A local company in the USA, as well as any European company operating in the American market, which employs workers in the USA, has the following options:
- employment with no guarantee of long-term work,
- temporary employment,
- the signing of a contract of mandate.
If your company is not located or based in the United States (US) and you need expert advice on how to go about taking on staff in America, you should check with a specialist firm, such as Lightman’s immigration legal services.
Employment Contract with an Employee in the US
You first option as a company that wants to employ somebody in the US is to sign an employment agreement with the employee. This type of agreement is typically offered to people in senior positions. It is also used for people with unique skills or individuals who may be extremely valuable to your competitors.
In most cases, your company and the prospective employee negotiate a contract of employment for two to three years. A typical employment contract in the USA addresses the following points:
- Remuneration for signing a contract of employment, i.e., for abandoning the previous place of work in the US.
- Basic salary and bonus for achieving business goals such as sales or target figures.
- The range of tasks and responsibilities at the workplace.
- The additional compensation that your employees in the US will receive, such as pension plans, health insurance, etc.
- Length of employment.
- How can an employee be dismissed and what kind of compensation they will receive if they terminate their employment.
- Reimbursement of expenses associated with taking up the job and performing duties, such as the use of a private car, telephone, etc.
- Restrictions on the protection of confidential information including, for example, the company’s customers obtained during temporary employment.
- Intellectual property rights created during the period of employment.
- How will legal conflicts between an employer and an employee be resolved?
- Additional compensation in the event the company being sold and the employee subsequently being dismissed.
American Contract for Work
The next option when hiring somebody is to use a contract of mandate where services to your company are provided by an individual who is considered under American law as an independent contractor or a freelancer.
Although this type of contract has many financial and business advantages for your company, there are also some risks that you need to take into account.
Hiring a subcontractor to perform services for your company in the US requires the introduction and definition of certain legal safeguards on issues such as:
- Confidentiality of the sub-contractor.
- The terms of payment for services provided in the USA.
- Termination of the contract.
- Ownership of intellectual property rights such as copyrights, patents, products, ideas, and know-how created during the cooperation between the two parties.
To reduce the risk on the part of the employer, the preparation of a specific contract for work – the so-called ‘consulting agreement’ – is needed. A consulting agreement should set out the rights and limitations of each of the parties.
If your company wants to avoid costly surprises in the US market, beware of using online agreement formats that you can download. Without local legal experts advising you, you won’t know how relevant, legal, and watertight your new agreement is.
An employee without an employment contract in the US
Most workers in the US are employed as an employee at will, which means that they don’t have an employment contract and may be dismissed without warning and for any reason (as long as the reason is legal).
Although there’s no guarantee of permanent employment, every American or European company that employs an individual in the United States is required to meet certain requirements imposed by US labor laws, such as:
- Employees working in the USA must be insured against accidents at work, which means that even a European company must have an American insurance policy; a worker’s compensation insurance.
- Employers hiring somebody in the United States must pay state and federal taxes on that person’s income.
- A company employing an American must offer the employee participation in a pension plan.