American labour law: what you need to know
You want to set up your company in the USA, but don’t know how to deal with American laws. Contracts, minimum wage, working hours, paid holidays, social protections… But what rules apply in the United States?
3 key things to know about US labour law
Oral employment contracts
In the United States, there is a very common practice in employment contracts: oral employment contracts. These, also called “at will” employment contracts, are exclusively verbal (in France, for example, we use written employment contracts).
Thus, even if the contract is the result of a verbal agreement, the contract is deemed to exist between the employer and the employee.
Unlike the employment contracts we are used to, these types of contracts can be terminated at any time, at the initiative of either the employer or the employee, without justification, without reasons and without notice. The big difference here is that the contract can be terminated without notice.
However, in the law there are grounds for illegal dismissals in the case of discrimination, violation of public interest, retaliation for reporting, etc.
In practice, however, both parties usually give two weeks’ notice before an employee leaves the company for good.
Nevertheless, it is noticeable that more and more employers in the USA are using the written contract. This is the case when the company in the USA hires a highly qualified employee, it allows them to protect themselves from any type of legal action from the employees.
If the employer decides to draw up an employment contract, it will usually contain the following elements
- The date of validity of the employment contract if it is a fixed-term contract
- Details of the clauses agreed by both parties
This employment relationship, governed by a written contract, is called a “Contract Employee”.
Wages, hours, holidays: American working conditions very different from those in France
Salary
In the United States, the federal gross hourly minimum wage has only been set at $7.25/hour since 2010. This minimum hourly rate is guaranteed to all employees; it is also called the subminimum. However, each state is free to set its own value for this hourly rate: for example, it is $10 in California or Massachusetts, $9 in New York, $8.05 in Florida, or $5.15 in Georgia. The proposed minimum wage for each state can be found online: https://www.dol.gov/
It should be noted, however, that in the event of a dispute, the law most advantageous to the employee applies.
In terms of employee payment, it is possible to pay an employee by the hour (Hourly Position) but also by the flat rate (Salary Position).
Working time
As far as working hours are concerned, it should be noted that there is no limit to the number of working hours per week. It should be noted, however, that the usual working time is an average of 40 hours per week. Beyond that, overtime is paid at 1.5 times the basic hourly wage, but this is not a legal rule.
Annual leave
Comme pour le temps de travail, il n’existe pas de règlementation pour encadrer les congés payés. C’est au bon vouloir de l’employeur d’accorder des congés payés à ses employés. Cependant, on recense environ 90% des employés qui bénéficient de congés payés ou non-payés.
On s’aperçoit qu’en pratique, 2 semaines de congés payés par an sont octroyées à l’employé (après la première année de travail).
Leave for medical reasons
In the USA it is possible for an employee to take up to 12 weeks leave per year. This leave may be for specific medical reasons or for family reasons. These 12 weeks will of course be considered unpaid, but it ensures that the employee remains in their job until they return.
The cases in which leave can be taken are
- Birth of a child (up to the age of one)
- Serious illness of spouse, child or parent
- Serious illness directly related to the employee
Social security charges in the US
Social charges in the US are known to be lower than in France, for example. In the USA, they amount to approximately 7.65% for employee charges and 15.55% for employer charges.
The latter are intended to finance the unemployment insurance scheme and the disability scheme (occupational illness/workplace accidents). There is also about 1.45% dedicated to the financing of Medicare (hospitalization).
Since 2015, the legislator has required companies with more than 50 employees to take out private health insurance for their employees who work more than 30 hours a week. For employees of companies with less than 50 employees, the financing of the health insurance remains at their expense. It is therefore strongly recommended that you take out health insurance in case of health problems, as medical costs in the USA are high.
American labour law is quite different from French or European labour law. It can be described as a labour law without any real framework or regulation. It is therefore essential that you become familiar with the regulations in force before starting your job search or before recruiting a new member to your team.
For more information, contact our Orlando office at: support@merritt.group .
