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Employment Law Overview USA


The employment relationship in the United States is subject to markedly less regulation than in other countries. With the exception of some protections on wage and hours and a prohibition on discrimination, the parties to an employment relationship in the United States are generally free to negotiate and set the terms and conditions of their relationship. Moreover, the default position is that private-sector employment relationships are at-will: either the employer or the employee may terminate the employment relationship at any time, for any (non-discriminatory or non-retaliatory) reason with or without notice.

Key Points

  • The laws governing employment relationships in the U.S. come from federal, state and local statutes, agency regulations, and case law.
  • Under United States law, there are no minimum requirements for an employment contract.
  • Except in certain mass dismissals or as provided for in an employment contract or a collective bargaining agreement, U.S. law does not impose a formal “notice period” to terminate an individual employment relationship.
  • Employees employed on an “at-will” basis may be terminated, with or without cause or grounds, provided it is not for an illegal reason, notably discrimination on grounds of a category protected by law or protected “whistleblowing” activity (reporting certain employer activity where the employee reasonably believes that the information he or she provided relates to potential violations of specific laws).
  • Under U.S. labour law, if a majority of the employees in the bargaining unit who cast their vote had voted in favor of union representation, the union obtains the right of “exclusive” representation of all the employees in the bargaining unit (not only the employees who voted in favor of the union).

As a common law and federal nation, with fifty (50) states and countless municipal governments, the United States does not have a single set of codified labour and employment laws applicable to all employers. Rather, the laws governing employment relationships are derived from a variety of sources.

Federal statutes: United States federal laws apply to all employers who engage in interstate commerce and set forth the minimum employment standards and protections governing employment relationships. The federal statutes address such issues as wage and hours, medical leaves of absence, discrimination, trade unions and bargaining with trade unions, mass layoffs and plant closings. In addition, immigration and work permits are regulated by federal law and apply to all employers regardless of the size or the nature of the business.

State statutes: Each state’s laws are enforceable only within its own borders. State laws often provide rights not articulated in federal protections or mirror federal statutes while extending the federally provided protections to individuals not covered or protected or expanding the scope of protections afforded to employees. Further, state laws regulate unemployment insurance benefits and workers’ compensation (for work-related illness and injuries).

Local statutes: Cities and municipalities often enact employment laws that can provide greater protection to employees than those provided by state or federal statutes. For example, although federal law does not prohibit discrimination based on gender identity in the private sector, the laws of numerous state and local governments outlaw such discrimination. (Employees who work for the U.S. federal government are also protected against discrimination on grounds of sexual identity under the Civil Services Reform Act of 1978.)

Federal, state and agency regulations: Rules promulgated by federal, state and local Employment Opportunities Commission (“EEOC”), the Internal Revenue Services, or the Department of Homeland Security set forth procedures for implementing federal, state or local statutes.

Court decisions: Through their decisions, United States courts interpret federal, state, and local statutes and regulations and apply them to facts presented in each particular case. Past decisions of the appellate courts serve as binding precedent on the lower courts.

New Developments

Sex Discrimination

In June 2020, the U.S. Supreme held that LGTBQ+ employees are protected from workplace discrimination under Title VII of the Civil Rights Act of 1964, which prohibits discrimination on a number of grounds including sex. Before this decision, discrimination on the basis of sexual orientation or gender identity was a matter of state law, meaning that there were inconsistent standards depending on the state where the employee worked. Now employees throughout the U.S. are protected from such discrimination.

In addition, Illinois and New York are among several states expanding employment protections against harassment and discrimination in 2020.  Effective August 2020, in New York. the statute of limitations for filing a sexual harassment complaint will expand from one year to three years. In Illinois, effective January 2020, there will be several new requirements for employers including restrictions on the use of nondisclosure agreements in discrimination and harassment cases, and expanded protections for contract workers.

Also of note, the EEOC recently rescinded its position that mandatory arbitration agreements, which cover employment discrimination claims, undermine the enforcement of U.S. anti-discrimination laws. This policy change is consistent with recent U.S. Supreme Court decisions that have endorsed the use of arbitration agreements, including in the employment context.

Class Actions

In 2018, the U.S. Supreme Court ruled that class action waivers in employment arbitration agreements do not violate the National Labour Relations Act (NLRA). Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP et al. v. Morris et al., No. 16-300; National Labour Relations Board v. Murphy Oil USA, Inc., et al., No. 16-307 (May 21, 2018). The Court explained that Section 7 of the NLRA is focused on employees’ rights to unionise and engage in collective bargaining and that Section 7 does not extend to protecting an employee’s right to participate in a class or collective action. Section 7 provides that employees have the right to form, join, or assist unions, and to engage in other concerted activities for their mutual aid and protection. The Court held that class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act.

Again, in April 2019, the U.S. Supreme Court weighed in on class action arbitration. Class action arbitration is such a departure from ordinary, bilateral arbitration of individual disputes that courts may compel class action arbitration only where the parties expressly declare their intention to be bound by such actions in their arbitration agreement. Following the Supreme Court’s decision, arbitration agreements must clearly and unmistakably state that the parties agree to resolve class and collective actions through arbitration. Without such a clear agreement, a party cannot be compelled to class arbitration.

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