Hiring practices in the USA

Requirement for Foreign Employees to Work

Foreign nationals who are not U.S. nationals, permanent residents, asylees or refugees are not permitted to work in the United States without work authorisation. An employer seeking to hire a foreign national may file, on behalf of its prospective employee, a petition with the United States Department of Homeland Security/United States Citizenship and Immigration Services (“USCIS”) for employment authorisation. If the petition is approved, the prospective employee must obtain a “visa stamp” from a United States embassy or consulate to enter the U.S. unless the individual already resides in the U.S. Canadian citizens are exempt from the visa issuance requirement.

Alternatively, an employer may sponsor a potential employee’s application for permanent resident status, referred to as a “green card,” if they are able to establish that the potential employee is a multinational executive/manager transferee, has extraordinary ability or outstanding achievements, or is being offered a job in the United States for which the employer has been unable to recruit a U.S. worker who meets the minimum requirements of the position. In most of the immigrant visa categories, the processing delays make it impractical to use an immigrant visa as the vehicle for entering the United States for an initial assignment. The normal procedure is to obtain a short-term work visa initially (assuming the individual meets the eligibility requirements) and seek an immigrant visa after the employee has started working in the United States.

Rather than hiring workers one by one, U.S. companies may engage outsourcing and staffing firms that obtain H-1B visas and hire groups of high-skilled foreign workers who then are placed with the U.S. company as needed.

All employers are obligated to verify an employee’s employment eligibility, which is done through the examination of identification and work authorisation documentation. To do so, employers are required to complete a USCIS Form I-9 for each newly hired employee. Employers may also participate in the government’s internet-based system, E-Verify, that compares information entered by an employer from the Form I-9 to records available to DHS and the Social Security Administration to confirm employment eligibility. Federal contractors with contracts containing the mandatory E-Verify clause are required to use E-Verify and some states require that employers use E-Verify. During COVID-19, DHS announced that it would exercise prosecutorial discretion to defer the physical presence requirements associated with completion of Form I-9. In July 2023, responding to the lessons learned during the pandemic, DHS created a permanent optional alternative procedure for remote document examination available to qualified E-Verify employers meeting specified requirements. This optional alternative has a number of requirements including a live video interaction to examine the documents as well as document retention.

Does a Foreign Employer need to Establish or Work through a Local Entity to Hire an Employee?

As a matter of tax, state corporate law, and other regulatory requirements, it may be necessary to either establish a local entity or register a foreign entity locally, depending on the nature and scope of the business activity associated with the hiring. This needs to be investigated with tax and corporate law advisors on a case-by-case basis.  Independent of these requirements, the foreign employer may be subject to federal and state income tax withholding obligations as well as payment of social security, disability, unemployment and other payroll contributions with respect to employment of individuals within the U.S.

Limitations on Background Checks

It is illegal in certain U.S. states (and cities) to ask about an applicant’s criminal history on an employment application. Such laws typically make exceptions for certain positions for which criminal history information may be required by law. The best practice under U.S. law is generally to avoid asking about arrests and/or convictions on the job application and, instead, wait until the employer has made a conditional offer of employment. In the case of a conviction revealed later in the application process, the best practice is to conduct an individualised assessment of the job-relatedness of the conviction to the job to which the candidate applied.

Another consideration in the application process is compliance with the federal Fair Credit Reporting Act, which governs the collection, assembly and use of information about consumers by consumer reporting agencies, including credit information, criminal background, motor vehicle reports, and other public record information. Though FCRA applies only to “consumer reports,” employers must ensure they comply with any relevant requirements if they seek to obtain such information. Certain states and cities also prohibit the use of credit-related information when making employment decisions.

Restrictions on Application/Interview Questions

In general, federal prohibitions on employment discrimination (see Section V below) also apply to hiring decisions. In other words, just as you cannot terminate an employee because he or she belongs to a protected category, you cannot refuse to hire an applicant on account of his or her protected status. For this reason, employers should avoid asking questions on a job application or in an interview, which are likely to reveal the applicant’s membership in a protected group. Similarly, to comply with background check laws mentioned above, employers should avoid asking about arrests and/or convictions on the job application or during an interview.