Duane Morris LLP

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

Certain federal employment-related claims can be asserted before federal agencies such as the Department of Labor, the Equal Employment Opportunity Commission, and the National Labor Relations Board. Most claims may be asserted in courts of general jurisdiction (state courts) and some in courts of limited jurisdiction (federal courts), although certain claims must first be filed with the appropriate federal, state, and/or other administrative agency. Parties may also contract or agree to use alternative dispute resolution, such as arbitration or mediation. The Federal Arbitration Act states that arbitration is the preferred method of dispute resolution, including in employment disputes, and has been held to pre-empt state laws restricting employment arbitration.


The Main Sources Of Employment Law

The United States Constitution, federal statutes, administrative regulations or rules adopted by federal agencies, and the common law (body of unwritten laws based on legal precedents established by courts) are the main sources of federal employment law. Executive Orders, guidelines from federal administrative agencies, judicial decisions and interpretations of such guidelines, collective bargaining agreements, and employment agreements may also govern employment relationships.


National Law And Employees Working For Foreign Companies

Generally speaking, federal employment laws apply to employees who work in the United States or its territories, regardless of their citizenship or work authorization status and regardless of whether the employee works for a United States or foreign employer. In certain narrow instances, employees working in the United States for a non-United States company may not be covered by certain federal laws, if the employer is not a United States employer and is subject to a treaty or other binding international agreement (e.g., Friendship, Commerce, and Navigation Treaties).


National Law And Employees Of National Companies Working In Another Jurisdiction

Individuals who are not United States citizens are not protected by certain United States laws when employed outside the United States or its territories. United States citizens who are employed outside the United States by a United States employer or a foreign company controlled by a United States employer are protected by certain federal laws. However, United States employers are not required to comply with the requirements of certain federal laws (including the preceding laws), if adherence to those laws would violate a law of the country in which the workplace is located.

An employer will be considered a U.S. employer if it is incorporated or based in the United States or if it has sufficient connections with the United States. The sufficiency of connections with the United States and whether a foreign company is controlled by a United States employer are determined by a variety of factors that should be fully investigated before any such determination is made.


Data privacy

There is no comprehensive federal statute governing consumer data privacy in the United States, although there are various laws and regulations relating to various specific industries/sectors, such as telecommunications, health information, credit information, financial institutions, and marketing. At the federal level, the Federal Trade Commission Act, empowers the U.S. Federal Trade Commission (FTC) to bring enforcement actions to protect consumers against unfair or deceptive practices and to enforce federal privacy and data protection regulations. State laws may provide for additional data privacy protections.

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

Individual written employment agreements are not required in the United States. Individual written employment agreements are optional and there are no legal requirements regarding the form. However, where employment agreements are used, they may not be contrary to or circumvent applicable federal, state or local employment laws. Most written employment agreements will be governed by the law of the state agreed upon by the parties, which may be the jurisdiction of the company’s principle place of business, the jurisdiction in which the employee works or where the agreement was finalized. Different laws govern the employment contracts of employees represented by labor unions.

    1. At-Will Employment

      2. The law generally presumes at-will employment, unless altered by contract. At-will employment refers to an arrangement whereby an employer can terminate an employee at any time for any reason (other than an illegal one) or for no reason and an employee is free to leave a job at any time for any reason or no reason without adverse legal consequences. Offer letters are often used to provide the key terms and conditions of employment, instead of an employment agreement, either of which may alter the at-will employment relationship by its terms.

    2. Independent Contractors

      3. A worker’s status is determined by the worker’s relationship with a hiring business. Among other relationships, workers may have an employer-employee relationship or an employer-independent contractor relationship with a business. There are a variety of tests used to determine whether a worker is properly classified as an employee or an independent contractor, depending on the law at issue. For example, under the Fair Labor Standards Act (“FLSA”), the “economic realities” of the relationship are examined, which include the extent to which the services rendered are an integral part of the principal’s business, the permanency of the relationship, the amount an alleged contractor invests in facilities and equipment, the nature and degree of control by the principal, and the degree of independent business organization and operation. For purposes of taxation, the Internal Revenue Service (“IRS”) looks at factors that fall within three main categories: behavioral control, financial control, and the perceived relationship between the business and the worker. States may apply different tests and requirements to assess whether workers are independent contractors or employees.

      If a worker is classified as an employee, the employee is covered by minimum wage, overtime and other similar protections afforded by the FLSA. Moreover, as to employees, employers must withhold income taxes and pay Social Security, Medicare taxes, and unemployment tax on employee wages. In contrast, independent contractors are not afforded protections under the FLSA and businesses do not have to withhold or pay taxes on payments to independent contractors.

      Misclassifying workers as independent contractors (rather than employees) can result in a variety of claims from the United States Department of Labor, the IRS, and individual workers, among others, and consequences including, for example, liability for back wages, fines and penalties, employee attorney’s fees, back taxes, class action lawsuits, and employee benefit coverage.


Mandatory Requirements
  • Trial Period

    • There are no legal requirements to provide trial periods (also referred to as “probationary periods” or “introductory periods”). To the extent a collective bargaining agreement or employment agreement applies, they may provide for a trial period. Trial periods may adversely impact at-will employment status (e.g., eligibility for protections of a law). .

  • Hours Of Work
      1. Minors (under age 18)
        2. FLSA governs when an employer may or may not employ a child, which for purposes of the FLSA is any individual under the age of 18. Under the FLSA, minor employees (under 18 years of age) cannot hold certain jobs, are limited in the total hours per week that they can work, cannot be employed during certain hours, and cannot perform certain types of work. Generally, 14 years of age is the minimum age for employment, with limited exceptions. For minor employees between 14 and 17 there are restrictions with regard to types of work and/or working time. State laws relating to employment of minor employees may provide additional restrictions and limitations, including on hours of work.
      2. Employee Classifications
        3. Under the FLSA employees are classified as either exempt or non-exempt from minimum wage and overtime requirements. “Non-exempt” employees are entitled to minimum wage and overtime under the FLSA. Non-exempt employees are entitled to overtime pay at a rate of one and one-half times the regular rate of pay for all hours worked over 40 hours in a workweek. “Exempt employees” are excluded from the FLSA’s minimum wage and overtime requirements. Properly classified exempt employees are not entitled to overtime pay regardless of how many hours they work in a workweek. In general, with certain exceptions, exempt employees must be paid a salary and perform executive, administrative, or professional duties or fit into another exemption under the FLSA. Whether an employee is exempt under the FLSA (or state law) will be driven by the facts and circumstances of the employee’s employment and not the classification assigned to that employee.
        Employment agreements may not be contrary to applicable federal laws (e.g., the Fair Labor Standards Act.). The terms of a collective bargaining agreement and applicable state law may also apply and modify the allowable hours of work. State laws may provide additional overtime rules, such as daily overtime or double-time pay.
  • Special Rules For Part-time Work

    • There are no federal laws specifically relating to part-time work, but various federal laws may be impacted by part time work. Under the FLSA, employers must track the hours of all non-exempt employees to determine eligibility for overtime. Since the Affordable Care Act (ACA) requires employers with 50 or more full-time equivalent employees to offer affordable health insurance coverage to employees working at least 30 hours per week (or 130 hours per month) to avoid paying penalties, the ACA requires employers to track the hours of employees to ensure that those working at least 30 hours per week (or 130 hours per month) are timely offered health insurance coverage. Employers must also track hours of part-time employees under Employee Retirement Income Security Act (“ERISA”) to determine whether they become eligible to participate in a qualified retirement plan.

  • Earnings

    • The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. All employees of certain enterprises (as defined in the FLSA) which have workers engaging in interstate commerce, producing goods for interstate commerce, or handling, selling, or otherwise working on goods or materials that have been moved in or produced for such commerce by any person, are covered by the FLSA.

    If the FLSA applies, covered non-exempt workers are entitled to a minimum wage of not less than $7.25 per hour (federal minimum wage as of June 2021) for all hours worked up to 40 in a workweek and overtime pay at a rate not less than one and one-half times the regular rate of pay for hours worked over 40 hours in that workweek.

    States and localities may have additional wage and hour laws. Employers must comply with both federal and state/local wage and hour laws. If these laws conflict, employers must apply the law that provides the greatest benefits and protections to employees. For example, if an applicable state law mandates a higher minimum wage than the federal minimum wage ($7.25/hour as of June 2021), then the employer must comply with the higher state minimum wage.

    Exempt employees must be paid certain minimum weekly salaries or fees in accordance with the FLSA (federal law). Under the FLSA, the minimum weekly salary to qualify as an exempt employee is $684 per week which equates to $35,568 annually (current minimum salary for exempt employee as of June 2021). The minimum weekly salary to qualify as an exempt employee may be higher under state law.

    The terms of a collective bargaining agreement may also apply. Employers may also have certain requirements regarding payroll withholdings that cannot be avoided. It is illegal under federal law to discriminate against employees in any protected classes in terms of pay and benefits.

      1. Income Tax Withholding
        2. Employers are required to withhold, deposit, and report federal income tax for most employees.
      2. Other Deductions and Withholdings
        3. Employers may be required by state law to make contributions for unemployment benefits, state disability insurance, or paid family leave.
  • Holidays/Rest Periods

    • There are no federal statutory provisions regarding holidays and rest periods; however, such terms may be negotiated in an individual employment agreement or a collective bargaining agreement with a union. Additionally, some state laws required meal and rest breaks be provided at prescribed intervals. Moreover, short breaks (lasting about 5 to 20 minutes) may be considered compensable time under federal law and included in the calculation of overtime. Bona fide meal periods (typically lasting 30 or more minutes of uninterrupted time) are not considered work time and are not compensable time under federal law. The terms of a collective bargaining agreement and applicable state law may apply.

  • Minimum/Maximum Age

    • The FLSA governs when an employer may or may not employ a child, which for purposes of the FLSA is any individual under the age of 18. Under the FLSA, minor employees (under 18 years of age) cannot hold certain jobs, are limited in the total hours per week that they can work, cannot be employed during certain hours, and/or cannot perform certain types of work. State laws relating to employment of minor employees may provide additional restrictions and limitations. Federal law does not proscribe a maximum age for employment. Employment decisions based on an employee’s or applicant’s age (over age 40) may violate federal law.

  • Illness/Disability

    • Employers with 15 or more employees are subject to the Americans with Disabilities Act, as amended by the ADA Amendments Act of 2008, which became effective on January 1, 2009 (“ADA”). The ADA prohibits discrimination against an individual with a disability in almost every aspect of the employment process, including job applications, hiring, compensation and benefits, and other terms and conditions of employment. An individual with a disability has a physical or mental impairment that substantially limits one or more major life activities. Employers who become aware of a disability must engage in an interactive discussion with the employee to determine if it can provide a reasonable accommodation to the employee to allow the employee to perform the essential functions of his or her job.

    The Family and Medical Leave Act (“FMLA”), entitles an “eligible employee” of a “covered employer” to take unpaid, job-protected time off for specified family and medical reasons, including (1) the birth of a child or placement of a child with the employee for adoption or foster care, (2) for an employee’s own serious health condition, (3) to care for a spouse, son, daughter, or parent who has a serious health condition, or(4) for any qualifying exigency arising out of the fact that a spouse, child, or parent is a military member on covered active duty or call to covered active duty status. The FMLA is discussed in more detail in Part 3(i).

  • Location Of Work/Mobility

    • There is no federal statutory provision requiring an employee to remain in a particular work location or that precludes an employer from seeking to relocate an employee. Applicable state law and the terms of a collective bargaining agreement may provide other requirements.

  • Pension Plans

    • Certain employees are entitled to a pension, such as certain public employees, and private employers may establish pensions through contracts or collective bargaining (but such pensions are not otherwise required). Employee pension benefit plans are typically governed by the ERISA, and the regulations related to the statutes.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • The Pregnancy Discrimination Act of 1978 (PDA), prohibits discrimination on the basis of pregnancy, childbirth, or related medical conditions as well as discrimination against employees with caregiving responsibilities, which includes child care. State laws may provide additional protection for pregnant employees.

    Federal law requires employers to provide reasonably accommodations, including breaks, to employees who need to express breast milk at work for up to one year after the child’s birth. If an employer has fewer than 50 employees, these federal requirements do not apply if the requirements impose and undue burden on the employer. The employer must provide a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by the employee to express breast milk.

    The FMLA entitles an “eligible employee” of a “covered employer” to take unpaid, job-protected time off for specified family and medical reasons, including (1) the birth of a child or placement of a son or daughter with the employee for adoption or foster care, (2) for an employee’s own serious health condition, (3) to care for a spouse, son, daughter, or parent who has a serious health condition, or (4) for any qualifying exigency arising out of the fact that a spouse, son, daughter, or parent is a military member on covered active duty or call to covered active duty status. The FMLA is discussed in more detail in Part 3(i).

  • Compulsory Terms

    • There are no required terms that must be included in an employment agreement.

  • Non-Compulsory Terms

    • The employer and employee may agree to any terms, provided that the terms do not abrogate statutory rights or otherwise conflict with a statute.


Types Of Agreement

Employers and employees may enter into a variety of agreements related to the employment relationship, including individual employment agreements (regarding hours of work, location of work, compensation, benefits, etc.), confidentiality and non-disclosure agreements, non-competition agreements, non-solicitation agreements, offer-letters (may be construed as a contract), executive compensation agreements, collective bargaining agreements (between union and employer), fixed duration/term agreements, retention agreements, part-time employment agreements, arbitration agreements etc. Generally, common law and state statutes (not federal law except as it relates to collective bargaining agreements and arbitration agreements) will determine the enforceability of such agreements.


Secrecy/Confidentiality

Employers may use confidentiality or non-disclosure agreements or include confidentiality or non-disclosure obligations in an individual employment agreement. The U.S. Economic Espionage Act of 1996, makes theft/misappropriation of trade secrets a federal crime. The Federal Computer Fraud and Abuse Act, generally prohibits intentionally accessing a computer without authorization or in excess of authorization and prohibits the theft of trade secrets from computer based programs or their destruction.

There are also specific statutes particular to certain industries or professions that may require or limit contractual or secrecy obligations. The Uniform Trade Secrets Act (“USTA”) which defines trade secrets and describes claims related to trade secrets, has been passed in many states, although not always in a uniform state. State law and common law apply with respect to trade secrets.


Ownership of Inventions/Other Intellectual Property (IP) Rights

Federal laws govern the ownership of certain intellectual property (“IP”) rights. In the absence of a written agreement between the parties, the employer typically owns the IP rights. Ownership may not be exclusive, depending on the type of IP. Individual employment agreements can include terms that properly assign IP (assignment of inventions agreement), protect works made for hire, and prevent improper use of IP developed for the employer. State laws may provide greater restrictions with regard to an employer’s right to claim ownership of IP created by an employee.


Pre-Employment Considerations

Federal law does not prohibit employers from conducting pre-employment drug testing, so long as the testing is non-discriminatory and in compliance with any applicable collective bargaining agreement. For example, the ADA makes it unlawful for employers to discriminate against recovering alcoholics and drug users who have already sought treatment for their addiction. As such, under the ADA, employers cannot refuse to hire someone simply because they have a history of substance abuse and employers cannot refuse to hire someone merely because they are enrolled in a drug or alcohol rehabilitation program. Under the NLRA, any drug testing program affecting unionized workers must be negotiated and agreed on with the union. Federal contractors and employers in certain industries may require, or be required to conduct, drug tests for employees in safety or security sensitive positions. Many states and localities have enacted prohibitions and/or limitations on such testing.

The Fair Credit Reporting Act (“FCRA”), governs the use of consumer reports, including credit checks and criminal background checks, for employment purposes. Prior to requesting a consumer report for an applicant or employee, the employer must disclose to the applicant or employee, in a clear and conspicuous written document consisting solely of the disclosure, that the employer intends to obtain such consumer report to make employment decisions. The applicant or employee must authorize the procurement of the report in writing. Employers must follow the specific requirements under the FCRA if it considers taking adverse action based on a consumer report against an employee.

Other than the FCRA, federal law does not prohibit employers from making pre-employment inquiries about arrest and conviction records, although the Equal Employment Opportunity Commission cautions against disqualifying applicants based on the results of criminal background checks, as doing so may have a disparate impact on certain racial and ethnic groups. Many states or localities enacted laws, often called “Ban the Box laws,” prohibiting pre-employment inquiries or criminal background checks or limiting the timing or scope of permissible inquiries and criminal background checks, such as after a conditional offer of employment has been made to the applicant.


Hiring Non-Nationals

Federal anti-discrimination laws prohibit employers from discriminating against individuals based on their national origin and citizenship. Employers cannot, however, hire individuals not authorized to work in the United States. Employers should confirm the potential employee’s status through a Form I-9 for U.S. nationals or by verifying the employment-based visa status of foreign nationals. Applicants must establish that they are admissible to the United States under provisions of the Immigration Admissibility Act.

 

Hiring Specified Categories Of Individuals

Under a variety of federal employment laws, employers are prohibited from discriminating and retaliating against employees who fall into various protected classes, including, by way of example, race/color, age, gender/sex (including gender identity, sexual orientation, and pregnancy status), national origin, religion, and disability.

Title VII prohibits discrimination, harassment, and retaliation by employers with 15 or more employees based on a person’s race, color, national origin, sex (including sexual orientation, gender identity, and pregnancy, childbirth or related conditions), and national origin in almost every aspect of the employment process, including job applications, hiring, compensation, and other terms and conditions of employment.

The ADA prohibits discrimination by employers with 15 or more employees against an individual with a disability in almost every aspect of the employment process, including job applications, hiring, compensation and benefits, and other terms and conditions of employment. Refer to Part 2(a)(ix) for additional information on the ADA.

The Age Discrimination in Employment Act (“ADEA”) prohibits employers with 20 or more employees from making employment decisions on the basis of an employee’s age (40 or older), including hiring, termination, discipline, advancement, demotion, or other terms and conditions of employment.

Applicable state and local laws may provide additional protections for applicants and employees in protected classes.


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

There are no federal laws regarding outsourcing and/or subcontracting (although employers that contract or subcontract with the federal government must abide by additional requirements). The terms of a collective bargaining agreement and the statutes governing or relating to unions may restrict or limit outsourcing/subcontracting.

Further, when employers subcontract or outsource work or use a temporary agency to hire temporary workers, they may remain liable as an employer or joint employer of the workers performing the outsourced or subcontracted or temporary work if not done properly.

If an employer properly outsources or sub-contracts or uses temporary workers, those workers should not be considered an employee. Most federal employment laws do not apply to an outsourced or sub-contracted party that is properly classified as an independent contractor. If an individual is misclassified as an independent contractor, that individual will be considered an employee with the benefit of applicable federal employment laws. On a federal level, the U.S. Department of Labor generally enforces the classification of a worker as an employee or independent contractor.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

As noted in Part 2(a)(i) above, the law generally presumes an employee is employed at-will, unless altered by an individual employment agreement or a collective bargaining agreement. Nothing under federal law prohibits an employer from changing the terms and conditions of an employee’s at-will employment, so long as such changes do not violate any other laws. It is a best practice to make changes to the terms and conditions of employment only on a prospective basis.

The terms of the employment contract, collective bargaining agreement and/or state common law will govern whether an employer can change the terms in the contract. There are no federal laws governing the ability to make changes to the contract, provided the changes are not contrary to or abrogate any applicable statute. Specific situations are more fully discussed below.


Change In Ownership Of The Business

Depending on the type of transaction, certain federal laws may apply when there is a change in the ownership of the business. For example, under the federal Worker Adjustment and Retraining Notification Act (WARN), discussed in greater detail in Part 4(g) below, covered employers are required to provide covered employees with 60 days’ prior notice in the event of layoffs affecting specific numbers of employees.


Social Security Contributions

Employers and employees are both required by federal law (the Federal Insurance Contributions Act, to make Social Security and Medicare contributions, withhold those amounts from the employee’s paycheck (including the employee’s portion), and remit those amounts to the appropriate governmental authority.


Accidents At Work / Drug and Alcohol testing

The Occupational Safety and Health Act of 1970, (“OSH Act”), which is enforced by the Occupational Safety and Health Administration (“OSHA”), is the main federal law governing working conditions for workers. The OSH Act covers most private sector employers and their workers. Under the general duties clause of the OSH Act, each employer “shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.” State law may also apply and impose additional or different workplace standards.

Employers are permitted to test for illegal drugs. Under the Drug-Free Workplace Act, employers must agree to provide drug-free workplaces as a condition of receiving federal contracts or grants. Employers can be penalized for failing to comply with the Act’s requirements. The Act does not require or regulate the establishment of testing and screening programs.

As noted in Part 2(j) above, employers must also be mindful of the ADA and terms of any applicable collective bargaining agreement when conducting drug and alcohol testing of employees. State and local laws may restrict the circumstances under which employers may test for illegal drugs or alcohol and what actions employers can take based on the results of such tests.


Discipline And Grievance

There are no federal statutory provisions regarding discipline and grievances for private sector employees. Employers may voluntarily decide to implement a policy or practice of providing progressive discipline or a grievance process. Employees can bring federal employment claims if they are treated inconsistent with or different than other employees with respect to discipline and grievances based upon a protected classification or if they are retaliated against for making a protected complaint. Public employers and Union employees may receive further statutory protections for employee discipline and grievances, including under the National Labor Relations Act, 29 U.S.C. § 151 et seq., the Labor Management Relations Act, 29 U.S.C. § 141 et seq., and the National Railway Labor Act, 45 U.S.C. § 151 et seq. A collective bargaining agreement, other contract or state law may apply.


Harassment/Discrimination/Equal pay

Under a variety of federal employment laws, employers are prohibited from discriminating and retaliating against employees who fall into various protected classes, including, by way of example, race/color, age, gender/sex (including gender identity, sexual orientation, and pregnancy status), national origin, religion, and disability. These prohibitions apply to almost every aspect of employment, including, but not limited to, recruiting and hiring, pay, benefits, promotions, work assignments, discipline, and termination.

All employers are subject to the federal Equal Pay Act, which requires that men and women receive equal pay for equal work in the same establishment and prohibits discrimination in the payment of wages on the basis of sex. Employers with 15 or more employees are subject to Title VII of the Civil Rights Act of 1964 (“Title VII”), which prohibits employers from using a person’s race, color, religion, sex (including sexual orientation, gender identity, and pregnancy status), or national origin as a basis for employment decisions, including hiring, termination, discipline, advancement, demotion, or other terms and conditions of employment or from harassing employees based on those same characteristics. State laws may provide additional protection to employees, apply to smaller employers, or designate additional protected categories than those under Title VII.

The Genetic Information Non-Discrimination Act (“GINA”) prohibits employers from discriminating against employees on the basis of a person’s genetic information or family history in employment, including with respect to providing employment benefits such as health insurance. State laws may provide additional protection for employees or place additional obligations on employers.


Compulsory Training Obligations

There are no federal statutory provisions requiring in the private sector, although the OSH Act may cite or fine employers that do not adequately train and protect employees if a lack of training results in an employee’s injury or death. Certain regulated industries may also require training.


Offsetting Earnings

Employees may authorize employers to deduct earnings from their pay checks in accordance with applicable federal and state laws. Most states have wage payment law that cover such issues as the frequency with which employees must be paid, the manner in which an employee can be paid, including direct deposit, when an employee must be paid upon termination from employment, and what deductions can be taken from an employee’s wages.

Employers may be required to garnish their employees’ wages. The Consumer Credit Protection Act protects employees from discharge by their employers because their wages have been garnished for any one debt, and it limits the amount of an employee’s earnings that may be garnished in any one week. However, by reason of garnishment or otherwise, an employee’s wages cannot result in a payment of less than minimum wage. State laws may govern wage garnishments regarding child support and alimony.


Maternity And Disability Leave

Federal law does not provide for paid sick leave; however, Executive Order 13706, “Establishing Paid Sick Leave for Federal Contractors”, was signed on September 7, 2015, and requires parties that enter into covered contracts (as defined) with the federal government to provide covered employees (as defined) with up to seven days of paid sick leave annually, including paid leave allowing for family care. State and local laws may provide for paid sick leave based on the number of hours an employee works.

The FMLA, entitles an “eligible employee” (who worked at least 1,250 hours in the previous 12 months and who works at a worksite with at least 50 employees within a 75 mile radius) of a “covered employer” (with 50 or more employees in a certain period of time) to take unpaid, job-protected time off for specified family and medical reasons, birth of a child or placement of a son or daughter with the employee for adoption or foster care and care for a family member, as reflected in Part 2(a)(ix) above. Eligible employees may take up to 12 workweeks of leave in a 12-month period and, under some circumstances, may take the leave intermittently or on a reduced schedule.

Leave under the FMLA is not required to be paid. However, the FMLA permits an employee to elect, or the employer to require the employee, to use accrued paid vacation leave, paid sick or family leave for some or all of the FMLA leave period.

Covered employers must provide certain notices and information to employees regarding rights and responsibilities under the FMLA. When an employee requests FMLA leave or the employer acquires knowledge that leave may be for a FMLA-qualifying reason, employers must provide the employee with notice (within 5 days) concerning their eligibility for FMLA leave and their rights and responsibilities under the FMLA. Employers must also notify employees whether leave is designated as FMLA leave and the amount of leave that will be deducted from the employee’s FMLA entitlement.

Upon return from FMLA leave, an employee must be restored to his or her original job or to an equivalent job with equivalent pay, benefits, and other terms and conditions of employment. An employee’s use of FMLA leave cannot be counted against the employee under a “no-fault” attendance policy. Employers are also required to continue group health insurance coverage for an employee on FMLA leave under the same terms and conditions as if the employee had not taken leave.

States may also enact laws that provide different or more protections for employees due to family or medical reasons. The terms of a collective bargaining agreement may also apply.


Compulsory Insurance

There are no federal laws requiring employer-provided health insurance. Union employees may negotiate employer provided and/or employer paid health insurance as part of a collective bargaining agreement.

The Patient Protection and Affordable Care Act was enacted in March 2010; however, the health reform law is extraordinarily complicated and all of its provisions become effective at various times, and some of those provisions have already been extended. The statute also remains subject to further modification or legislative change. The applicability of this law should be more fully explored before determining the employer’s obligations. While the law does not require employers to provide health insurance for their employees, employers with 50 or more full-time employees that do not offer insurance are subject to fees (a/k/a the employer penalties).

Federal law does not require employers to provide workers’ compensation insurance, but employers are required to obtain workers compensation coverage under most states’ laws.


Absence For Military Or Public Service Duties

Federal law requires employers to provide unpaid military leave (Uniformed Services Employment and Reemployment Rights Act (“USERRA”) and court and jury duty leave. State laws may provide employees with additional protections or leave for crime victims, voting leave (paid or unpaid), leave for school activities, emergency response or volunteer law enforcement leave and donor leave.


Works Councils or Trade Unions

The National Labor Relations Act, the Labor Management Relations Act, and the National Railway Labor Act, govern the relationships between employers and unions.


Employees’ Right To Strike

Strikes are protected as long as they are lawful, a determination that may depend on the purpose of the strike, its timing, or the conduct of the strikers. The right to strike may be limited for public service employees. State law and the terms of a collective bargaining agreement may also apply.


Employees On Strike

Employees may be terminated for striking depending on the purpose of the strike, its lawfulness, its timing or the conduct of the strikers. State law and the terms of a collective bargaining agreement may also apply.


Employers’ Responsibility For Actions Of Their Employees

Under the doctrine of respondeat superior (also known as vicarious liability) an employer may be liable for the negligent acts or omissions by an employee that are committed within the course and scope of employment. Employers may also be liable for negligent hiring and/or retention if legal requirements are met. For this claim, it is not necessary that the offending conduct occur within the course and scope of employment. Employers may be statutorily responsible for the actions of their employees, depending on the particular occupation or industry and the employee’s conduct.

4

FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

There are no statutory provisions regarding the form or procedures for terminating an employment agreement. Unless an individual employment contract or collective bargaining agreement with a specific term applies, the employment relationship is at-will and may be terminated at any time, provided the termination does not otherwise violate an applicable statute or public policy.

An employment contract or collective bargaining agreement may specify termination procedures or forms. To the extent there is a contract of employment or collective bargaining agreement, the terms of such an agreement will need to be followed for purposes of terminating the employment relationship including determination of the applicable law.

Federal law does not require employers to give former employees their final paycheck immediately upon termination of employment, but final wages should be paid on the next regularly scheduled pay date after termination of employment. Some states, however, may require payment of final wages on the employee’s separation date or payment within a certain number of days.


Instant Dismissal

There are no federal statutory provisions precluding an employer from immediately terminating an employee (other than under the Workers Adjustment and Retraining Notification Act, regarding group lay-offs referenced in Part 4(g) below). Unless an employee has an employment contract containing a specific term/length of employment or a provision requiring prior notice of termination or restricting the reason for termination, the employment relationship is at-will and may be terminated at any time (provided such termination is not in violation of the law) and may be done immediately. A collective bargaining agreement may contain notice requirements, require that employees be separated in order of seniority in the event of group layoffs, or prevent immediate dismissal. Applicable state law may regulate when an employer must pay final wages to an employee and what information must be provided to an employee upon separation of employment.


Employee's Resignation

There are no federal statutory provisions precluding an employee from resigning. Unless an employment contract with a specific term applies, the employment relationship is at-will and may be terminated by the employee at any time and may be done with or without notice. An employment contract or collective bargaining agreement may specify resignation procedures. A minimum of two weeks’ notice is considered a professional courtesy but is not legally required. State law may regulate when an employer must pay final wages to an employee who has resigned.


Termination On Notice

There are no federal statutory provisions requiring prior notice of termination of employment (other than as may be required under the Workers Adjustment and Retraining Notification (“WARN”) Act regarding group lay-offs, as referenced in Part 4(g) below). Please see Part 4(a) regarding individual layoffs.


Termination By Reason Of The Employee's Age

The Age Discrimination in Employment Act (“ADEA”), prohibits employers with 20 or more employees from terminating an employee because of an employee’s age (40 or older).


Automatic Termination In Cases Of Force Majeure

There are no federal statutory provisions regarding whether employment can be automatically terminated in cases of force majeure (other than under the WARN Act, regarding group lay-offs referenced in Part 4(g) below). The terms of an employment contract or collective bargaining agreement may contain terms related impact on employment in cases of force majeure.


Collective Dismissals

The Workers Adjustment and Retraining Notification Act, (the federal “WARN Act”), requires covered employers to provide 60 days’ advance notice of a “plant closing” (as defined) and “mass layoff” (as defined) to employees or their union representatives, state dislocated worker units, and local government officials in case of a layoff of a defined number of employees within a period of 30 days. Under certain circumstances employment losses within any 90-day period will count together toward WARN threshold levels.

In general, employers are covered by the WARN Act if they have 100 or more employees, not counting employees who have worked less than 6 months in the last 12 months and not counting employees who work an average of fewer than 20 hours a week. Federal, State, and local government entities which provide public services are not covered.

The WARN Act generally applies to (1) plant closings resulting in the “employment loss” (as defined) at a “single site of employment” (as defined) for 50 or more employees during a 30-day period; (2) layoffs resulting in the employment loss within a 30-day period of 50 to 499 full-time employees constituting at least 33% of the full-time workforce at a single site of employment; and (3) layoffs resulting in the employment loss of 500 or more employees regardless of the percentage of workforce. A covered employer also must give WARN notice if the number of employment losses which occur during a 30-day period fails to meet the threshold requirements of a plant closing or mass layoff, but the number of employment losses for two or more groups of workers, each of which is less than the minimum number needed to trigger WARN notice, reaches the threshold level, during any 90-day period, of either a plant closing or mass layoff. Employment losses within any 90-day period will count together toward WARN threshold levels, unless the employer demonstrates that the employment losses during the 90-day period are the result of separate and distinct actions and causes.

The 60-day notice requirement can be reduced when the plant closing or mass layoff is due to (1) a natural disaster, (2) a faltering company is seeking financing or additional business to avoid or postpone plant closings, or (3) plant closings or mass layoffs are caused by circumstances that were not reasonably foreseeable 60 days in advance. In such instances, employers must give as much notice as is practicable with a brief statement of reasons for reducing the notice period.

The WARN Act specifies the content of the WARN notice. An employer who violates the WARN Act by ordering a plant closing or mass layoff without providing appropriate notice is liable to each aggrieved employee for an amount including back pay and benefits for the period of violation, up to 60 days and other penalties may apply.

Note that some states or localities also have laws requiring employers to provide advance notice of plant closing or mass layoffs that are more protective of employees. Such laws may apply to smaller employers or to a lower threshold of employees or layoffs.


Termination By Parties’ Agreement

There is no federal statute regarding the termination of employment by agreement between the employer and employee. In the absence of an employment contract or collective bargaining agreement to the contrary, the employer and employee are free to terminate the employment relationship on any grounds they desire, except for unlawful reasons proscribed by federal, state or local law or public policy. If the parties to an employment agreement agree to terminate the employee’s employment, they generally have the right to do so, provided the parties were capable of making such an agreement. A collective bargaining agreement may also restrict the ability of the parties to terminate an agreement by mutual consent (as the union may also need to be a party to any such termination by agreement).

Approval from a court or other regulatory body is not required before an employment agreement is terminated, unless otherwise provided in the employment agreement. In certain instances, however, settlements of certain types of claims must be approved by certain administrative agencies. In addition, any termination agreement between the parties in which the employee purports to give up statutory legal rights will only be enforceable if it complies with certain statutory requirements, if applicable.


Directors Or Other Senior Officers

There are no federal statutory provisions regarding termination of directors and officers (as directors and officers will receive the same treatment under the law as employees, to the extent they are employees and receive no further protections resulting from their corporate status as a director or officer), which roles are governed by state law. An employment contract, articles of incorporation, by-laws, shareholder agreement, or other agreement governing the director or officer position may apply and contain termination procedures and state statutes may also apply. The termination of employment does not automatically terminate board membership or officer status. Separate steps, generally set forth in the bylaws or articles of incorporation/organization, are required to terminate board membership. The termination or removal of a director or other senior officer would be governed by the applicable compliance document of the employer and may also be governed by state statute.


Special Rules For Categories Of Employee

There is no specific federal law regarding the termination of special categories of employees; however, termination decisions must comply with federal anti-discrimination, no-retaliation and whistleblower laws (and the federal WARN Act as applicable, as previously discussed). Collective bargaining agreements and applicable state law may also apply.


Whistleblower Laws

Several federal laws (e.g., Title VII of the Civil Rights Act of 1964, False Claims Act, Occupational Safety and Health Act, Sarbanes-Oxley Act, Consumer Product Safety Improvement Act) prohibit retaliation against current and former who report or expose unlawful or wrongful practices by employers. Retaliation may include, but are not limited to, such adverse employment actions against employees such as demotion, reductions in pay, changes in schedule or title, denial of benefits, and termination of employment. State laws may provide for additional protection from retaliation.


Specific Rules For Companies in Financial Difficulties

There are no specific federal statutory provisions requiring employee notification of a company in financial difficulties. If the company files bankruptcy, however, the bankruptcy court or the trustee may impose certain restrictions on employers. Employers who lay off a large number of employees may be subject to a 60-day notice period under the federal WARN Act, though exceptions exist for companies whose financial difficulties were not foreseeable at the time notice was due.


Special Rules For Garden Leave

There are no federal statutory provisions regarding garden leave for employees.


Restricting Future Activities

There are no federal statutory provisions governing post-employment restrictions, such as non-compete, non-solicitation and non-interference provisions. State law and common law govern clauses which restrict future activities post-employment.


Severance Payments

There are no federal statutory provisions requiring severance payments. Employers are not required to pay severance unless the employer and the employee have an employment agreement requiring the employer to pay severance or if an employer implements a severance plan which provides for severance pay under the circumstances of the employee’s separation. If the employer requests that an employee sign a waiver or release of claims against the employer in exchange for severance pay, the employer must comply with the Older Workers Benefits Protection Act of 1990 (“OWBPA”) and any other federal regulations or state laws governing what claims can be released as part of a private agreement. OWBPA also applies for a group termination, which occurs when two or more employees are terminated as part of the same decision-making process and at least one of those employees is age 40 or over. Additionally, employers must provide a written disclosure to the employees age 40 or over with certain required information.


Special Tax Provisions And Severance Payments

Severance payments are taxed in the same way as other wages. If an arrangement provides for a “deferral of compensation” (as may be the case with severance agreements), such agreements may be subject to Section 409A of the Internal Revenue Code 26 U.S.C. § 409A and be subject to additional tax.


Allowances Payable To Employees After Termination

There is no federal law that requires employers to contribute towards any allowances paid to employees after termination.


Continuing Health Benefits

The Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) requires employers with at least 20 employees to permit employees to elect to continue their employer-provided health insurance coverage at their own expense following a loss of plan coverage, such as a termination of employment. If employees elect COBRA continuation coverage, employers must continue group health plan coverage for specific lengths of time, notify employees about their right to continue plan coverage, and permit employees to convert coverage to individual policies under certain conditions.

Pursuant to the American Rescue Plan Act of 2021, employees that experience an involuntary termination of employment and timely elect to continue their employer provided health insurance coverage may be eligible to receive 100% premium assistance for the period from April 2021 through September 2021.


Time Limits For Claims Following Termination

Statutes of limitation vary depending upon the nature of the claim and the applicable law(s). Most statutes of limitation under federal law range from 300 days to three years following the last action giving rise to the claim.

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

N/A



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© 2021, Duane Morris LLP. All rights reserved by Duane Morris LLP as author and the owner of the copyright in this chapter. Duane Morris LLP has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021