US employment law essentials for expanding UK companies

Understanding US employment law becomes essential when UK companies expand across the Atlantic. American employment regulations differ drastically from British standards, creating compliance challenges that can result in expensive penalties, legal disputes, and operational setbacks.

UK businesses entering the US market must navigate federal requirements while managing state-specific variations that often exceed national minimums. This article covers the fundamental US employment law essentials every growing UK company needs to master, from mandatory employment verification to complex benefit requirements and termination procedures.

US employment verification practices

1. Federal requirements under Form I-9

US employment law begins with proving every single person you hire can legally work in the US. All American employers must verify this using Form I-9 within three days of hiring someone, regardless of company size or location. 

Unlike UK right-to-work checks, the I-9 process requires employers to physically look at their documents (passport, driver's license, whatever proves they're allowed to work), make copies, and file everything properly. 

Miss this step? You're looking at some hefty fines.

2. State-level variations and E-Verify requirements

While Form I-9 is federally mandated, some states also require E-Verify. 

E-Verify is an online system that double-checks government databases to verify I-9 information. It's like getting a second opinion, but mandatory in these states:

• Arizona, Georgia, and South Carolina – Mandate E-Verify for all employers
• Alabama and Mississippi – Require E-Verify for public contractors and certain business license holders
• Utah and Louisiana – Have industry-specific E-Verify requirements

Understanding at-will employment in the US 

1. Federal at-will employment doctrine

At-will employment means you can fire someone for almost any reason, at any time. Seriously. Don't like their coffee choice? Technically grounds for termination (though maybe not the best business practice).

This is probably the biggest shock coming from the UK system. No lengthy dismissal procedures, no extensive documentation requirements – although we recommend keeping thorough documentation anyway.

However, at-will employment has important exceptions. You can’t base terminations on protected characteristics (race, gender, age, disability) or in retaliation for filing complaints about workplace violations.

2. State exceptions and modifications

Not every state loves the "fire at will" approach:

• Montana – Requires "good cause" for termination after a probationary period
• California, New York, and Washington – Have stronger whistleblower protections
• Connecticut and Nevada – Limit terminations related to lawful off-duty activities

You can't just assume at-will employment works the same everywhere. Check your specific state's rules before making any big termination decisions.

Health insurance requirements: Navigating the Affordable Care Act 

1. Federal healthcare mandates for large employers

Once you hit 50 full-time employees in the US, the Affordable Care Act (ACA) kicks in. You must offer health insurance to your workers, or the government will charge you $4,060 per employee per year in penalties.

2. State marketplace requirement variations 

Additionally, each state has its own healthcare marketplace with different rules:

• California and New York – Have state-run marketplaces with additional regulations
• Hawaii – Requires employer health coverage for employees working 20+ hours weekly
• Massachusetts – Has individual mandate penalties that can affect employee decision-making

Some states also mandate that you cover specific things, like mental health services or reproductive health, so check what's required in your specific location.

Retirement accounts: 401(k) and state programs

1. Federal 401(k) plan requirements

While not federally mandated, most competitive US employers offer 401(k) retirement plans. 

But here's the catch—if you do offer a 401(k), you're responsible for a ton of administrative work and legal obligations under the ERISA (Employee Retirement Income Security Act). Think annual discrimination testing, government filing requirements, and fiduciary responsibilities that can get you sued if you mess up.

2. State-sponsored retirement program mandates

Some states now require employers without retirement plans to participate in state-sponsored programs:

• California's CalSavers – Affects employers with 5+ employees
• Illinois Secure Choice – Covers employers with 25+ workers
• Oregon's OregonSaves – Applies to employers with 1+ employees

These state programs automatically enroll your workers in government-managed retirement accounts. You handle the payroll deductions, but don't have to contribute money or manage investments.

Anti-harassment training requirements: Federal and state mandates

1. Federal harassment prevention standards

While federal law doesn't explicitly require anti-harassment training, the EEOC strongly recommends it as part of effective harassment prevention programs. Federal guidelines emphasize that training should be interactive, tailored to the workplace, and regularly updated.

Courts often consider the presence and quality of harassment training when evaluating employer liability in discrimination cases, making comprehensive programs a practical necessity.

2. State-specific training mandates

Multiple states have implemented mandatory harassment training requirements:

• California – Requires two hours of training for supervisors and one hour for all employees biennially
• New York – Mandates annual training for all employees with enhanced requirements for certain industries
• Connecticut – Requires two hours of training for supervisors every five years
• Maine – Rquires training for employers with 15+ employees

Pay practices: Hiring, ongoing compensation, and terminations

1. Federal wage and hour compliance

The Fair Labor Standards Act establishes federal minimum wage ($7.25/hour), overtime pay (1.5x regular rate after 40 hours), and child labor standards. Unlike salaried UK employees, you have to pay many US workers overtime pay regardless of their salary level, unless they meet specific exemption criteria.

UK companies must also comply with equal pay requirements under the Equal Pay Act and consider pay equity audits to identify potential disparities.

2. State wage law variations

State wage laws often exceed federal minimums:

• California – Has a $16/hour minimum wage with additional local requirements
• Massachusetts – Requires time-and-a-half pay for Sunday work
• New York – Has complex regulations around salary thresholds for overtime exemptions

Final pay and termination requirements

Termination pay practices vary significantly by state:

• California – Requires immediate final pay upon termination
• Massachusetts – Mandates final pay on the next regular payday
• Colorado – Requires pay by the next business day for involuntary terminations

Some states also have "waiting time" penalties for late final payments, making prompt compliance essential.

PTO policies: Vacation, sick leave, and family leave

1. Federal family and medical leave

The Family and Medical Leave Act give eligible employees with up to 12 weeks of unpaid leave for family and medical reasons. This applies to employers with 50+ employees and covers situations like:

• Childbirth
• Serious health conditions
• Military family leave
• Caring for a sick family member

2. State-specific PTO mandates

Many states have implemented paid sick leave and family leave programs:

• California – Provides paid family leave and requires paid sick leave accrual
• Washington – Has comprehensive paid family and medical leave
• Massachusetts – Offers both paid family leave and paid sick leave requirements

Some states also regulate vacation pay policies, treating accrued vacation as earned wages that must be paid upon termination.

Frequently Asked Questions About US Employment Law for UK Companies

Q: What are the most important US employment law essentials for UK businesses? 

The five critical areas include employment verification (Form I-9), understanding at-will employment, health insurance requirements under the ACA, anti-harassment training mandates, and federal wage and hour compliance.

Q: Do state employment laws override federal requirements? 

State laws can exceed federal minimums but cannot provide less protection. UK companies must comply with whichever standard is higher - federal or state.

Q: How soon must UK companies comply with US employment law when hiring? 

Compliance begins immediately upon hiring the first US employee. Form I-9 verification must occur within three business days of hire.

Q: What penalties do UK companies face for US employment law violations? 

Penalties vary by violation type but can include fines up to $4,060 per employee for ACA non-compliance, plus potential lawsuits and back wage payments for other violations.

Making it all work: Your UK to US compliance game plan

Look, we get it—this all sounds overwhelming. You're trying to grow your business, not become an American employment law expert overnight. But getting this stuff wrong isn't just expensive, it can literally shut down your US operations.

The tricky part about American employment law is that it's like a layer cake of rules. You've got federal requirements as your base layer, then each state adds its own frosting on top. Sometimes that state frosting is way thicker than the federal base.

Your survival strategy

Consider partnering with experienced US payroll and HR service providers who can help navigate these complex employment law requirements. Let them worry about which forms to file and when while you focus on actually running your business.

Ready to expand your UK business to the US market without the legal nightmares? Contact Hiline for expert guidance on US employment law essentials and the accounting requirements that'll keep your international expansion on track.

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