Employment Relationship
Family and Medical Leave Act
Worker Adjustment and Retraining Notification Act
Whistleblower Protection
Employee Privacy and Individual Rights
Workplace Tort Claims
Restrictive Covenants

Wage and Hour Laws
Employee Benefits
Occupational Safety and Health Act

This overview provides a broad outline of employment law in the United States. The American workplace is regulated by federal, state and local laws. Because there are vast differences among the laws of the states, this overview focuses on federal employment law and identifies areas in which state and/or local law may be implicated.

Employment Relationship

Employment at will doctrine
In general, employees are employed at will. An employer can dismiss an at-will employee at any time for any reason or no reason. Conversely, employees can terminate their employment at any time for any reason or no reason.

Individual employment agreements
The rule of at-will employment does not apply when there is a contract between an employer and employee that sets forth a definite period of employment. The employee's employment can be terminated only in accordance with the terms of the agreement, and an employer will be liable for breach of contract if it does not comply with the contractual terms.

Collective bargaining agreements
Most collective bargaining agreements (ie, agreements between an employer and a union representing a class of employees) require, among other things, that dismissals of employees be supported by 'just cause'.

Employee handbooks
An employee handbook may constitute a binding contract. Handbook policies that provide for progressive discipline prior to termination have been held to destroy the at-will relationship. Accordingly, an employee handbook should include a clear, prominent disclaimer stating that:

  • the handbook does not constitute a contract;

  • the handbook can be amended at any time with or without notice to employees; and

  • employees' employment is at will and thus can be terminated at any time for any reason or no reason.

Informal policies
Consistent employment practices can give rise to a contractual obligation of the employer to act in accordance with these practices.

Oral agreements
Some oral agreements between employers and employees may constitute binding contracts and, thus, destroy the at-will employment relationship. Many state statutes (called 'statutes of frauds') bar oral agreements (including employment agreements) that are incapable of being performed within one year.

Public policy exceptions
Some states recognize a public policy exception to the rule of at-will employment. Under this exception, it is unlawful to dismiss an employee for reasons contrary to a clear mandate of public policy, such as the employee's refusal to engage in illegal conduct.

Tort-based exceptions
Some states provide non-statutory causes of action for employees harmed by employers' wrongful conduct. Some of these causes of action (including wrongful discharge, fraudulent inducement and tortious interference with contractual relations) constitute exceptions to the rule of employment at will.

Employee v independent contractor
The distinction between employees and independent contractors is significant under many employment laws. For instance, employers are obligated to withhold payroll taxes from the compensation of employees but not independent contractors, and independent contractors, unlike employees, are not entitled to employee benefits. Employers' misclassification of employees as independent contractors can result in broad-based liability and, consequently, large damages awards.

An employer's labelling of an individual as an independent contractor is not determinative of whether the individual is, in fact, an independent contractor. Generally, in determining whether a worker is an employee, courts look to various factors, including the degree of control exercised by the employer, the skill and initiative required in performing the job, and the permanency of the relationship.


In the United States, federal, state and local laws prohibit various forms of employment discrimination. At the federal level, discrimination on the basis of race, colour, sex, national origin, disability and age is unlawful. Many state and local statutes prohibit these and other types of discrimination, and often provide broader remedies than those provided by the federal laws.

Equal Employment Opportunity Commission
The US Equal Employment Opportunity Commission (EEOC) is the federal agency authorized to enforce federal anti-discrimination statutes. The EEOC has broad powers to investigate charges of discrimination and litigate discrimination claims on behalf of aggrieved individuals. In general, individuals who wish to pursue discrimination complaints in federal court must first file an administrative charge of discrimination with the EEOC.

Title VII of the Civil Rights Act
Title VII of the Civil Rights Act of 1964 prohibits discrimination on the basis of national origin, race, colour, religion or sex (including pregnancy). Employers with 15 or more employees are covered by Title VII.

Sexual harassment
Under Title VII, sexual harassment is a form of prohibited sex discrimination. There are two types of sexual harrassment recognized: (i) conduct that explicitly or implicitly renders a job, job benefit or the absence of a job detriment conditional on an employee's acceptance of sexual conduct (ie, quid pro quo harassment), and (ii) conduct that is sufficiently severe or pervasive to alter the terms or conditions of employment and create an abusive working environment (ie, hostile work environment harassment).

Sex discrimination under Title VII and the Equal Pay Act
The Equal Pay Act of 1963 covers employers with two or more employees and prohibits said employers from paying unequal wages to male and female employees who perform substantially the same jobs. The act's scope is narrower than that of Title VII, only applying to wage inequities because of sex. Title VII covers the broader employment practices (eg, failure to hire and termination of employment) based upon sex as well as pay inequity. The proof requirements under Title VII are less strict than those under the Equal Pay Act.

Remedies available under Title VII include equitable relief (eg, reinstatement, back pay, front pay and injunctive relief). Compensatory damages (ie, awards for emotional pain and suffering) and punitive damages may also be awarded, but the combined total of compensatory and punitive damages is capped at $300,000. (The damages cap is lower for employers with fewer than 501 employees.) Attorney's fees may be awarded to the prevailing party.

State and local anti-discrimination laws
Many state and local statutes also provide extensive protection from the types of employment discrimination prohibited by Title VII. Individuals often may seek redress for employment discrimination under federal, state and local law. They cannot, however, receive duplicative awards. Because many state and local laws provide greater protections and remedies (eg, unlimited compensatory and punitive damages), individuals often choose to enforce their rights under these laws as well as under federal law.

Age discrimination
The federal law that covers age discrimination is the Age Discrimination in Employment Act. Employers with 20 or more employees, and employees aged 40 or older, are covered by the act.

Practices that are prohibited by the act include the following:

  • to fail or refuse to hire or to discharge any individual, or otherwise discriminate against any individual with respect to compensation, terms, conditions or privileges of employment, because of that individual's age;

  • to limit, segregate or classify in any way that would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his or her status as an employee, because of that individual's age; and

  • to print or publish, or cause to be printed or published, any notice or advertisement relating to employment that indicates a preference, limitation, specification or discrimination based on age.

Age-related employer practices deemed lawful under the act include:

  • any action where age is a bona fide occupational qualification reasonably necessary to the normal operation of the particular business or where the differentiation is based on reasonable factors other than age;

  • any action taken to observe the terms of a bona fide seniority system that is not intended to evade the purposes of the ADEA; and

  • any action taken to observe the terms of a bona fide employee benefit plan, including retirement, pension and insurance plans. However, the plan may not be a subterfuge to evade the purposes of the ADEA; failure to hire is never justified by such a plan; and involuntary retirement, other than for exempted employees, is never justified by such a plan.

Equitable relief (eg, hiring, reinstatement, promotion, back pay, front pay and injunctive relief) is available to aggrieved individuals under the act. Liquidated damages (ie, doubling the amount of damages awarded) are available in cases of willful violations of the act. Compensatory damages (eg, damages for pain and suffering) and punitive damages are not available under the act.

Waivers of rights
The Age Discrimination in Employment Act was amended by the Older Workers Benefit Protection Act of 1990 to include strict requirements for the waiver of an individual's rights and remedies under the act. Waivers of rights under the Age Discrimination in Employment Act must be knowing and voluntary. A waiver is not knowing and voluntary unless:

  • it is part of an agreement made between the individual and the employer, written so that it can be understood by that individual or the average individual who is eligible to participate;

  • it contains a specific reference to rights or claims arising under the act;

  • rights or claims arising from facts that occur after the execution of the waiver are not waived by the agreement;

  • the waiver is made only in exchange for consideration, in addition to anything of value to which the individual is entitled;

  • the employee is advised in writing to consult with an attorney before executing the agreement;

  • the employee has at least 21 days to consider the agreement or, if the waiver is part of an exit incentive plan offered to a group or class of employees, at least 45 days to consider the agreement;

  • the agreement provides at least seven days for revocation following the execution of the agreement, and the agreement does not become effective or enforceable until the expiration of the revocation period; and

  • waivers that are part of a group exit incentive plan specify, in plain language, the group covered, any eligibility or time factors involved, and the job titles and ages of both eligible and ineligible individuals.

State laws
Most states also have laws in place that prohibit discrimination on the basis of age. Some offer broader protection than the Age Discrimination in Employment Act. For example, the New York Human Rights Law protects employees aged 18 and over.

Disability discrimination
Americans with Disabilities Act
The Americans with Disabilities Act of 1990 covers employers with 15 or more employees. The act generally prohibits discrimination against a qualified individual with a disability because of the disability of that individual in regard to:

  • job application procedures;

  • the hiring, advancement or discharge of employees;

  • employee compensation;

  • job training; and

  • other terms, conditions and privileges of employment.

Under the act, prohibited employment practices include:

  • limiting, segregating or classifying a job applicant or employee in a way that adversely affects the opportunities or status of that applicant or employee because of the disability of that individual;

  • not making reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee, unless the employer can demonstrate an undue hardship;

  • denying employment opportunities to a job applicant or an employee who is an otherwise qualified individual with a disability because of the disability;

  • using qualification standards and employment tests or other selection criteria that screen out an individual with a disability or a class of individuals with disabilities unless the standard, test or other selection criteria is shown to be job-related to the position in question and is consistent with business necessity;

  • failing to select and administer tests concerning employment in the most effective manner to ensure that when such tests are administered to a job applicant or an employee with a disability that impairs sensory, manual or speaking skills, that the tests accurately reflect the skills, attitude or whatever other factor of such applicant or employee that such tests purport to measure;

  • participating in a contractual or other relationship that has the effect of subjecting a covered entity's qualified applicant or employee with a disability to discrimination prohibited by the act (such relationship includes that with an employment or referral agency, labour union, organization providing fringe benefits to the employee, or an organization providing training and apprenticeship programmes); and

  • excluding or otherwise denying equal jobs or benefits to a qualified individual because of a known disability of an individual with whom the qualified individual is known to have a relationship or association.

'Disability' is defined by the act as a physical or mental impairment that substantially limits one or more of the major life activities of the individual, a record of such impairment or being regarded as having such an impairment.

The definition of 'reasonable accommodation', an important requirement of the act, varies depending on the particular circumstances, but may include:

  • making existing facilities used by employees readily accessible to, and usable by, individuals with disabilities;

  • job restructuring;

  • part-time or modified work schedules;

  • reassignment to a vacant position;

  • acquisition or modification of equipment or devices;

  • appropriate adjustments or modifications of examinations, training materials or policies; and

  • the provision of qualified readers or interpreters, and other similar accommodations for individuals with disabilities.

The act adopts the remedies of Title VII of the Civil Rights Act of 1964, which include reinstatement or hiring, back pay, injunctive relief, other equitable relief, and compensatory and punitive damages of up to $300,000. The act contains its own provision permitting the award of attorney's fees, including litigation expenses and costs, to a prevailing party. The award may be made by a court or an administrative agency. Courts usually grant some amount of attorney's fees to prevailing plaintiffs. Prevailing defendants, however, are not generally awarded attorney's fees.

Rehabilitation Act
The Rehabilitation Act of 1973 covers the US government, federal contractors and subcontractors with contracts in excess of $10,000, and recipients of federal financial assistance.

The act requires that the federal government, covered contractors and subcontractors, and recipients of federal financial assistance refrain from discrimination on the basis of disability. The act also requires that covered parties take affirmative action to employ and advance the employment of qualified individuals with disabilities. The federal government and entities with federal contracts of more than $50,000 who have 50 or more employees are required to develop a written affirmative action plan detailing policies, practices and procedures regarding the employment of individuals with disabilities.

The definition of 'disability' is the same as under the ADA.

The remedies available under the act depend on the type of covered entity involved. Section 501 of the act states which remedies are available when the US government is the employer. They include reinstatement or hiring, back pay, appropriate injunctive remedies and reasonable attorney's fees. Liquidated, compensatory and punitive damages are not available.

Section 503 states those remedies that are available when a federal contractor is the employer. It provides an administrative remedy through the US Department of Labour's Office of Federal Contract Compliance Programmes (OFCCP). The OFCCP may seek judicial action to enforce the contractual provisions and award injunctive relief. The OFCCP may cancel or terminate a contract in whole or in part, and may bar the contractor or subcontractor from future government contracts. Employers are not subject to a private cause of action under Section 503.

Section 504, which applies to recipients of federal assistance, provides for equitable relief, back pay and attorney's fees. Some courts have held that compensatory, liquidated and punitive damages are not permitted under Section 504.

State and local laws
Most states prohibit discrimination on the basis of disability. Some state laws offer broader protections and/or greater remedies for disability discrimination than the federal statutes.

Discrimination prohibited by state/local laws
There are a number of types of discrimination prohibited by state/local laws that are not covered by federal statutes. These include, but are not limited to, discrimination on the basis of sexual orientation, marital/familial status and genetic characteristics.

Reconstruction-era civil rights statutes
Several federal statutes were enacted in the years immediately following the US Civil War to provide private remedies to individuals who were deprived of their civil rights by the states or by groups (eg, the Ku Klux Klan). Although the statutes do not mention employment, three provisions (Sections 1981, 1983 and 1985) have been recognized by the courts as providing remedies for certain types of employment discrimination.

Section 1981 provides, among other things, that all persons within the jurisdiction of the United States shall have the same right to "make and enforce contracts ... as is enjoyed by white citizens". The reference to 'white citizens' requires an element of race, colour and/or citizenship in any Section 1981 claim. In addition, the Civil Rights Act of 1991 made it clear that Section 1981's prohibitions are not limited to the hiring stage; they apply to a broad range of employment decisions, including denial of promotion, demotion and dismissal.

Section 1983 provides that every person who under the colour of law, custom, or usage of a state or territory subjects any person within the jurisdiction of the United States to the deprivation of rights, privileges or immunities secured by the Constitution and laws shall be liable to the injured party. The phrase 'under colour of law' requires an element of state action to sustain a Section 1983 claim. The section does not provide any independent rights. It is an enforcement vehicle for the Constitution and laws, and thus requires that injured parties identify a source of rights. Unlike Section 1981, Section 1983's protections are not limited to the issues of race, colour and non-citizenship.

Section 1985 provides that if two or more persons "conspire or go in disguise on the highway or premises of another" for the purpose of depriving a person or persons of due process or equal protection of the laws, the injured party may have an action to recover damages from any of the conspirators. Like Section 1983, Section 1985 does not establish any independent substantive rights but creates remedies for rights established elsewhere. Because Section 1985 prohibits conspiracy, the statute can be violated even if the violator(s) failed to deprive the injured party of any rights.

The anti-discrimination statutes also prohibit retaliation against employees for complaining of discrimination or otherwise seeking to enforce their rights under the statutes. An employer can be held liable for retaliation even if the underlying claim of discrimination is unsuccessful.

Executive Order 11246
Executive Order 11246 covers (i) those entities that have a federal government contract or subcontract, and (ii) financial institutions acting as depositories of any amount of federal funds, or issuing or paying agents for US saving bonds.

Equal opportunity clause
Covered contractors, subcontractors and financial institutions must comply with the equal opportunity clause of the Executive Order (although this provision does not usually apply to contracts and subcontracts worth $10,000 or less).

Covered entities must also agree to take affirmative action to ensure that applicants are considered for employment, and that employees are treated during employment, without regard to their race, colour, religion, sex or national origin. This non-discrimination rule applies to, among other things:

  • employment, upgrading, demotion or transfer;

  • recruitment or recruitment advertising;

  • layoff or dismissal;

  • rates of pay or other forms of compensation; and

  • selection for training, including apprenticeship.

Covered entities must agree to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officer setting forth the provisions of the equal opportunity clause.

Affirmative action plans
Contractors and subcontractors who employ 50 or more employees and have contracts of $50,000 or more are required to prepare written affirmative action programmes for each of their establishments. Affirmative action programmes are result-oriented and are directed towards materially increasing the use of minorities and women in the workforce whenever underutilization exists.

The OFCCP is responsible for the enforcement of this order. It has promulgated detailed regulations that set forth contractors' non-discrimination and affirmative action obligations. The OFCCP is authorized to conduct on-site compliance reviews to analyze and evaluate the contractor's employment policies and practices. When a compliance review reveals deficiencies in the employer's practices, the employer must commit to correct them. If the employer fails to make or honour this commitment, the OFCCP may initiate enforcement proceedings.

Vietnam Era Veterans Readjustment Act
The Vietnam Era Veterans Readjustment Act of 1974 applies to federal contractors and subcontractors with contracts of $10,000 or more. Covered contractors and subcontractors must take affirmative action to employ and advance in employment qualified disabled veterans of the Vietnam era. Contractors and subcontractors with contracts of $50,000 or more, and 50 or more employees, must prepare and maintain a written affirmative action programme at each establishment. The act is enforced by the OFCCP.

Family and Medical Leave Act

The Family and Medical Leave Act of 1993 is the federal law that provides for unpaid leaves of absence and reinstatement rights for covered employees. The act applies to employers with 50 or more employees, and employees who have been employed by the employer for at least 12 months and who have worked for the employer at least 1,250 hours in the previous 12 months.

General provisions
The act provides 12 weeks of unpaid leave in a 12-month period for:

  • the birth or adoption of a child, or placement of a child in foster care;

  • an employee's own serious health condition; or

  • the care of a family member with a serious health condition.

The act requires that an employee returning from such leave be reinstated to the position he or she held immediately prior to taking the leave or to an equivalent position.

The act requires that medical coverage be continued for employees taking leave under the act. (Employees may be required to continue contributing their portions of the premiums for medical coverage during such leave.)

Serious health condition
'Serious health condition' is defined as an illness, injury, impairment, or physical or mental condition that involves (i) in-patient care in a hospital, hospice or residential medical care facility, or (ii) continuing treatment by a health care provider.

The Family and Medical Leave Act permits employees to file civil actions against covered employers for violations of the act. In addition to reasonable attorney's and expert fees, an employee may receive one or more of the following:

  • wages, employment benefits, or other compensation denied to or lost by such employee as a result of the violation;

  • where no such tangible loss has occurred (eg, if leave under the act was unlawfully denied), any actual monetary loss sustained by the employee as a direct result of the violation (eg, the cost of providing care, up to a sum equal to 12 weeks of wages or salary for the employee);

  • liquidated damages in the amount equal to sums described above, unless such amount is reduced by the court because the violation was in good faith and the employer had reasonable grounds for believing it had not violated the act; and

  • when appropriate, employment, reinstatement and promotion, and reimbursement for the cost of the action.

Interaction with other laws
Some states have family and/or medical leave laws. The Family and Medical Leave Act will not supersede any provision of state law that provides greater family and medical leave rights to employees than does the act. The act will supersede state law to the extent that it provides greater leave rights. Where leave is covered by both the act and state law, the leave used counts against leave entitlements under both acts. Where a type of leave is covered by one act and not by the other, that type of leave counts against the employee's leave entitlement for that act only.

If an employee is a qualified individual with a disability under the Americans with Disabilities Act, the employer must make reasonable accommodations (in the absence of undue hardship). At the same time, the employer must afford the employee his or her rights under the Family and Medical Leave Act. The leave provisions of the Family and Medical Leave Act are distinct from the reasonable accommodation obligations of employers covered by the Americans with Disabilities Act. Employers may be required to provide an additional leave of absence under the Americans with Disabilities Act to employees who have used their 12-week entitlement under the Family and Medical Leave Act. The Americans with Disabilities Act's 'disability' and the Family and Medical Leave Act's 'serious health condition' are different concepts and must be analyzed separately.

Leave under the Family and Medical Leave Act may run concurrently with a worker's compensation absence when the injury meets the criteria for a serious health condition.

Worker Adjustment and Retraining Notification Act

The purpose of the Worker Adjustment and Retraining Notification Act is to protect workers, their families and the community from sudden and unexpected job losses. The notice required by the act provides a transition period for the employee to adjust to the loss of employment, to seek and obtain new jobs, and to enter new training or retraining for new jobs.

The act applies to any business enterprise that employs 100 or more full-time employees, or 100 or more employees who combined work at least 4,000 hours per week, exclusive of overtime.

General requirements
The act requires covered employers to provide 60 days' advance written notice of any plant closing or mass layoff. An employer may order a plant closing or mass layoff with less than 60 days' notice if compelled by business circumstances that were not reasonably foreseeable.

Written notice must be given to the union representative of the affected employees (or to each affected employee if no union representative exists), the state dislocated worker unit and the chief elected official of the local government unit where the closing or layoff takes place.

Plant closing
A plant closing occurs when there is any permanent or temporary shutdown of a single site of employment, or an operating unit within a single site of employment, which results in an employment loss during any 30-day period for 50 or more full-time employees.

Mass layoff
A mass layoff occurs when there is a loss of employment during any 30-day period of (i) at least 33% of the full-time employees at a single site of employment affecting 50 or more full-time employees, or (ii) at least 500 full-time employees, regardless of percentage.

Failure to comply with the act can result in back-pay liability for the employer, up to a 60-day period for each affected employee, including the value of any lost fringe benefits. The employer is also subject to a $500-a-day fine (for up to 60 days) for failing to provide notification to the local government unit, unless the employer pays each aggrieved employee back pay and the value of benefits within three weeks of the plant closing or mass layoff.

Whistleblower Protection

Some provisions of federal statutes (eg, various environmental laws) and some state laws prohibit employers from taking adverse action against whistleblowing employees. 'Whistleblowing' generally refers to disclosing, objecting to, or refusing to participate in, the unlawful activity of the employer.

Employee Privacy and Individual Rights

Investigation of applicants and employees
Fair Credit Reporting Act
The Fair Credit Reporting Act requires that, before obtaining a consumer or investigative report concerning an applicant or employee, an employer must notify the individual in writing (in a document consisting solely of the notice) that a report may be used. The individual's written authorization must be obtained. In addition, before an employer takes an adverse employment action against an applicant or employee as a result of information obtained from an investigative report, the employer must provide the applicant or employee with a copy of the report and a summary of his or her rights under the act. Consumer and investigative reports include, but are not limited to, credit reports and criminal background checks.

State laws on arrests and convictions
Many states prohibit or otherwise restrict the use of individuals' arrest and conviction records in making hiring, termination and other employment decisions.

Polygraph testing
The Employee Polygraph Protection Act generally prohibits employers from directly or indirectly requiring, requesting, suggesting or causing any employee or prospective employee to take or submit to any type of lie detector test.

The act also prohibits employers from inquiring into or using the results of any lie detector test, or taking any employment action against any employee or prospective employee, on the basis of such a test.

The act does permit employers to administer polygraph tests to their employees in limited circumstances. Polygraph testing is permitted where:

  • there is an ongoing investigation of the employer's business involving economic loss or injury such as theft, embezzlement, misappropriation, or an act of unlawful industrial espionage or sabotage;

  • the employee suspected of wrongdoing has access to the property that is the subject of the investigation;

  • the employer has a reasonable suspicion that the employee was involved in the incident or activity being investigated; and

  • the employer executes a statement provided to the employee before the polygraph test which (i) sets forth the specific incident or activity being investigated and the basis for testing the particular employee; (ii) is signed by the employee; (iii) is retained by the employer for three years; and (iv) contains an identification of the specific economic loss or injury to business, a statement that the employee tested had access to the property that is subject to investigation, and a statement describing the basis for the employer's suspicion.

Even if an employer is permitted to administer a polygraph test to an employee under the limited circumstances described above, the employer is still prohibited from taking adverse action against the employee on the basis of the results of the polygraph test, or the employee's refusal to take the polygraph test, without additional evidence.

Drug and alcohol testing
Drug Free Workplace Act
The Drug Free Workplace Act of 1988 applies to federal contractors and subcontractors with contracts of $25,000 or more, and federal grantees (regardless of the amount of the grant). The act's general requirements include the following:

  • Covered employers must certify that they will provide a drug-free workplace.

  • Covered employers must publish and provide to each employee a policy statement that prohibits the unlawful manufacture, dispensation, possession or use of a controlled substance in the workplace. The policy statement must also specify the actions that will be taken against the employee for violations. Employers must notify each employee that he or she is required to abide by the statement.

  • An employee must notify a covered employer if he or she is convicted of a criminal drug offence occurring in the workplace within five days of the conviction. The employer must then notify the granting or procuring governmental agency of an employee conviction within 10 days of learning of said conviction.

  • Covered employers must discipline a convicted employee or require the employee to complete a drug abuse assistance or rehabilitation programme.

  • Covered employers must also establish an awareness programme to inform employees about the dangers of drug abuse in the workplace.

  • Covered employers must inform employees of the employer's policy of maintaining a drug-free workplace and the availability of drug counselling, rehabilitation and employee assistance programmes, and the penalties that may be imposed for violations.

Department of Transportation regulations
Under the rules of the US Department of Transportation, employers engaged in interstate transportation are required to conduct pre-employment, random, reasonable cause and post-accident drug tests on covered employees.

Americans with Disabilities Act
The Americans with Disabilities Act does not endorse or prohibit drug testing, as current use of illegal drugs is not protected under the act. (Rehabilitated former drug addicts, on the other hand, are protected under the act.) Because alcoholism is considered a disability, alcohol testing could implicate the act.

State laws
Many states restrict, prohibit or otherwise regulate drug testing in the workplace. Because the laws vary greatly from state to state, applicable state law should be consulted before any employee is required to submit to a drug test.

Medical examinations
Medical examinations that are not consistent with business necessity are prohibited by the Americans with Disabilities Act.

Many states and municipalities prohibit or otherwise restrict smoking in the workplace.

Jury service
Some states prohibit employers from taking adverse action against an employee for absences caused by the employee's service as a juror.

Workplace Tort Claims

Individuals may have non-statutory claims against employers for harm resulting from the employers' wrongful actions. These claims are governed by state law. Some of the most common claims are listed below.

Wrongful discharge
In some states, employees can state a claim for wrongful discharge, despite the general rule of at-will employment. Wrongful discharge claims, when recognized by courts, generally are established by demonstrating that an employee's dismissal violated a clear mandate of public policy.

Fraudulent inducement
An employee may have a claim for fraud against an employer if he or she can establish that, in an attempt to induce the employee to work for the employer:

  • the employer misrepresented a material fact;

  • the employer knew or should have known that the representation was false; and

  • the employee justifiably relied on the representation and suffered damages as a result of his or her reliance.

Tortious interference with contract
A claim for tortious interference with contract may be established in cases where a party interferes with a contract between two other parties (eg, where a former employer acts to cause an employee's new employer to terminate that relationship, or a new employer causes an employee to breach contractual obligations to his former employer). Elements of such a claim generally include:

  • a valid contractual relationship between the individual and a third party (an employer cannot interfere with its own contractual relationship);

  • knowledge of the contractual relationship;

  • intentional interference through inducing a contracting party to withdraw from the contractual relationship or otherwise causing a breach of the valid contractual relationship;

  • lack of justification (ie, the interference was improper); and

  • damage to the individual from the disruption of the valid contractual relationship.

Claims of defamation in the employment context usually concern statements made to prospective employers seeking reference requests. To establish a claim of defamation, an individual must show that (i) the employer published or communicated to a third party a defamatory statement (a statement that tends to injure the individual's reputation), and (ii) the employee was injured and incurred damages as a result of the publication or communication.

Employers can defend against claims of defamation by proving that the statement was true or merely expressed an opinion, or by asserting an applicable privilege.

Absolute privilege
Statements made to quasi-judicial administrative agencies or courts are generally immune from claims of defamation.

Qualified privilege
Statements made in furtherance of a legitimate business interest (eg, providing accurate information on a performance appraisal) are subject to a qualified privilege. A qualified privilege is defeated, however, if the employer acted with malice.

Negligent hiring
A third party to whom an employer owed a duty of care may have a claim for negligent hiring if, prior to the time an employee is hired, the employer knew or should have known of the employee's unfitness, and the third party was injured and suffered damages as a result of the hiring.

Restrictive Covenants

Restrictive covenants limit employees' ability to compete with their former employers and solicit former employers' employees and/or customers. They can be useful tools, if drafted properly, in protecting the trade secrets and other proprietary information of employers. Restrictive covenants are governed by state law. Because the law varies greatly from state to state, the applicable state's law should be reviewed to ensure the enforceability of any particular restrictive covenant.

Non-competition agreements prohibit employees from competing with their employers for a period of time after the termination of their employment. They are often disfavoured by the courts, but may be upheld if they are narrowly tailored to protect the employer's legitimate interests. They must be reasonable in time and geographic scope. California law prohibits non-competition agreements except in limited circumstances.

Non-solicitation agreements prohibit employees from soliciting a former employer's employees and/or customers. Because non-solicitation agreements are less intrusive than non-competition agreements, courts are generally more inclined to enforce them.

Confidentiality agreements require employees, during and after their employment, to maintain the confidentiality of, and not disclose, the trade secrets and other proprietary and confidential information of their employers. These agreements generally reinforce employer's rights under common law principles and are routinely upheld by the courts.

Wage and Hour Laws

Fair Labour Standards Act
The Fair Labour Standards Act is the federal law governing wages. Its most significant provisions require that employees be paid a minimum hourly wage and receive additional (ie, overtime) pay for hours worked in excess of 40 during any working week.

The act applies to all employers, with few exceptions. The act exempts various types of employees from its minimum wage and overtime requirements, including those employed in an administrative, executive or professional capacity. In general, these employees are those in 'white collar' positions who receive a predetermined salary (that generally is not subject to deductions) on a weekly or less frequent basis.

Wage requirements
The act requires that covered employees be paid (i) a minimum of $5.15 per hour, and (ii) one-and-a-half times their hourly rates for all hours worked in excess of 40 hours per week.

State laws
Minimum wage laws
Some states require a greater minimum wage than that required by the act.

Wage payment laws
Most states have enacted wage payment laws, which regulate the way in which wages are paid to employees. For instance, many states require that wages be paid at least semi-monthly and prohibit employers from deducting amounts from employees' paychecks that are not authorized by the employees.

Meal/rest periods
Many states require that employers provide employees with certain meal and/or rest periods when working a certain number of hours per day.

Taxation of wages
Employers are required to withhold payroll taxes from the paychecks of their employees. The withholding requirement includes federal income tax, state and local income tax, social security tax and Medicare tax.

Employee Benefits

Employee Retirement Income Security Act
General provisions
The Employee Retirement Income Security Act of 1974 covers any plan, fund or programme established or maintained by an employer or employee organization for the purpose of providing certain pension and welfare benefits. It provides a detailed framework of requirements for covered employee benefit plans, including eligibility requirements, notice requirements and enforcement procedures. It pre-empts state laws that relate to plans, funds and programmes covered by the act.

Continuation of medical benefits
Under the act, as amended by the Consolidated Omnibus Budget Reconciliation Act of 1985, employers who maintain a group health plan and have employed 20 or more employees on a typical business day in the preceding year, must offer health coverage at group rates to an employee (and, if applicable, the employee's covered family members) if a qualifying event occurs. Qualifying events include:

  • voluntary termination of employment;

  • involuntary termination of employment (except for gross misconduct);

  • a reduction in hours that would render the employee ineligible under the insurance plan; and

  • entitlement to benefits under Title XVIII of the Social Security Act.

Events that would qualify a spouse or dependent child as beneficiaries for continuation coverage include death of the covered employee, divorce or legal separation from the covered employee, the covered employee's eligibility for Medicare, or the child's marriage or 21st birthday.

Individuals who become eligible for continuation coverage can elect to use it for up to 18 months. This period is reduced or enlarged under certain circumstances.

The Consolidated Omnibus Budget Reconciliation Act contains specific notice procedures with which employers must comply. In general, employers are required to provide employees and other affected individuals with notice of their rights on hiring and on the occurrence of a qualifying event.

Types of benefits
Employers are not generally required to offer benefits to employees. Employers that offer benefits, however, must do so in accordance with applicable law (eg, the Employee Retirement Income Security Act ), and the terms of their plans and programmes. Types of benefit that may be offered include:

  • health benefits;

  • retirement benefits;

  • severance benefits;

  • disability benefits;

  • stock options;

  • vacation and holiday pay;

  • short-term and long-term disability benefits; and

  • life insurance benefits.

State-regulated benefit programmes
State temporary disability laws
Several states provide temporary disability benefits to employees who are unable to work due to their own disability. Eligible employees generally receive a portion of their wages (up to a maximum amount) for the period of disability (up to a maximum duration).

Unemployment compensation
Unemployment insurance, which is governed by state law, is intended to ease the hardship of involuntary unemployment. Covered employees receive a portion of their wages for the period of unemployment (again, up to a maximum amount and duration). Unemployment benefits are funded generally, in part, by mandatory employer contributions.

Worker's compensation
Worker's compensation, which is governed by state law, is the exclusive remedy for employees injured in the workplace. Injured workers receive compensation without regard to issues of fault. Employers are required to maintain worker's compensation insurance for their employees.


Immigration Reform and Control Act
The Immigration Reform and Control Act of 1986 prohibits the employment of unauthorized aliens. The act requires employers to complete Section 2 of INS Form I-9 upon the hiring of each employee. To complete Section 2, the employer must examine either a single document that verifies identity and employment authorization (eg, a US passport) or documents that separately establish identity (eg, a valid driver's licence) and work authorization (eg, a social security card). Employers are subject to fines and possible criminal penalties for violations of the act.

Immigration and Naturalization Act
Unfair immigration-related practices
The act prohibits discrimination based on national origin and citizenship status when hiring and discharging employees. This provision does not apply, however, if the employee is protected by Title VII of the Civil Rights Act of 1964.

The act prohibits employers from intimidating, threatening, coercing or retaliating against any individual because that individual intends to file or has filed a charge or complaint, or otherwise sought to enforce his or her rights under the act.

Impermissible inquiries
The Office of the Special Counsel of the Immigration and Naturalization Service has advised that questions regarding (i) whether the applicant is authorized for permanent employment, and (ii) the immigration status and how such status was obtained, may constitute unfair employment practices. The office has recommended that instead the applicant be asked whether he or she is "legally authorized to work in the United States on a full-time basis".

Occupational Safety and Health Act

The Occupational Safety and Health Act of 1970, which covers almost all employers and their employees, sets a multitude of safety and health standards in the workplace. It requires that employers eliminate dangerous conditions and take action to achieve safe and healthy working conditions.

States have the opportunity to establish and operate their own Occupational Safety and Health Act plans (in lieu of abiding by federal requirements), on approval from the US Department of Labour.

For further information on this topic please contact Kevin Leblang, Robert Holtzman or Susan Kohn at Kramer Levin Naftalis & Frankel LLP by (+1 212 715 9100) or by fax (+1 212 715 8000) or by e-mail ( [email protected], [email protected] or [email protected]).

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