The European Lawyer

USA Employment

18 May 2012

Employment and Labour Law: 2nd edition - United States

Editors: Epstein Becker & Green PC, William J Milani and Howard Pianko

1. SOURCES OF EMPLOYMENT LAW
1.1 What are the principal sources of law and regulation?
Federal, state and local statutes, the common law in each of the 50 states, as well as the judicial decisions that interpret the statutory and common law, govern employment relationships. There are federal courts and state courts in each state. The US Supreme Court is the highest court; its decisions are binding on all lower federal courts and sometimes binding on state courts as well. Each state has its own supreme court whose decisions are binding on their lower state courts.

Federal laws are applicable throughout the whole country, whereas state and local laws are only applicable within their state or locality of enactment. State and local laws may provide greater protection to employees than federal laws (eg, minimum wage, additional protected categories under state and local anti-discrimination laws, etc).

The US Constitution provides public employees with certain employment-related rights such as freedom of speech and the right to privacy in the workplace in certain situations.

1.2 What is the order of priority of the relevant sources – ie, which take precedence in the event of a conflict?
At the federal level, the highest court is the Supreme Court, followed by the courts of appeals and finally by the district courts. There is a similar scheme in each state, generally the supreme court, appeals court, and trial court. The decisions of each higher court are binding on all its lower courts.

In certain circumstances, federal laws pre-empt the enactment of state or local laws on specific topics (eg, pensions). At times, local laws that conflict with state laws are void as well.

1.3 List and briefly describe relevant statutes and international treaties
Title VII of the Civil Rights Act of 1964 (Title VII): Title VII prohibits discrimination in employment on the basis of race, colour, national origin, sex and religion. Title VII applies broadly to all aspects of employment including hiring, promotions, demotions, compensation, terminations, and other terms and conditions of employment. Title VII also prohibits retaliation against an employee who protests conditions made unlawful by Title VII or who files a complaint or cooperates in a government agency investigation, irrespective of the merits of the underlying charge of discrimination. Title VII applies to employers engaged in an industry affecting commerce that have 15 or more employees on each working day in each of 20 or more calendar weeks in the current or preceding calendar year.
The Americans with Disabilities Act (ADA): The ADA and a growing number of state laws make it unlawful to discriminate against a qualified individual with a disability, and require covered employers to make reasonable accommodations for qualified disabled applicants and employees unless such accommodations pose an ‘undue hardship’ for the employer or the individual poses a direct threat to the health or safety of other workers. The ADA covers employers with 15 or more employees.

Family and Medical Leave Act (FMLA): The FMLA requires employers who employ 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave to employees for certain family and medical reasons. Employees are eligible if they have worked for the employer for at least one year, and for 1,250 hours over the previous 12 months. Unpaid leave must be granted for any of the following reasons: (a) to care for the employee’s child after birth, (b) a placement for adoption or foster care, (c) to care for the employee’s spouse, son, daughter, or parent who has a serious health condition, or (d) the employee’s own serious health condition that makes the employee unable to perform essential job requirements. Upon return from an FMLA leave, most employees must be restored to their original or equivalent position with equivalent pay, benefits and other employment terms.

Age Discrimination in Employment Act (ADEA): The ADEA makes it unlawful to: (a) not hire or to discharge any individual age 40 or over, (b) otherwise discriminate against such individual with respect to compensation or other terms and conditions of employment because of age, or (c) limit, segregate or classify employees in any way which would deprive any individual within the protected-age bracket of employment opportunities or otherwise adversely affect employee status because of such individual’s age. The ADEA applies to employers, including public employers, having 20 or more employees, employment agencies serving employers, and labour organisations with 25 or more members. 

The Fair Labour Standards Act (FLSA): The FLSA regulates wages and hours in the field of interstate commerce. It protects against substandard wages by requiring payment of a specified minimum wage to employees of businesses and governments subject to the FLSA. It protects against excessive hours of work by requiring the payment of overtime compensation to certain types of employees.  It also protects child labour from exploitation.

The Equal Pay Act (EPA): The EPA prohibits sex discrimination in the payment of wages to employees performing substantially equal work, provided the jobs (a) require substantially equal skill, effort, and responsibility, and (b) are performed under similar working conditions.

Immigration Reform and Control Act (IRCA): Federal law prohibits an employer from hiring an individual without verifying that (a) he or she is authorised to work in the United States, and (b) continuing the employment of an employee hired after 6 November 1986, knowing that the employee is, or has become, an unauthorised alien. Employers must verify each individual’s identity and authorisation on Form I-9 (including US citizens), and are required to maintain records for at least three years, or one year after the employment concludes, whichever is longer.

Separation Benefits (COBRA): Federal law and most states require employers to offer employees and their dependents the right to continue any health plan coverage offered by the employer (including health maintenance organisations, flexible benefits, employee assistance programmes, vision, dental and prescription plans). Coverage continues for an extended period after a ‘triggering event’ such as separation from employment (other than due to gross misconduct), reduction in hours, loss of dependent coverage, divorce, legal separation or death. Employers must provide notice of these rights to employees and their dependents.

Worker Adjustment and Retraining Notification Act (WARN): WARN requires employers with 100 or more full-time employees to provide, under specific circumstances, notification of plant closings and mass layoffs to workers, unions, and affected state agencies 60 days in advance.

Occupational Safety and Health Act (OSHA): Safety and health conditions in most private industries are regulated by OSHA or OSHA-approved state programmes, which also cover public sector employers. Employers covered by OSHA must comply with its regulations and safety and health standards. Employers also have a general duty under OSHA to provide their employees with work and a workplace free from recognised serious hazards. OSHA is enforced through workplace inspections and investigations.

The Employee Retirement Income Security Act (ERISA): ERISA regulates employers that offer pension or welfare benefit plans for their employees. ERISA imposes a wide range of fiduciary, disclosure and reporting requirements on fiduciaries of pension and welfare benefit plans and on others having dealings with these plans. These provisions pre-empt many similar state laws.

The Labour-Management Reporting and Disclosure Act of 1959: This statute deals with the relationship between a union and its members. It protects union funds and promotes union democracy by requiring labour organisations to file annual financial reports, by requiring union officials, employers, and labour consultants to file reports regarding certain of their labour relations practices, and by establishing standards for the election of union officers.

National Labour Relations Act (NLRA): The NLRA governs relations between labour unions and most non-governmental employers whose businesses affect interstate commerce. It guarantees employees the right to join labour unions and bargain collectively with employers as well as to refrain from such activities.

The Sarbanes-Oxley Act (Sarbanes-Oxley): Sarbanes-Oxley was enacted in 2002 as a legislative response to several major corporate and accounting scandals (eg, Enron, Worldcom, Tyco International, etc.). This legislation establishes new or enhanced standards for all US public companies and public accounting firms. In the employment law area, it provides protection for employees of public companies who ‘blow the whistle’ by reporting to certain company personnel or to a federal regulatory or law enforcement agency, conduct that they reasonably believe constitutes a violation of federal law relating to securities fraud or fraud against shareholders, or by participating or assisting in a proceeding relating to the alleged fraud.

Friendship, Commerce and Navigation Treaties (FCN Treaties): After World War II, the United States entered into a series of FCN Treaties with various countries (eg, Japan, Finland, Italy, Spain, etc.) that grant the right to foreign corporations to conduct business in the US on an equal basis without suffering discrimination based on their alienage. Many of these treaties include provisions which grant foreign corporations the discretion to ‘engage’ executives and other professionals of ‘their choice’ in the US. Based upon such provisions, foreign corporations and/or their US subsidiaries have argued that FCN Treaties provide a defence to claims brought by locally hired employees that preferential treatment of rotating staff employees violates US anti-discrimination laws. FCN Treaties have been the source of extensive litigation in federal courts, including the US Supreme Court, and has produced inconsistent court decisions as to whether such FCN Treaties provide a defence to US anti-discrimination laws.

2. PRINCIPAL INSTITUTIONS 
2.1 Describe the principal institutions and/or government agencies that assist in the administration or oversight of employment law/ relationships
Apart from the federal and state courts, there are three main federal institutions in charge of insuring compliance with federal labour and employment laws and promulgating rules and regulations:

US Department of Labour (DOL)
The DOL administers and enforces a variety of federal labour laws including those that guarantee workers’ rights to safe and healthy working conditions (OSHA); minimum hourly wage and overtime pay (FLSA); medical and family leave (FMLA); and whistle-blowing protection for employees in public companies with regard to reporting securities frauds or frauds against shareholders (Sarbanes-Oxley) etc.

Each state has its own Department of labour in charge of administering and enforcing its own state labour laws.

Equal Employment Opportunity Commission (EEOC)
The EEOC is the agency in charge of ensuring compliance with all federal anti-discrimination laws (eg, Title VII, ADEA and ADA). Discrimination and harassment claims based on federal law must be initially filed by an employee at the EEOC. The agency generally will try to settle the claims on terms agreeable to the parties. If settlement is not possible, the agency will investigate the claims. At the end of its investigation, it may find that probable cause exists or does not exist to believe that discrimination has occurred. In either case, it will issue a Notice of Right to Sue letter that authorises the employee to file his or her claims in District Court. In a few cases, the EEOC, provided that it has found that probable cause exists and after failing to conciliate the matter, will actually represent the employee in District Court. The agency also issues regulations and guidance to employers on cases and statutory changes. These regulations are not due any particular deference by courts.

Other important agencies are various state and local Human Rights Commissions in charge of enforcing the state and local anti-discrimination laws.

The National Labour Relations Board (NLRB)
The NLRB is the federal agency that administers and enforces the NLRA. It has two basic functions: (1) to oversee and conduct secret ballot elections where employees can decide whether or not they want union representation; and (2) to prevent enumerated unfair labour practices by employers or unions, such as threats, coercion, violence, or certain types of strike activity. If the NLRB’s investigation of unfair labour practices leads the agency to conclude that the allegations may be meritorious, a hearing before an Administrative Law Judge will be held. A losing party may appeal an adverse decision to the NLRB in Washington DC, and if unsuccessful there, may appeal to one of the United States Courts of Appeals.

3. ROLE OF THE NATIONAL COURTS
3.1 In which courts are employment rights/obligations enforced?
Employment rights/obligations are enforceable in most federal and state courts. Unlike most of the civil law countries, US courts, with some very limited exceptions, are not divided by areas of laws; the main division is between state and federal courts. State courts generally deal with employment law cases based on state statutes or common law. Federal courts generally will take charge of cases dealing with federal laws as well as some cases where the plaintiffs and defendants reside in different states (known as diversity jurisdiction).

Although federal employment discrimination claims (based on Title VII, ADEA or ADA) must be initially filed with the EEOC, claims brought under state anti-discrimination statutes are different. In some states, for example, claims must be initially filed with their State Human Rights Commission, but other states permit employees to file directly in court.
 
4. EMPLOYMENT STATUS AND CATEGORIES OF WORKER 
4.1 What defines employment status (eg, whether an individual is employed or self-employed)?
In Nationwide Mutual Insurance Company v Darden 503 US 318 (1992), the Supreme Court established the ‘right-to-control’ test as the dominant test for courts to determine whether an individual is an employee or an independent contractor under most federal and state anti-discrimination and employment laws. Although the Supreme Court provided 12 factors relevant to the test, the most determinative factor is whether the alleged employer has ‘the right to control when, where, and how the worker performs the job ….’

However, some federal courts in interpreting and determining coverage in the context of whether a person is an employee under the FLSA, primarily for minimum wage or overtime purposes, use a broader test known as the ‘economic realities’ test to distinguish between employees and independent contractors. This test focuses on how economically dependent the individual is on the business that he or she serves. To the extent that an individual is highly dependent and derives a substantial portion of his or her income from it, the ‘economic realities’ test strongly suggests employee, rather than independent contractor, status.

The US Circuit Courts have developed various versions of the ‘economic realities’ test. In Secretary of labour v. Lauritzen, 835 F.2d 1529 (7th Cir. 1987), for example, the Seventh Circuit considered six different factors, affirming, however, that no factor ‘is by itself, or by its absence, dispositive or controlling.’ The factors are: (1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; and (6) the extent to which the service rendered is an integral part of the alleged employer’s business.

Please note that among federal and state agencies, the standards for assessing the status of a worker or group of workers vary. It is possible that workers classified by one agency as employees could be classified as independent contractors by another agency, as not all agencies use the same test. The Internal Revenue Service (IRS) generally applies the ‘right-to-control’ test, and many federal agencies, with the exception of the IRS, apply either the ‘economic realities’ test or the ‘hybrid’ test.
The ‘hybrid’ test combines factual control and financial dependence inquiries. Additionally, an expanded ‘common law agency’ test that essentially is a modified version of the ‘hybrid’ test has been used in circumstances of alleged employment discrimination. This test emphasises the right-to-control factors, but also takes into account economic factors. Under any of these standards, however, the regulatory agencies generally begin with the proposition that most, if not all, workers are employees. Generally, regulatory agencies require the alleged employer to persuade them to the contrary.

4.2 What is the relevance of the distinction?
Employees are protected by the above-described laws, whereas independent contractors’ rights are only established within the terms of the agreed contract.

4.3 What are the main categories of worker?
The most important distinction to be drawn is between exempt and non-exempt employees in relation to FLSA minimum wage and overtime requirements.

The ‘white collar’ exemptions exclude those employed in an executive, administrative, or professional capacity. ‘Outside salesmen’ and computer professionals are often exempt as well.

Employees of seasonal amusement and recreational businesses, certain employees in fishing and aquatic businesses, most agricultural workers, publishers of small newspapers, and domestic workers who perform casual babysitting or care for the disabled or aged, as well as several other categories of employees are also exempt.

5. CONTRACT
5.1 What constitutes an employment contract?
The traditional rule in the US regarding the relationship between employer and employee is that a hiring for an indefinite term represents ‘employment-at-will.’ Thus, unless there is an agreement to the contrary or a statute limiting an employer’s right, either party may terminate the employment relationship at any time with or without cause or notice. Historically, a majority of American workers have been employed on an at-will basis. Most at-will employees do not have a written contract. However, at-will employees may have offer letters that outline their compensation structure and benefits, and that may contain other provisions such as those discussed below in section 6.
Generally, persons employed for an established duration in terms of years or who can only be terminated for cause have written contracts. They usually are highly-qualified and highly-remunerated employees.

5.2 Formal requirements
There are no formal requirements. Signing an offer letter is enough to start the employment relationship.

6. TERMS AND CONDITIONS
6.1 What terms, if any, must be included in a contract?
Other than mutual promises to perform and consideration, there generally are no formal requirements that must be included in an employment contract. Certain states, however, require that contracts contain express provisions to ensure that certain terms of the contract or offer of employment satisfy their state law. For example, California and Texas courts have required specific language to be set forth in certain restrictive covenants (eg, non-solicitation clauses) that are usually included in employment contracts or offer letters in order for these provisions to be effective.

6.2 What terms are typically included in a contract?
The following are typical contract provisions:

• Position, duties, compensation and length of employment are generally set forth in employment contracts.
• For ‘cause’ clause – defines the circumstances under which the employment relationship can be terminated by the employer without liability.
• Severance provision – sets forth the compensation to be paid to the employee in case of termination of employment before the specified term. Typically, the severance provisions will only be triggered if the employee is terminated ‘without cause.’
• Non-compete clause – establishes the obligation of the employee of not competing with the company for a specific period of time and within a specific geographical zone once the employment relationship is terminated. Starting the employment relationship might be construed as valid consideration for the introduction of this provision. Receiving independent consideration such as severance pay after termination, during which time the employee cannot compete, will increase the probability that the clause will be enforced by a court. Some states greatly restrict the use of non-compete clauses by limiting its use to very specific circumstances.
• Non-solicitation – prohibits the employee during a specific period of time from acquiring customers/clients of his/her former company for his/her new employer or for him/herself.
• No-hire clause – prohibits the employee during a specific period of time from hiring other employees from his/her former company for his/her new employer or for him/herself.
• Jurisdiction clause – selects the courts or other forums with authority to hear any controversy that might arise from the contract.
• Choice of Law clause – selects the law under which the contract shall be interpreted in case of controversy.
• Confidentiality clause – establishes which information is confidential and must not be disclosed by the employee to third parties, as well as the sanctions for disclosure.

6.3 Working time and rest breaks
Working time is regulated by law and by the company policy. The FLSA and various state laws set forth the requirements and exemptions concerning overtime compensation. Non-exempt employees receive compensation at a rate not less than one and a half times the hourly rate paid the employee for every hour worked after 40 in a given workweek. Some states, such as California, have enacted statutes providing for more generous overtime compensation.

In addition, the FLSA includes child labour provisions. These provisions are designed to protect minors and prohibit their employment in certain jobs and under conditions detrimental to their health or well being. The provisions include restrictions on hours of work for minors under age 16 and lists occupations that youths cannot perform because they are deemed too dangerous. Moreover, there are state regulations providing even wider protection and stricter limits with regard to the employment of minors.

Many states have also their own legislation regulating the minimum requirements for meals and rest breaks.

6.4 Annual leave
There is no legal requirement concerning vacations at either the state or federal level. The annual leave conditions are set by each company according to their own internal policies.

7. EMPLOYEE REPRESENTATION
7.1 Trade unions
Union representation typically comes about through an NLRB-conducted election where a majority of those employees voting in a secret ballot election decide in favour of union representation in an appropriate bargaining unit, which may be plant-wide, department-wide or other grouping of employees with common terms and conditions of employment. Employers also may voluntarily agree to recognise a labour union if the union proves that a majority of employees want union representation via a signed union card check procedure.

Employers who purchase unionised facilities may under certain circumstances be considered a legal successor and be required to recognise the union and adopt the union contract. Moreover, in certain limited circumstances, the NLRB can impose what is called a bargaining order on an employer where the union has demonstrated that a majority of employees wanted union representation, the employer committed egregious unfair labour practices (ie, firing pro-union employee leaders), and the NLRB concludes that a fair election cannot be held.

8. INFORMATION AND CONSULTATION
8.1 Describe the circumstances in which it is necessary to inform and/or consult with employee representatives
In union-related circumstances, the NLRA imposes a duty on employers to bargain with the unions representing their employees concerning matters affecting the employees’ wages, hours and other terms and conditions of employment. Employers may be required by the NLRA or under the terms of a negotiated union collective bargaining agreement to provide unions with information to enable them to engage in collective bargaining negotiations, grievance and arbitration procedures, and contract administration. 

9. EQUAL OPPORTUNITIES
9.1 Describe any forms of discrimination which are prohibited
Title VII prohibits discrimination and harassment in employment on the basis of race, colour, national origin, sex and religion. The ADEA makes it unlawful to discriminate against any individual age 40 or older. The ADA makes it unlawful to discriminate against a qualified individual with a disability. The Pregnancy Discrimination Act (PDA), an amendment to Title VII, prohibits discrimination on the basis of pregnancy. Under these statutes, generally only employers – as opposed to managers, executives, etc – can be liable for discrimination.

Many states and localities maintain their own employment discrimination statutes, which provide wider protections. Some states, such as New York, include sexual orientation and marital status in their list of ‘protected classes.’ State and local laws often provide for greater damages and/or attorneys’ fees. Additionally, many state and local laws provide that individuals can be liable for damages.
Sexual harassment is an illegal form of sex discrimination. The Supreme Court has defined sexual harassment by recognising two types:

• ‘Quid pro quo’ refers to those circumstances when an employer (eg, supervisor) demands sexual favours from an employee in return for an economic benefit such as a raise or threatens to terminate an employee or withhold job benefits unless sexual demands are met.
• ‘Hostile work environment’ sexual harassment involves a supervisor, co-worker or even customer, vendor, or other third party making unwelcome sexual comments or remarks, inappropriately touching or acting in a sexually inappropriate way toward an employee. The conduct must be severe or pervasive so as to change the conditions of the employee’s job and create an intimidating, hostile or offensive work environment. 

The anti-discrimination laws prohibit discrimination in all areas of employment including hiring, firing, promotion, demotion, compensation, and other terms and conditions of employment. There are several basic theories under which an employee may claim discrimination:

• Disparate treatment is the practice of intentionally treating employees differently because of their specific protected trait, eg, race. To succeed on a disparate treatment claim, the plaintiff must prove that the defendant acted with discriminatory intent or motive.
• Disparate impact is the adverse effect of a facially-neutral practice that nonetheless discriminates against persons because of their protected trait, eg, requiring secretaries to have college degrees, when such degrees are unnecessary to perform the job. Such a requirement tends to discriminate against blacks because whites graduate from college in higher percentages than blacks. Discriminatory intent is irrelevant under this theory.
• Failure to accommodate: The ADA requires covered employers to make reasonable accommodations for qualified disabled applicants and employees unless they would pose an ‘undue hardship’ for the employer or the individual poses a direct threat to the health or safety of other workers. Similarly, Title VII imposes a duty upon employers to accommodate the religious beliefs of employees (eg, giving time off for holy day observance) unless an undue hardship would be imposed.

Depending on the statute, besides proving that discrimination did not occur, there may be other defences available to an employer such as a bona fide occupational qualification (BFOQ). An employer can defend a classification based on sex, national origin, religion, age or disability (but not race) by establishing that the classification is a BFOQ. This defence allows the employer to show that the classification is necessary for the efficient operation of the business and that the discriminated minority would be unable to perform the job properly (eg, women not allowed to work in male maximum-security jails; men not being permitted in women’s lingerie department, etc). The courts interpret this defence narrowly.

Discrimination also will not generally be found where, for example, the employer: (1) acts pursuant to a bona fide seniority or merit system, (2) measures earnings by quantity or quality of production, (3) acts on the results of a professionally developed ability test that ‘is not designed, intended, or used to discriminate because of race, colour, religion, sex, or national origin,’ or (4) makes a decision concerning a protected worker under the ADEA that is based on reasonable factors other than age.

Remedies
Federal and state statutes vary greatly as to permissible remedies that a prevailing employee can receive. The most common are back pay and benefits, front pay or reinstatement to former or like position, compensatory damages for emotional distress, punitive damages, attorneys’ fees and costs.
Title VII and the ADA cap compensatory and punitive damages at $300,000 for an employer with more than 500 employees. The ADEA provides liquidated damages in lieu of punitive damages. Liquidated damages are the doubling of amounts owing to a prevailing plaintiff in cases of willful violations. The amounts owing are unpaid wages and overtime compensation. It does not include front pay. Certain state and local anti-discrimination statutes do not contain similar caps.

Retaliation
All of the anti-discrimination statutes include anti-retaliation provisions, protecting covered employees from retaliation from the employer for complaining about harassment or discrimination (whether in the form of an internal complaint, a complaint to local, state or federal administrative body, or filing a lawsuit), or participating in any way with a harassment or discrimination claim by another employee (eg, serving as a witness in a company internal harassment investigation). Thus, an employer may not terminate an employee, demote an employee, fail to promote him or her, or otherwise adversely affect the terms and conditions of an employee’s employment for engaging in the activities described above. Importantly, even if an employee’s discrimination claim has no merit, he or she can still prevail on a retaliation claim. In fact, this occurs with some frequency in the courts.

Employees are also protected from retaliation under several other laws. In certain cases, whistleblower and other types of public policy claims protect employees from retaliation for either reporting employer violations of statutory safety, environmental or other ethical standards, or for refusing to participate in illegal or improper activities at the behest of the employer.

9.2 Parental rights
The FMLA, as discussed above, requires employers that employ 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave to eligible employees for certain family and medical reasons. Employees are eligible if they have worked for at least one year, and for 1,250 hours over the previous 12 months. Unpaid leave must be granted to care for the employee’s child after birth or a placement for adoption or foster care. Upon return from FMLA leave, employees generally must be restored to their original or equivalent positions with equivalent pay, benefits, and other employment terms.

Some states, including California, Connecticut and New Jersey, provide greater protection in the form of: (a) more weeks of leave, (b) some type of compensation during the leave, and/or (c) additional reasons to take the leave.

10. DISCIPLINE AND TERMINATION
10.1 What rules/procedures must be followed if an employer wishes to discipline an employee?
There are no formal procedures established by law. Rather, the employer should follow its internal policy which often is contained in the employer’s employee handbook. A failure to provide or enforce consistent corporate employment policies relating to any employment practices violation may expose the employer to liability. In some jurisdictions, employers are expressly required to adhere to their own internal policies and procedures.

Unionised companies must follow all discipline provisions in their collective bargaining agreements (CBAs) with the union. CBAs typically contain specified steps to process grievances, including meetings with supervisors and union officials as a prelude to an arbitration hearing. CBAs usually state that employees can be terminated for good cause and define the meaning of good cause. An arbitrator selected by the parties will ultimately resolve the dispute.
 
10.2 What disciplinary action may be taken?
The employer may take any disciplinary action, including termination, established in its internal policies, unless there is an applicable CBA in which case the employer must follow its predetermined procedures. Some employers in the US elect to maintain ‘progressive discipline’ policies, whereby discipline takes several specific steps (eg, first violation warrants an oral warning, the second violation results in a written warning, and the third may result in discharge). A failure to adhere to this procedure (eg, skipping a step) may result in liability.

10.3 What are the grounds on which employment contracts can be terminated (by both employer and employee)?
As explained, the US follows an at-will approach to the employment relationship. Unless otherwise specified in a written contract, an employee can be dismissed for a good reason, a bad reason or no reason, and with or without notice, as long as the reason is not unlawful. Similarly, an employee can quit and leave his employment at any time without advance notice unless a contract provides to the contrary.

10.4 What procedure must be followed?
There are no formal procedures established by law. The employer follows the procedure established in the contract, CBA or employee handbook. The past practice of an employer concerning how it has previously dealt with the same or similar situations may be taken into consideration by an agency or court, especially where employees have alleged that other employees have been treated more favourably.

10.5 What indemnities must be paid?
The employer is not mandated to pay any type of severance compensation unless such payment is guaranteed by company policy, contract or a CBA.

10.6 What are the consequences of not having the right grounds/ following the right procedure?
If contract procedures or termination grounds are not followed, the employee can sue for, among other things, breach of contract and employment discrimination (eg, termination procedures are followed when male employees are involved, but not when female employees are involved). In the absence of a written employment contract, certain states recognise a claim of wrongful discharge based upon a breach of an implied contract or a covenant of good faith and fair dealing between the employer and employee.

In the event that procedures set forth in a CBA are not followed, an arbitration hearing may occur. In some cases, an unfair labour practice claim can be filed with the NLRB.

In addition, an individual who has resigned from employment based on an employer’s alleged discriminatory acts may claim that he or she has been constructively discharged
(ie, the resignation occurred under such intolerable conditions that the law should treat the resignation as an involuntary discharge). Constructive discharge requires deliberate action on the employer’s part. Claims of constructive discharge may be established when, for example, an employee is subjected to an unreasonable risk of physical harm, to significant verbal abuse, or sexual harassment. Intolerability of working conditions is assessed by the objective standard of whether a reasonable person in the employee’s situation would have no choice but to resign. An employee’s subjective opinion that working conditions are intolerable is not sufficient to establish constructive discharge.

10.7 Do special rules apply in certain situations?
Protected categories
N/A.

Fixed-term contracts
The at-will nature of the employment relationship disappears under a fixed-term contract, which by definition is a contract that cannot be terminated before a specific period of time has elapsed, unless there is good cause to cancel it. Under a fixed-term contract, an employee can only be dismissed in accordance with its stipulated terms, and he or she will receive damages in case the contract is breached by the employer.

Probationary periods
There is no legal requirement to have probationary periods for new employees. Where an employee is hired with a probationary period, the contract or employee handbook would generally control it. Unionised employees often have probationary periods; in such cases, the applicable provisions in CBAs would govern.

11. COLLECTIVE DISMISSALS
11.1 What is the definition of collective dismissal?
Under WARN, a mass layoff or a reduction-in-force occurs when an employer with 100 or more employees reduces its workforce at a single site of employment during any 30-day period (or under certain specific circumstances during any 90-day period) and: (a) at least 33 per cent of the employees at a single site of employment and a minimum of 50 employees are affected, or (2) at least 500 employees at a single site of employment are affected.

11.2 What is the procedure that must be followed in the event of collective dismissals?
In the event of mass layoff, the employer must give 60-days written notice to workers, unions and affected state agencies.

11.3 What are the consequences of not complying with the applicable procedures?
If sufficient notice is not given, the employer may be required to pay the affected workers backpay and benefits. The employer also may have to pay civil fines. However, the notice period can be reduced or eliminated where the employer can establish that providing notice at an earlier point would have interfered with its good faith efforts to obtain capital or business to avoid or postpone the closing. Notice also will not be required where the closing was caused by unforeseeable business circumstances or natural disasters.

11.4 What are employees’ rights in the event of collective dismissals?
Other than the WARN notice rights above, some states provide broader protections.

11.5 Are there other circumstances which trigger collective dismissals?
Plant closings trigger collective dismissal rights. Plant closings are defined by WARN as the permanent or temporary shutdown of a single site of employment or one or more facilities or distinct operating units within a single site of employment, if the shutdown results in an employment loss at the single site of employment for 50 or more employees during any 30-day period (or under certain specific circumstances during any 90-day period).

12. FORTHCOMING LEGISLATION
12.1 Outline any major employment legislation in the pipeline
The US Congress is expected to enact legislation in early 2007 that will raise the minimum wage to $7.25 per hour.

Recently, the US Supreme Court issued a recent decision with important consequences in the employment law arena, Burlington Northern & Santa Fe Railway Co. v. White. The Supreme Court ruled that retaliation includes any employer actions, whether or not employment-related, that are ‘harmful to the point that they could well dissuade a reasonable worker from making or supporting a charge of discrimination.’ The ruling greatly expands the definition of retaliation. The standard is now more flexible and easier for employees to satisfy. It is expected that the number of retaliation claims will increase in the future.

13. USEFUL REFERENCES
13.1 Please identify any useful works of reference relating to employment law in your jurisdiction including useful websites
DOL website: www.dol.com
EEOC website: www.eeoc.com
NLRB website: www.nlrb.gov
Epstein, Becker & Green website: www.ebglaw.com