and creating a safe work environment for all employees.
  • Retaliation: It’s illegal to retaliate against an employee for filing a discrimination charge, participating in an investigation, or opposing discriminatory practices.

For international companies operating in the US, it’s important to note that US anti-discrimination laws may be broader or differ from those in your home country.

Data on Title VII Lawsuits:

The Equal Employment Opportunity Commission (EEOC) tracks data on discrimination charges filed under Title VII. You can find their resources here:

Foothold America (or your preferred service provider) can help you develop and implement policies that ensure compliance with Title VII and create a diverse, equitable, and inclusive workplace for all employees.

 

COBRA

COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, is a crucial aspect of employee benefits that international companies offering health coverage to US employees need to understand. COBRA is part of the broader Employee Retirement Income Security Act (ERISA) legislation, but its specific provisions are particularly important for employers.

Key points about COBRA:

  1. Continuation of Health Coverage: COBRA allows employees and their families to continue their group health coverage for a limited time after certain events that would otherwise end that coverage.
  2. Qualifying Events: These include termination of employment, reduction in hours, death of the employee, divorce, and loss of dependent child status.
  3. Duration: Typically, COBRA coverage lasts up to 18 months, but can extend to 36 months in certain circumstances.
  4. Cost: The employee usually pays the full premium, including the portion previously paid by the employer, plus a small administrative fee.
  5. Employer Obligations: Employers must notify employees of their COBRA rights and provide the option to continue coverage when a qualifying event occurs.

Understanding and complying with COBRA is crucial for international companies offering health benefits to US employees. Failing to comply with COBRA requirements can result in significant penalties.

While COBRA is part of ERISA, which also covers retirement plans like 401(k)s, the COBRA provisions are often the most immediately relevant for many of our clients. Foothold America can guide you through the complexities of COBRA compliance and help you design benefit plans that meet your business objectives and legal requirements.

For more detailed information, the Department of Labor provides a comprehensive guide for employers on COBRA requirements.

 

Family and Medical Leave Act (FMLA)

The Family and Medical Leave Act grants eligible employees up to 12 weeks of unpaid, job-protected leave annually for specified family and medical reasons. While this legislation is designed to provide a safety net for employees, it can present unique challenges for foreign employers. The FMLA’s leave provisions often contrast sharply with those in other countries, such as the more generous maternity leave policies standard in many European nations.

Key provisions of the FMLA include:

  1. Covered Employers: The Family and Medical Leave Act (FMLA) grants eligible employees up to 12 weeks of unpaid, job-protected leave annually for specified family and medical reasons. While this legislation is designed to provide a safety net for employees, it can present unique challenges for foreign employers. The FMLA’s leave provisions often contrast sharply with those in other countries, such as the more generous maternity leave policies standard in many European nations.

Even if you are a smaller employer, it is crucial to be aware of the FMLA and your state’s family leave laws. This awareness will help you provide necessary support to your employees. The FMLA applies to all public agencies, all public and private elementary and secondary schools, and companies with 50 or more employees. However, some states have more restrictive laws for who must cover family leave. For example, California requires all employers with 5 or more employees to provide up to 12 weeks of unpaid family leave. New York requires all employers with 5 or more employees to provide up to 8 weeks of unpaid family leave. Massachusetts requires all employers with 6 or more employees to provide up to 12 weeks of unpaid family leave. If you have any questions, you should consult with a trusted partner, such as Foothold America.

  1. Eligible Employees: To be eligible for FMLA leave, an employee must have worked for the employer for at least 12 months, have at least 1,250 hours of service in the 12 months before taking leave, and work at a location where the company employs 50 or more employees within 75 miles.
  2. Qualifying Reasons for Leave: FMLA leave can be taken for the birth and care of a newborn child, placement of a child for adoption or foster care, care for an immediate family member with a severe health condition, or when the employee is unable to work because of a serious health condition.
  3. Job Protection: Upon returning from FMLA leave, employees must be restored to their original jobs or equivalent jobs with equivalent pay, benefits, and other terms and conditions of employment.
  4. Continuation of Health Benefits: The employer must maintain the employee’s health benefits during the leave period as if the employee had continued to work.

For international companies, it’s crucial to understand that while the FMLA provides unpaid leave, some states have enacted paid family and medical leave laws. Foothold America can help you navigate these federal and state requirements and develop compliant leave policies for your US operations.

 

Immigration Reform and Control Act (IRCA)

The Immigration Reform and Control Act makes it illegal for employers to knowingly hire or continue to employ individuals not authorized to work in the United States. This law is particularly relevant for foreign companies expanding into the US market.

Key aspects of the IRCA include:

  1. Employment Eligibility Verification: Employers must verify all employees’ identity and employment eligibility by completing Form I-9 within three business days of employment. This is crucial in complying with IRCA and ensuring that your company is not hiring undocumented workers.
  2. Non-Discrimination Provisions: The IRCA prohibits hiring, firing, or recruitment discrimination based on an individual’s national origin or citizenship status.
  3. E-Verify: While not mandatory for most private employers, some may be required to use the E-Verify system to confirm employment eligibility.
  4. Penalties: Employers who violate IRCA provisions may face civil and criminal penalties.
  5. Maintaining I-9 Records: Employers must retain I-9 forms for a designated period and provide them for inspection by authorized government officers.

Navigating US immigration law can be complex for foreign employers. Foothold America can assist you in developing compliant hiring practices and maintaining proper documentation to ensure your US operations meet all IRCA requirements.

 

Age Discrimination in Employment Act (ADEA)

The Age Discrimination in Employment Act protects individuals 40 or older from employment discrimination. This law is particularly important for foreign employers, as age discrimination protections may differ significantly from those in other countries.

Critical aspects of the ADEA include:

  1. Protected Group: The law protects workers and job applicants 40 years of age or older.
  2. Prohibited Practices: It’s illegal to discriminate against a person because of their age concerning any term, condition, or privilege of employment, including hiring, firing, promotion, layoff, compensation, benefits, job assignments, and training.
  3. Job Advertisements and Specifications: Job notices or advertisements cannot specify age preferences or limitations unless age is a bona fide occupational qualification.
  4. Benefits: The law allows employers to favor older workers based on age even when doing so adversely affects a younger worker who is 40 or older.
  5. Waiver of ADEA Rights: Any waiver of ADEA rights must be known and voluntary and satisfy specific requirements outlined in the law.

International companies must be aware that practices that may be common in other countries, such as mandatory retirement ages or explicitly seeking “young” employees, can violate the ADEA. Foothold America can help you review your hiring practices and employment policies to ensure they comply with US age discrimination laws.

 

National Labor Relations Act (NLRA)

The National Labor Relations Act protects employees’ rights to engage in collective bargaining and other concerted activities for mutual aid or protection. This law applies to most private sector employers, including foreign companies operating in the US.

Key provisions of the NLRA include:

  1. Protected Concerted Activity: Employees can act together to address work-related issues, with or without a union.
  2. Union Organization: Employees can form, join, or assist labor organizations.
  3. Collective Bargaining: Employers must bargain in good faith with the union that represents their employees.
  4. Unfair Labor Practices: The NLRA prohibits specific employer and union conduct that interferes with the rights of employees.
  5. Social Media Policies: The NLRB has issued guidance on how company social media policies can comply with the NLRA.

Here is an example of how the NLRA could be applied to a specific situation:

Let’s take a scenario where a group of employees at a factory, concerned about their low wages, decide to form a union. Their goal is to negotiate with their employer for a raise. However, the employer, instead of engaging in a fair negotiation, starts firing employees involved in the union organizing activity. In response, the employees can file a complaint with the NLRB. This involves submitting a formal document that outlines the alleged unfair labor practices of the employer. The NLRB will then investigate the complaint and may order the employer to reinstate the fired employees and engage in a fair negotiation with the union.

For international companies, it’s crucial to understand that US labor law grants significant protections to employees engaging in union activities. Even if your workforce is not unionized, your policies and practices must respect employees’ rights under the NLRA. Foothold America can help you develop a bespoke compliance social media policy.

 

State and Local Laws

While this guide has focused primarily on federal laws, foreign employers must understand that US labor law is a complex interplay of federal, state, and local regulations. States and even some cities have labor laws that may provide greater protections or benefits to employees than federal law.

Areas where state and local laws often exceed federal standards include:

  1. Minimum Wage: Many states and cities have higher minimum wage rates than the federal standard. For example:
    • California: $15.50 per hour (2023)
    • New York: $14.20 per hour (2023), with higher rates in New York City
    • Washington: $15.74 per hour (2023)
  2. Paid Sick Leave: Several states and cities mandate paid sick leave, which is not required under federal law. Examples include:
    • Massachusetts: Up to 40 hours of paid sick leave per year
    • Oregon: 1 hour of paid sick leave for every 30 hours worked
    • Arizona: 1 hour of paid sick leave for every 30 hours worked, up to 40 hours per year
  3. Paid Family Leave: Some states have implemented paid family leave programs, such as:
    • California: Up to 8 weeks of paid family leave
    • New Jersey: Up to 12 weeks of paid family leave
    • New York: Up to 12 weeks of paid family leave
  4. Anti-Discrimination Protections: State and local laws often protect additional categories beyond federal law, such as sexual orientation, gender identity, or marital status. For instance:
    • Colorado: Protects against discrimination based on sexual orientation, gender identity, and marital status
    • Illinois: Prohibits discrimination based on sexual orientation, gender identity, and order of protection status
    • California: Protects against discrimination based on sexual orientation, gender identity, marital status, and military or veteran status
  5. Predictive Scheduling: Some jurisdictions have enacted laws requiring employers to provide advance notice of work schedules.
  6. Ban-the-Box Laws: Many states and cities have laws restricting when employers can inquire about an applicant’s criminal history.
  7. Marijuana Legalization: With the changing legal status of marijuana in many states, employers need to be aware of how this affects drug testing and workplace policies.

Navigating this patchwork of regulations can take time and effort for foreign employers. Researching and complying with all applicable state and local laws in each location where you have employees is crucial. Foothold America can assist in identifying and interpreting relevant state and local laws to ensure your company’s full compliance.

 

Occupational Safety and Health Act (OSHA)

The Occupational Safety and Health Act sets and enforces standards to ensure employees’ safe and healthful working conditions. Compliance with OSHA regulations is critical for all employers operating in the US, including foreign companies.

Critical aspects of OSHA include:

  1. General Duty Clause: Employers must provide a workplace free from recognized hazards that are causing or are likely to cause death or serious physical harm to employees.
  2. Industry-Specific Standards: OSHA has developed numerous standards for specific industries and types of work.
  3. Training Requirements: Employers must provide safety training to employees in a language and vocabulary they can understand.
  4. Record Keeping: Certain employers must keep records of work-related injuries and illnesses.
  5. Reporting: Employers must report any worker fatality within 8 hours and any amputation, loss of an eye, or hospitalization of a worker within 24 hours.
  6. Inspections: OSHA conducts workplace inspections to enforce its standards and regulations.

For foreign employers, it’s important to note that OSHA standards may be more stringent or different from those in your home country. Foothold America can assist you in developing a comprehensive safety program that meets OSHA requirements and fosters a culture of safety in your US operations.

 

Compliance Strategies for Foreign Employers

A robust compliance strategy is essential for a foreign employer expanding into the US market. Here are some critical steps to ensure your company adheres to US labor laws.

1.    Conduct a Comprehensive Compliance Audit:

  • Review all your existing policies and practices against US federal, state, and local labor laws.
  • Identify any gaps or areas of non-compliance.
  • Develop an action plan to address any issues uncovered.

2.    Establish Clear Policies and Procedures:

  • Create a state-specific employee handbook that outlines your company’s policies and employees’ rights under US law.
  • Develop procedures for handling issues like discrimination complaints, requests for accommodations, and leave requests.
  • Ensure all policies are consistently applied and regularly reviewed for compliance with changing laws.

3.    Invest in Training:

  • Provide comprehensive training to all managers and HR personnel on US labor laws and your company’s policies, or use outsourced HR to reduce your compliance risk.
  • Conduct regular refresher training to keep everyone up-to-date on changes in the law and best practices.
  • Consider cultural training to help your non-U.S. managers understand the nuances of the US workplace.

4.    Implement Robust Record-Keeping Systems:

  • Develop systems to track employee hours, wages, and benefits accurately.
  • Maintain thorough documentation of all employment decisions, including hiring, promotions, and terminations.
  • Ensure all required notices and posters are displayed in the workplace.

5.    Stay Informed About Legal Changes:

  • Subscribe to updates from relevant government agencies and legal publications.
  • Consult with US employment law experts or services like Foothold America to ensure ongoing compliance.

6.    Conduct Regular Internal Audits:

  • Periodically review your practices to ensure ongoing compliance.
  • Consider engaging external experts to conduct independent audits.
  • Use audit findings to improve your compliance efforts continuously.

7.    Develop a Culture of Compliance:

  • Make compliance a core value of your US operations.
  • Encourage employees to report potential violations without fear of retaliation.
  • Lead by example, with top management demonstrating a commitment to legal and ethical practices.

8.    Leverage Technology:

  • Implement HR software that can help track compliance with various labor laws or use an HR outsourcing company versed in labor compliance.
  • Use time-tracking tools to ensure accurate recording of hours worked and overtime.

9.    Plan for Contingencies:

  • Develop action plans for potential compliance issues or investigations.
  • Create crisis communication plans to address public relations issues arising from compliance problems.

10.Partner with Experts:

  • Engage with companies like Foothold America that specialize in helping foreign businesses navigate US employment laws.
  • Consider using Professional Employer Organizations (PEOs) or Employee of Record (EOR) services to help manage compliance risks.

Remember, compliance is an ongoing process, not a one-time effort. Laws and regulations change, and your compliance strategy should evolve accordingly.

 

Conclusion: Navigating US Labor Laws with Confidence

As a foreign employer venturing into the US market, you’re embarking on an exciting journey filled with potential. While the intricacies of US labor laws may seem challenging initially, view them as a framework for building a fair, productive, and legally sound workplace. By prioritizing compliance, staying informed about regulatory changes, and fostering a culture of respect for workers’ rights, you’ll avoid legal pitfalls and position your company as an attractive employer in a competitive landscape. Remember, successfully navigating US labor laws isn’t just about avoiding penalties—it’s about creating a foundation for sustainable growth and positive employee relations in your new market.

Key takeaways for foreign employers operating in the US include:

  1. Understand the Basics: Familiarize yourself with US labor laws, such as the FLSA, Title VII, ADA, FMLA, and OSHA regulations.
  2. Recognize State and Local Variations: State and local laws often provide additional protections beyond federal standards.
  3. Develop Comprehensive Policies: Create clear, compliant policies that address all aspects of the employment relationship.
  4. Invest in Training and Education: Ensure your management team understands US labor laws and company policies.
  5. Stay Informed and Adaptable: Keep abreast of changes in labor laws and be prepared to adapt your practices accordingly.
  6. Seek Expert Assistance: Don’t hesitate to engage with experts like Foothold America, who can provide guidance tailored to your situation.

Remember, compliance with US labor laws is not just about avoiding legal issues—it’s about creating a fair, safe, and productive work environment to help your business thrive in the US market. Taking a proactive approach to compliance can build a strong foundation for your US operations and position your company for long-term success.

At Foothold America, we’re committed to helping international companies like yours navigate the complexities of the US market. From ensuring compliance with labor laws to assisting with recruitment and onboarding, we provide the expertise and support you need to expand confidently into the United States. By partnering with us, you can focus on growing your business while we help ensure your US operations remain compliant and efficient.

Expanding into the US market is an exciting journey. With the proper knowledge and support, you can turn the compliance challenge into a competitive advantage. We look forward to being part of your success story in the US.

Laurie Spicer

UK Based

Over 25 years experience doing business in North American, European, and Asian markets with a primary focus and specialism on the complexity of the US market.

Lamar Manning

UK Based

Experienced HR professional with over 11 years of experience in driving business growth. Possessing dual US and UK citizenship, Lamar has experience in US HR, payroll and recruitment, bringing a unique perspective and international expertise to his approach. 

DIGITAL MARKETING MANAGERThis conversion-minded marketer is responsible for strategizing, planning and creating high-calibre content for our website visitor’s digital experience. With over seven years in marketing, Natalie specialises in PPC, SEO, emerging trends, and customer behavioural insights that help clients find the best solutions for their business needs. Linkedin Envelope

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