by Maria Mejia-Opaciuch, John Herrington, and Irma Solares
Foreign companies and investors that enter the U.S. market are governed by numerous state and federal labor and employment laws. When you’re opening a business in the United States, it’s critical to work with experienced lawyers who can guide you through the necessary steps. Here is an overview of the major employment issues companies must account for when opening up shop in the U.S. 
Step 1: hiring and recruitment
Employers may not discriminate against job candidates or employees based on their age, race, sex, national origin, disability, or other protected status under local, state, and federal laws. It’s crucial to follow appropriate hiring practices to comply with the laws of the jurisdictions in which you operate—and to avoid potential litigation.
Job description. When advertising the position or posting it in writing on your website, a job search engine, social media, or elsewhere, be specific about the job requirements and the skills and experience an applicant must possess.
Employment applications and the interview process. State and federal laws govern what employers can ask on employment applications and in interviews. Generally, you cannot ask about or seek to identify an applicant’s race, sex, age, disability, religion, national origin, marital status, union membership, or AIDS, HIV, or sickle cell trait status. Avoid making notations on the employment application about any of those characteristics or asking any questions about criminal history or convictions. Also, don’t pose any medical questions or ask about past workers’ compensation cases on an employment application or during an interview.
Adopt employment applications for all positions, and use them consistently. Keep the job application simple, focused on education, employment history, and attestations of consent to conduct certain drug tests, background checks, credit checks, and employment verification and to seek employment references as permitted by state and federal law.
Depending on your company’s location, you may have applicants who are foreign nationals with time-limited work permits and will inquire about visa sponsorship. You must decide whether to adopt a policy of sponsoring such applicants and to what extent. You should implement an immigration sponsorship policy that simply states the parameters of employment and sponsorship. Having such a policy will ensure that you hire and retain the most talented workforce possible and minimize your liability if you are audited or litigation ensues.
Step 2: offer letters
Offer letters serve to document the employment relationship and can also be the basis for termination. Short form letters can be used for nonexecutive employees and should include the following information about the position:
- Job title;
- Exempt or nonexempt status;
- Location;
- Hours;
- Pay and frequency of pay;
- Start date;
- Benefits, eligibility, and date of eligibility;
- Contingency clauses;
- Whether employment is at will or may be terminated for cause; and
- The time frame to accept the offer.
The letter should be on company letterhead and executed by an authorized employee.
Offer letters for executives will be more detailed and can include noncompete provisions, severance language, bonus information, restrictive covenants, and confidentiality and trade secret provisions. Employment arrangements for contract, remote, and part-time employees or other unique situations should also be detailed in a written document spelling out the arrangement.
Every state except for Montana is an at-will-employment state, which means that either the employer or the employee is free to terminate the employment relationship at any time and for any reason if there isn’t a contract to the contrary. To preserve the at-will relationship, you must use precise language when drafting any type of document, agreement, or communication related to an employee’s terms and conditions of employment so you don’t unintentionally create a contract to the contrary.
Step 3: acceptance and I-9 compliance
All employers in all states must complete and maintain a Form I-9 employment verification form for each employee hired after November 6, 1986, the date the Immigration Reform and Control Act of 1986 (IRCA) was enacted. Employers must complete the I-9 in a timely manner (usually within three days of hiring an employee), have the employee complete and sign Section 1, review the acceptable documents presented by the employee, and complete Section 2.
In the process of completing the Form I-9, you cannot discriminate or retaliate in any way by your actions, remarks, or threats, or by overdocumenting or requesting specific documents. You must give employees the list of acceptable documents found on the last page of the Form I-9. As your company grows, it is critical to establish and maintain a formal I-9 policy and conduct regular I-9 self-audits to ensure you are compliant and avoid heavy monetary fines resulting from audits by the U.S. government.
Step 4: wage and hour laws
The vast majority of legal disputes faced by many small and emerging companies result from claims that nonexempt employees were inadequately compensated for overtime work. Failure to properly classify and compensate employees may lead to significant legal problems. Federal wage and hour standards are governed by the Fair Labor Standards Act (FLSA), which also governs minimum wage, overtime compensation for hours worked in excess of 40 per week, record-keeping requirements, and pay equality between men and women.
Many states have their own wage and hour statutes that set higher minimum wage standards than the FLSA’s standards or contain special provisions for rest and meal breaks. In those states, employers must follow wage and hour laws that are more generous or favorable to employees. You should also understand that you cannot avoid minimum wage or overtime requirements by merely calling an employee an “independent contractor,” labeling a position “exempt,” or paying someone a salary. Under the FLSA (and emerging court decisions), several factors are used to determine whether an employee or a certain position (e.g., an executive, administrative, or professional job) is properly classified as exempt.
Step 5: employee benefits and incentive compensation
Since cash flow may be limited in the early days of a start-up or small company, you may decide to offer other forms of incentive compensation to executives or to attract talent. Examples may include restricted stocks, stock options, restricted stock units, or stock appreciation rights. Other types of compensation may include incentive bonus plans, severance benefits, health plans that are available under the Affordable Care Act (ACA), and retirement benefits (e.g., a 401(k) plan). Any alternative compensation plan should be structured with the advice of an employee benefits expert and detailed in the offer letter.
Step 6: drafting and maintaining policies
As your company and workforce grow, developing and implementing employment policies and practices will facilitate your compliance with the applicable employment laws and minimize workplace disputes. To prevent liability and foster employee morale, you should establish clear policies addressing vacation, sick leave, Family and Medical Leave Act (FMLA) rights, harassment, discrimination, and prohibited conduct and the consequences for such conduct. Take care to avoid overly restrictive social media policies and policies that afford greater protection to employees than employment laws require. Update your policies regularly to ensure compliance with changing laws.
Although employee manuals, policies, or handbooks typically are not viewed as enforceable contracts in most states, in some states, the absence of an explicit disclaimer in any of those documents creates a risk that a state court may infer that a contractual relationship exists. Employers should therefore strongly consider including in any employee handbook or manual an explicit disclaimer stating that the document itself is not a contract.
Finally, the keys to ensuring that an employment manual is effective are (1) consistent application and enforcement of policies and (2) regular training on prevention of harassment and discrimination for employees at all levels, including supervisors.
Step 7: employee evaluation and discipline
Employee performance evaluations are critical to a company’s personnel practices. Honest and effective evaluations can gauge whether employees are performing in accordance with expectations, identify areas for improvement, and serve as valuable tools when an employment decision is questioned or challenged in court. Evaluations should be conducted at least annually. But if performance issues are identified, midyear reviews are often advisable.
If discipline or termination appears to be warranted, the reason for the decision should be clearly documented. Termination requires compliance with wage laws and, if applicable, proper notification about the right to continue insurance and other benefits under COBRA and the Employee Retirement Income Security Act (ERISA).
Other considerations
Depending on your company’s size, you may be subject to state and federal employment laws. For example, the IRCA, the FLSA, the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), and states’ workers’ comp laws apply regardless of the size of your workforce. A single employee can trigger liability for violations of those laws.
By contrast, some federal employment laws require a minimum number of employees before they apply. Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act (ADA) each require covered companies to have a minimum of 15 employees. The Age Discrimination in Employment Act (ADEA) applies to companies with 20 employees, the FMLA is applicable to companies with 50 employees, and the Worker Adjustment and Retraining Notification Act (WARN Act) covers companies with 100 employees. Many local and state laws have lower workforce thresholds, so it’s important to understand which laws apply to your company.
Here are a few other things to keep in mind:
- Small or start-up companies should have written agreements with all service providers detailing the exact terms and conditions of the services to be provided to the company (e.g., payroll, benefits administration, or other HR services).
- Using social media to recruit and hire is a developing legal area, so you should be extremely cautious about gathering information not otherwise permissible in the hiring process to avoid claims of discrimination or invasion of privacy.
- Because start-ups may have intangible assets to protect, intellectual property concerns should be addressed early, ownership and value should be well documented, and the company should ensure that employees sign confidentiality agreements before commencing their employment.
Bottom line
When you’re opening a company anywhere in the United States, it’s best to use reputable and trustworthy counsel to help you develop employment policies and processes that will be legally compliant, efficient, and cost-effective. Opening a new company and becoming operational as quickly as possible is a difficult process. Early counseling and guidance from experts
in labor and employment law is vital to address the considerations raised here and avoid expensive headaches.
Maria Mejia-Opaciuch is senior counsel with Carlton Fields Jorden Burt, practicing in the firm’s Miami, Florida, office. She may be contacted at mmejia-opaciuch@cfjblaw.com.
John Herrington is a litigation associate with Carlton Fields Jorden Burt, practicing in the firm’s Hartford, 
Connecticut, office. He may be contacted at jherrington@cfjblaw.com.
Irma Solares is a shareholder with Carlton Fields Jorden Burt, practicing in the firm’s Miami, Florida, office. She may be contacted at isolares@cfjblaw.com.