The United States is a hub for innovation, talent, and global business. For international companies looking to hire in the U.S., understanding and complying with Labour Laws in USA is crucial. This guide offers a detailed overview of employment regulations across federal and state levels, including contracts, wages, benefits, terminations, and how an Employer of Record (EOR) can help you navigate U.S. hiring efficiently and compliantly.
Table of Contents
- Overview of Labour Laws in the United States
- Employment Contracts in the United States
- Working Hours and Overtime Rules
- Minimum Wage and Salary Regulations
- Social Security and Payroll Contributions
- Leave Entitlements and Public Holidays
- Termination and Severance Rules
- Employee Benefits and Additional Perks
- Anti-Discrimination and Equal Treatment Laws
- Labour Law Compliance Tips for Global Employers
- Why Work With an Employer of Record (EOR) in the United States
- Conclusion
- FAQs
Overview of Labour Laws in the United States
Unlike many countries, the U.S. does not have a single unified labour code. Instead, it operates through a combination of federal, state, and local laws, which employers must follow simultaneously. Key federal employment laws include:
- Fair Labor Standards Act (FLSA) – Governs minimum wage, overtime, and working hours
- Occupational Safety and Health Act (OSHA) – Regulates workplace health and safety
- Family and Medical Leave Act (FMLA) – Grants eligible employees unpaid leave for family or medical reasons
- Title VII of the Civil Rights Act – Prohibits discrimination in employment
State and local jurisdictions may implement additional rules regarding wages, paid leave, discrimination protections, and worker classification.
Employment Contracts in the United States
Most employment in the U.S. operates under at-will employment, meaning either party can terminate the relationship at any time, with or without cause (except for unlawful reasons). However, written contracts are common for executives, key employees, and independent contractors.
Key contract elements include:
- Job title and duties
- Compensation and benefits
- Employment classification (W-2 employee or 1099 contractor)
- Confidentiality and non-compete clauses
- Termination terms and severance (if applicable)
Although written contracts aren’t legally required for most roles, they are highly recommended to clarify expectations and mitigate risks.
Working Hours and Overtime Rules
Under the FLSA, the standard workweek is 40 hours. Any additional hours are considered overtime and must be compensated at 1.5x the employee’s regular rate for non-exempt employees.
Key points:
- Exempt employees (e.g., salaried managers, professionals) are not eligible for overtime pay
- States may enforce stricter regulations (e.g., California’s daily overtime rule)
- Meal and rest break requirements vary by state
Employers must track hours accurately and classify employees properly to remain compliant.
Minimum Wage and Salary Regulations
The federal minimum wage is $7.25/hour, but many states and cities have implemented higher minimums. Employers must always pay the higher applicable rate.
Examples of 2025 projected minimum wages:
- California: $16.00/hour
- New York City: $17.00/hour
- Texas (federal rate): $7.25/hour
In addition:
- Tipped employees may earn a lower base rate, provided tips bring them up to minimum wage
- Salary thresholds apply for exempt (non-overtime-eligible) employees under FLSA
Social Security and Payroll Contributions
Employers and employees share responsibility for funding federal programs via payroll taxes. These include:
- Social Security tax (6.2% each from employer and employee)
- Medicare tax (1.45% each)
- Federal Unemployment Tax Act (FUTA) – paid solely by employers
- State unemployment insurance (SUI) – varies by state
In addition, employers must:
- Withhold federal and state income taxes
- Issue IRS forms W-2 or 1099 based on classification
Leave Entitlements and Public Holidays
In the United States, leave entitlements are not governed by a universal national policy. Instead, they vary significantly based on whether the employer is following federal guidelines, state-specific laws, or internal company policies. As a result, leave practices can differ greatly depending on location and employer size.
Paid Leave
There is currently no federal mandate requiring private employers to offer paid vacation, sick leave, or paid holidays. However, offering Paid Time Off (PTO) has become a standard practice among U.S. employers to remain competitive in attracting and retaining talent.
Most companies provide a bundled PTO policy that covers vacation, personal, and sick days, often starting from 10 to 15 days per year and increasing with seniority. PTO policies are usually outlined in the employee handbook and may include rules for carryover, accrual, and payout upon termination.
Some states and municipalities, such as California, New York, Massachusetts, New Jersey, and Washington D.C., have passed laws requiring employers to provide paid sick leave, with specific accrual rates and usage conditions. These laws apply even to small businesses and may include protections for time off related to domestic violence, public health emergencies, or caring for ill family members.
Unpaid Leave
The Family and Medical Leave Act (FMLA) is a federal law that requires covered employers (those with 50 or more employees) to provide eligible employees with up to 12 weeks of unpaid, job-protected leave per year. The leave can be taken for the following reasons:
- Birth, adoption, or foster care placement of a child
- Serious health condition of the employee
- Caring for a spouse, child, or parent with a serious health condition
- Military caregiving or qualifying exigency leave related to deployment
To qualify, employees must have worked for their employer for at least 12 months and 1,250 hours during the past year. While FMLA is unpaid, some employers allow employees to use accrued PTO or sick leave during the absence.
Public Holidays
The United States observes 10 official federal holidays, including:
- New Year’s Day (January 1)
- Martin Luther King Jr. Day (third Monday in January)
- Presidents’ Day (third Monday in February)
- Memorial Day (last Monday in May)
- Independence Day (July 4)
- Labor Day (first Monday in September)
- Columbus Day (second Monday in October)
- Veterans Day (November 11)
- Thanksgiving Day (fourth Thursday in November)
- Christmas Day (December 25)
However, private employers are not legally required to provide paid time off on federal holidays. Despite this, many businesses offer paid holiday leave for some or all of these dates as part of their standard benefits package. In certain industries—like healthcare, retail, and hospitality—employees may work on holidays and receive either additional pay (holiday premium) or compensatory time off.
Since holiday and leave policies can vary by state, employer, and even industry, international companies hiring in the U.S. often work with an Employer of Record (EOR) in the United States to ensure their policies align with all relevant laws and remain competitive in the local job market.
Termination and Severance Rules
Terminating employees in the United States requires careful attention to both federal and state laws, even though the country widely follows an at-will employment model. Employers must ensure that dismissals are handled fairly, documented properly, and comply with all applicable regulations.
Termination
The U.S. follows the at-will employment doctrine in most states, allowing employers to terminate an employee at any time, with or without cause or notice, provided the termination is not based on an unlawful reason. Similarly, employees may resign at will.
However, employers must comply with the following legal requirements:
- Anti-discrimination laws: Employers cannot terminate someone based on protected characteristics under federal statutes such as:
- Title VII of the Civil Rights Act (race, religion, sex, national origin)
- Americans with Disabilities Act (ADA)
- Age Discrimination in Employment Act (ADEA)
- Genetic Information Nondiscrimination Act (GINA)
- State and local laws: Many states provide additional protections. For instance, some prohibit termination for off-duty lawful conduct or political activity.
- Retaliation protections: Employers cannot dismiss employees for reporting workplace violations, discrimination, harassment, safety concerns, or for participating in protected activities such as whistleblowing or union organizing.
- Advance notice requirements: For large-scale layoffs or plant closures, employers must comply with the Worker Adjustment and Retraining Notification (WARN) Act, which requires 60 days’ written notice to affected employees if certain thresholds are met.
- Final paycheck rules: State laws govern when and how a terminated employee must receive their final wages, including payment for unused vacation or PTO where applicable.
To mitigate risks, employers should document performance issues, disciplinary actions, and the reasons for termination. Consistent HR practices and legal review are essential before dismissals.
Severance Pay
There is no federal law requiring employers to provide severance pay upon termination. However, severance may be:
- Mandated by an employment contract or collective bargaining agreement (CBA)
- Outlined in company policy or offered in exchange for a release of claims
- Customarily provided to executives or in mass layoffs to reduce litigation risk or as part of goodwill
Typical severance packages may include:
- Payment based on length of service (e.g., 1–2 weeks’ salary per year of service)
- Continued health benefits for a limited period (e.g., COBRA coverage assistance)
- Outplacement support or job search assistance
Severance agreements must comply with specific regulations, especially when waiving rights under the ADEA (for employees 40 and older), which requires a minimum 21-day review period and a 7-day revocation period.
For global companies unfamiliar with U.S. termination laws, working with an Employer of Record (EOR) in USA ensures compliant offboarding, timely payments, and protection against wrongful termination claims.
Employee Benefits and Additional Perks
While U.S. law mandates few benefits, most employers offer additional perks to stay competitive:
- Health insurance (required for employers with 50+ employees under the ACA)
- Retirement plans (e.g., 401(k) matching)
- Bonuses and stock options
- Remote or hybrid work policies
- Wellness programs, tuition assistance, and commuter benefits
These voluntary benefits help attract and retain top talent in a tight labor market.
Anti-Discrimination and Equal Treatment Laws
Federal laws prohibit employment discrimination based on:
- Race, color, religion, sex (including pregnancy and sexual orientation)
- National origin, age (40+), disability, and genetic information
Key enforcement agencies:
- Equal Employment Opportunity Commission (EEOC)
- State and local human rights commissions
Employers must provide:
- Equal pay for equal work
- Reasonable accommodations for disabilities or religious practices
- Anti-harassment training and clear reporting mechanisms
Labour Law Compliance Tips for Global Employers
Navigating U.S. employment law can be complex due to overlapping federal, state, and local rules. To stay compliant:
- Determine employee classification (W-2 vs 1099, exempt vs non-exempt)
- Follow applicable wage, tax, and leave laws in each state of operation
- Document all HR policies and employee actions
- Use proper onboarding and termination checklists
- Consider working with a U.S.-based legal or HR partner
Alternatively, partnering with an Employer of Record (EOR) in the United States allows you to hire compliantly across states without setting up your own legal entity.
Why Work With an Employer of Record (EOR) in the United States
An Employer of Record (EOR) in the U.S. serves as the legal employer, managing all HR, tax, and compliance responsibilities on your behalf. This includes:
- Drafting compliant employment agreements
- Managing payroll, tax filings, and withholdings
- Administering employee benefits and leave tracking
- Ensuring compliance with state and federal labour laws
Ideal use cases:
- Testing the U.S. market or building a remote team
- Hiring employees in multiple states without opening multiple entities
- Avoiding worker misclassification risks
Partnering with trusted Global EOR Services like Asanify gives you peace of mind and a faster route to scaling your U.S. workforce.
Conclusion
Hiring in the United States opens doors to world-class talent and expansive business opportunities. However, its decentralized employment system—governed by federal, state, and local laws—makes compliance a challenge for global companies. From wage requirements and tax filings to employee classification and termination rules, getting it wrong can lead to legal and financial risk.
Partnering with an Employer of Record (EOR) in the United States simplifies the complexity. An EOR ensures full legal compliance, manages payroll and benefits, and helps you scale across multiple states—without needing to establish a U.S. entity.
Whether you’re exploring the U.S. market or expanding a remote team, trusted Global EOR Services like Asanify provide the support you need to hire fast and operate with confidence.
FAQs
No, most employment is at-will, but written agreements are recommended.
$7.25/hour, though many states and cities have higher local minimums.
Not federally, but many states require paid sick leave and most companies offer PTO.
The ability to terminate employment at any time, for any lawful reason.
No, unless included in a contract or company policy.
Non-exempt employees must be paid 1.5x their regular rate for hours over 40/week.
Yes, for companies with 50+ full-time employees under the ACA.
No legal requirement, but most employers offer paid time off for major holidays.
Federal and state laws apply based on where the employee works—not just the company’s location.
Yes, by using an Employer of Record (EOR) to legally employ workers on your behalf.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
