U.S. Employment Law & Regulations

22.1 Foundations

Employment at Will

Employment at will means that either the employer or the employee may end the employment relationship at any time, for any lawful reason or no reason, with or without notice. It is the default rule in every state except Montana, which requires good cause after a probationary period.

Exceptions to At Will

Related terms:

• Constructive discharge: an employee resigns because the employer made working conditions intolerable. The law treats it as a termination.
• Wrongful termination: a dismissal that breaks the law or a contract.

Employee or Independent Contractor?

Misclassifying an employee as an independent contractor can trigger back wages and overtime, back taxes, benefits liability and penalties. Different laws use different tests:

⚑ Update: the DOL's FLSA independent contractor regulations have changed several times (2021, 2024 and later). The core idea, economic dependence, stays the same.

Joint employment: two businesses may both be legally responsible as employers of the same workers. For example, a staffing agency and its client, or a franchisor and franchisee, may be joint employers if both control the terms of employment.

Theories of Discrimination

McDonnell Douglas Burden-Shifting Framework (1973)

Used to analyze disparate treatment claims relying on circumstantial evidence:

1. The plaintiff establishes a prima facie case: (a) they belong to a protected class; (b) they were qualified for the job; (c) they suffered an adverse action; (d) the circumstances suggest discrimination.
2. The employer states a legitimate, nondiscriminatory reason for the action.
3. The plaintiff must show that reason is a pretext for discrimination.

Mixed motive: Price Waterhouse v. Hopkins (1989) held that sex stereotyping is sex discrimination. The Civil Rights Act of 1991 codified the mixed-motive standard for decisions driven by both lawful and unlawful motives.

Proving disparate impact: The four-fifths (80%) rule from the UGESP. Adverse impact is indicated when the selection rate for a protected group is less than 80% of the rate for the group with the highest selection rate.

• Example: Group A (highest) has a 50% hire rate. Group B has a 30% hire rate. 30% ÷ 50% = 60%. Since 60% < 80%, adverse impact is indicated.

EEOC Charge Process

1. File a charge: Within 180 calendar days (300 days if a state agency is involved). Under the Lilly Ledbetter Fair Pay Act, each discriminatory paycheck restarts the clock for pay claims.
2. Notification: EEOC notifies the employer; employer submits a position statement.
3. Mediation: Voluntary option.
4. Investigation: Requests for info, interviews, and visits.
5. Determination: "No reasonable cause" (Right to Sue issued) or "Reasonable cause" (Conciliation attempted). If conciliation fails, EEOC may sue or issue a right-to-sue notice.
6. Lawsuit: Employee has 90 days after receiving the notice to file suit.

Remedies: Reinstatement, back pay, front pay, attorney's fees, and compensatory/punitive damages. Compensatory and punitive damages are capped by employer size (e.g., $50,000 for 15–100 employees; $300,000 for 501+ employees). Back and front pay are not subject to the cap.

22.2 Employment and Authorization to Work

Immigration Reform and Control Act of 1986 (IRCA)

• Covers: All employers for I-9 requirements; anti-discrimination provisions apply to 4+ employees.
• Form I-9: Section 1 by first day of work; Section 2 within 3 business days. Original documents required: One from List A (Identity & Work Auth) OR one from List B (Identity) + one from List C (Work Auth).

★ The employee chooses which acceptable documents to present. Asking for specific documents is document abuse.

• Retention: 3 years after hire or 1 year after termination, whichever is later. Store separately from personnel files.
• E-Verify: Online verification comparing I-9 info with DHS/SSA records. Required for many federal contractors.

Background Checks and FCRA (1970)

Applies when using a third-party (consumer reporting agency):

1. Standalone written disclosure and written authorization.
2. Pre-adverse action notice (give copy of report + Summary of Rights).
3. Wait a reasonable time (usually 5 business days).
4. Adverse action notice.

Criminal Records: Use individualized assessment based on Green factors: (1) nature/gravity of offense, (2) time passed, (3) nature of job. Arrests are not convictions.

22.3 Compensation Laws

Fair Labor Standards Act of 1938 (FLSA)

• Minimum Wage: $7.25/hour federal ($2.13 for tipped employees if total hits $7.25).
• Overtime: 1.5x regular rate for hours over 40 in a workweek.
• Regular Rate: Includes nondiscretionary bonuses and shift differentials.
• Compensatory Time: Only for public-sector employees.
• Recordkeeping: Payroll records for 3 years; supplementary records (time cards) for 2 years.

Exempt vs. Non-exempt (White-Collar Exemptions)

Requires three tests: Salary basis, Salary level ($684/week), and Duties test.

• Executive: Managing enterprise/department; directing 2+ employees; authority to hire/fire.
• Administrative: Office/non-manual work related to management/business operations; discretion on matters of significance.
• Learned Professional: Requires advanced knowledge in science/learning (doctors, lawyers, etc.).
• Computer Employee: Systems analysts/programmers. Paid salary or at least $27.63/hour.
• Outside Sales: Making sales away from employer's place of business. No salary test.
• HCE: $107,432+ annual comp; performs at least one exempt duty.

★ Job titles don't determine exempt status. Duties and pay do.

Equal Pay Act of 1963 (EPA)

Prohibits sex-based pay differences for substantially equal work. Defenses: (1) seniority, (2) merit, (3) quantity/quality of production, (4) factor other than sex.

Employee Retirement Income Security Act of 1974 (ERISA)

Covers private-sector pension and welfare plans.

• Fiduciary duties: Act solely in participants' interest.
• Reporting: Summary Plan Description (SPD) within 90 days; Form 5500 annually.
• Participation: Generally 21 years old and 1 year of service.

22.4 Employee Relations Laws

National Labor Relations Act of 1935 (NLRA)

Section 7 rights for private-sector employees to organize and engage in protected concerted activity. Created the NLRB. Employer ULPs (8a): Interference, dominating a union, discrimination based on union status, retaliation, refusal to bargain.

Labor Management Relations Act of 1947 (Taft-Hartley)

Balanced power; added Union ULPs (8b). Banned closed shops; allowed state right-to-work laws. Allowed 80-day cooling-off injunctions for national health/safety strikes.

Key Labor Cases

• NLRB v. J. Weingarten, Inc. (1975): Unionized employees have the right to a union representative at an investigatory interview they reasonably believe may lead to discipline, if they request it.
• Lechmere, Inc. v. NLRB (1992): An employer generally may bar non-employee union organizers from its private property, such as a parking lot. The exception is when the employees are otherwise inaccessible through reasonable means, for example at a remote logging camp. This rule does not apply to employees, who have greater rights to solicit on non-work time in non-work areas.

Electronic Communications Privacy Act of 1986 (ECPA)

The ECPA prohibits the intentional interception of wire, oral and electronic communications, and unauthorized access to stored communications. Exceptions relevant to employers:

• Business-use (ordinary course of business) exception: monitoring business communications on company systems for a legitimate purpose.
• Consent exception: prior consent by one party, which an employer usually obtains through a written policy employees acknowledge.

Employers should also have a written monitoring policy that says employees have no expectation of privacy on company systems, and should check state laws, some of which require notice of monitoring.

Worker Adjustment and Retraining Notification Act of 1988 (WARN)

★ Many states have "mini-WARN" acts with stricter rules (for example, California and New York).

Employee Polygraph Protection Act of 1988 (EPPA)

The EPPA prohibits most private employers from requiring or requesting lie detector tests from applicants or employees, and from disciplining people who refuse a test. The employer must display the EPPA poster.

Exceptions:

• Government employers (federal, state and local) and certain national security contractors.
• Armored car and security guard firms, for certain applicants and employees.
• Pharmaceutical manufacturers, distributors and dispensers, for certain employees with access to controlled substances.
• Ongoing investigations of economic loss (such as theft), when the employee had access and the employer has a reasonable suspicion. The employee must receive written notice 48 hours in advance, and the employee keeps several rights.

Paper-and-pencil honesty tests are not covered by the EPPA. They are legal.

22.5 Job safety and health

Occupational Safety and Health Act of 1970 (OSH Act)

Covers: most private employers, and public employers in states with OSHA-approved state plans. OSHA (part of the DOL) sets and enforces standards. NIOSH (part of the CDC) does research and makes recommendations.

Workers' compensation

Workers' compensation is state-mandated, no-fault insurance, except in Texas, where private employers may opt out ("nonsubscribers"). It pays medical care, wage replacement, rehabilitation and death benefits for work-related injuries and illnesses. In exchange, it is the employee's exclusive remedy: employees generally can't sue their employer for negligence.

• Workers' compensation may overlap with FMLA leave (which can run at the same time) and ADA accommodation.
• Firing someone for filing a claim is illegal retaliation under most states' laws.
• Federal programs cover specific groups: FECA (federal employees), the Longshore and Harbor Workers' Compensation Act, and the Black Lung Benefits Act.

Drug-Free Workplace Act of 1988

Covers: federal contractors (on contracts above the threshold set in federal acquisition rules; prep materials often cite $100,000) and all federal grant recipients. It does not require drug testing. It requires the employer to:

1. Publish a policy statement that prohibits unlawful drugs in the workplace and states the consequences.
2. Run a drug-free awareness program (dangers of drug abuse, the policy, available assistance, penalties).
3. Give every employee on the contract a copy of the policy.
4. Require employees to notify the employer within 5 days of a criminal drug conviction for a workplace offense.
5. Notify the contracting agency within 10 days of learning of such a conviction.
6. Take action (discipline or require rehabilitation) within 30 days.
7. Make a good-faith effort to keep the workplace drug-free.

Health Insurance Portability and Accountability Act of 1996 (HIPAA)

HIPAA amended ERISA and other laws.

• Portability and nondiscrimination: group health plans may not discriminate in eligibility or premiums based on health factors. Special enrollment rights let people enroll mid-year after events such as marriage, birth or loss of other coverage, generally within 30 days (60 days for Medicaid/CHIP events). The ACA later eliminated pre-existing condition exclusions.
• Privacy Rule: protects protected health information (PHI) held by covered entities, which are health plans (including employer group health plans), healthcare providers and clearinghouses, and by their business associates.

★ HIPAA protects PHI held by the health plan, not employment records. Medical information an employer receives as an employer, such as a doctor's note for FMLA or sick leave, is governed instead by the ADA, FMLA and GINA confidentiality rules. It must be kept confidential and separate from personnel files.

• Security Rule: safeguards for electronic PHI.

Sexual harassment guidelines and key cases

The EEOC's long-standing guidelines (29 CFR 1604.11) define sexual harassment as unwelcome sexual advances, requests for sexual favors and other verbal or physical conduct of a sexual nature when:

• Quid pro quo: submitting to the conduct is made an explicit or implicit condition of employment, or employment decisions are based on whether the person submits or rejects it. For example, "sleep with me or you're fired."
• Hostile work environment: the conduct is severe or pervasive enough to create an intimidating, hostile or offensive working environment, judged from the perspective of a reasonable person in the victim's position.

Harassment based on any protected characteristic (race, religion, age, disability and so on) is also illegal.

★ The Faragher/Ellerth defense is why every employer needs a written anti-harassment policy with multiple reporting channels (not only the employee's supervisor), regular training, and prompt, thorough investigations.

Update: the EEOC's 2024 Enforcement Guidance on Harassment in the Workplace was rescinded by the Commission in January 2026. The statute, the regulations and the case law above remain in effect, and courts continue to apply Bostock.

22.6 Equal employment opportunity laws

Title VII of the Civil Rights Act of 1964

• Religious accommodation. Employers must reasonably accommodate sincerely held religious beliefs and practices (schedules, dress and grooming, prayer breaks) unless doing so would cause undue hardship. In Groff v. DeJoy (2023), the Supreme Court held that undue hardship means a burden that is substantial in the overall context of the business, meaning substantial increased costs. In EEOC v. Abercrombie & Fitch (2015), the Court held that an employer violates Title VII if the need for accommodation is a motivating factor in its decision, even if the applicant never asked for an accommodation.
• National origin. This includes ancestry, ethnicity, accent and language. English-only rules must be justified by business necessity, for example safety, and generally shouldn't apply to breaks.

Other Title VII cases:

Equal Employment Opportunity Act of 1972

This Act amended Title VII to give the EEOC authority to file lawsuits, and extended Title VII to state and local governments, educational institutions and the federal government.

Civil Rights Act of 1991

This Act responded to several 1989 Supreme Court decisions. It:

• Added compensatory and punitive damages (capped by size) and jury trials for intentional discrimination
• Codified disparate impact (the employer's burden to prove job-relatedness and business necessity)
• Addressed mixed-motive cases
• Banned "race norming" (adjusting test scores by race)
• Extended Title VII and the ADA to U.S. citizens working abroad for U.S.-controlled employers
• Created the Glass Ceiling Commission

Age Discrimination in Employment Act of 1967 (ADEA)

Rehabilitation Act of 1973

• Section 501: prohibits disability discrimination by federal agencies and requires them to practice affirmative action.
• Section 503: federal contractors and subcontractors may not discriminate against people with disabilities and must take affirmative action. Coverage historically began at $15,000 in contracts, with a written affirmative action plan required at 50+ employees and $50,000+ in contracts. It is enforced by the OFCCP.
• Section 504: prohibits disability discrimination by recipients of federal financial assistance.
• The ADA's standards are applied to Rehabilitation Act claims.

Update (OFCCP, 2026): under final rules published in August 2026, the Section 503 coverage threshold rises to $20,000, the 7% utilization goal and the related data collection are rescinded, and written plans are still required at 50+ employees and $50,000+.

Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRAA)

VEVRAA requires federal contractors and subcontractors (historically those with contracts of $150,000+) to not discriminate against, and to take affirmative action for, protected veterans. Protected veterans are disabled veterans, recently separated veterans (within 3 years of discharge), active duty wartime or campaign badge veterans, and Armed Forces service medal veterans. Contractors must list job openings with the state employment service and set a hiring benchmark. Written plans are required at 50+ employees.

Update (2026): the VEVRAA threshold rises to $200,000, and veteran data collection remains.

Executive Order 11246 (1965): what it was, and its 2025 revocation

For nearly 60 years, EO 11246 required federal contractors and subcontractors to not discriminate based on race, color, religion, sex, sexual orientation, gender identity or national origin, and to take affirmative action. Written affirmative action plans (AAPs) were required for contractors with 50+ employees and $50,000+ in contracts.

Update: EO 14173 (January 2025) revoked EO 11246. OFCCP's EO 11246 regulations were formally rescinded effective October 26, 2026. Title VII still prohibits discrimination by contractors. Section 503 and VEVRAA obligations continue in revised form. Your exam questions may still describe AAPs in general terms, so understand the concepts: utilization, availability, placement goals, and the fact that goals are not quotas.

Uniform Guidelines on Employee Selection Procedures (UGESP, 1978; 29 CFR Part 1607)

The UGESP applies to any selection procedure used to make employment decisions: tests, interviews, application screens, physical requirements and so on.

• It establishes the four-fifths (80%) rule for adverse impact.
• When adverse impact exists, the procedure must be validated using content, criterion-related or construct validity, or the employer should use an alternative with less adverse impact.
• Employers must keep records of applicant flow and selection rates by race, sex and ethnicity.

Pregnancy Discrimination Act of 1978 (PDA)

The PDA amended Title VII. It covers employers with 15+ employees. Discrimination based on pregnancy, childbirth or related medical conditions is sex discrimination. Pregnant workers must be treated the same as others who are similar in their ability or inability to work (see Young v. UPS).

Pregnant Workers Fairness Act (PWFA, effective June 27, 2023)

The PWFA covers employers with 15+ employees. They must provide reasonable accommodations for a qualified worker's known limitations related to pregnancy, childbirth or related medical conditions, unless this would cause undue hardship.

Employers may not:

• Force an employee to take leave if another accommodation would work
• Require an accommodation the employee didn't agree to
• Deny opportunities or retaliate

Americans with Disabilities Act of 1990 (ADA) and the ADA Amendments Act of 2008 (ADAAA)

Title I (employment) covers employers with 15+ employees. It is enforced by the EEOC.

Definition of disability (three prongs):

1. Actual disability: A physical or mental impairment that substantially limits one or more major life activities. Major life activities include walking, seeing, hearing, learning, working, concentrating, and major bodily functions.
2. Record of such an impairment: such as a history of cancer.
3. Being regarded as having an impairment: Since the ADAAA, this prong doesn't require proof that the impairment is perceived as substantially limiting, but it excludes transitory and minor impairments (6 months or less). No accommodation is owed under this prong.

ADAAA (2008) changes:

• Requires "disability" to be construed broadly.
• Mitigating measures (except ordinary eyeglasses) must be ignored when deciding if a person is disabled.
• Conditions in remission or episodic conditions are disabilities if they would limit a major life activity when active.

Key concepts:

Reasonable Accommodation and the ADA

Not required: eliminating essential functions, lowering production standards that apply to everyone, creating a new job, providing personal-use items such as eyeglasses, or excusing misconduct.

Disability-related inquiries and medical exams at each stage:

All medical information must be kept confidential and stored in separate medical files, not in the personnel file.

ADA leave as a reasonable accommodation

Unpaid leave can be a reasonable accommodation, even after FMLA leave is used up or when the employee isn't FMLA-eligible. Inflexible "maximum leave" or "no-fault attendance" policies that terminate employees automatically after a set period, without an individualized assessment, violate the ADA. In EEOC v. Verizon (2011), Verizon paid $20 million in a consent decree over a no-fault attendance policy that didn't allow exceptions as accommodations. Indefinite leave, with no expected return date, generally doesn't have to be granted.

★ Illegal drug users are not protected (Ch. 20). The ADA also excludes compulsive gambling, kleptomania, pyromania and current illegal drug use from the definition of disability.

Genetic Information Nondiscrimination Act of 2008 (GINA)

• Title I covers group health plans and insurers. Title II (employment) covers employers with 15+ employees.
• Prohibits using genetic information in employment decisions, and restricts employers from requesting, requiring or purchasing it. Genetic information includes genetic tests of the employee or family members, family medical history, and the use of genetic services.
• Exceptions: inadvertent acquisition (the "water cooler" exception), voluntary wellness programs, FMLA certification (for a family member's condition), commercially available publications, genetic monitoring of toxic substances in the workplace, and DNA analysis for law enforcement.

★ When requesting medical information (for example, for ADA or FMLA purposes), employers should include GINA's "safe harbor" language telling the provider not to provide genetic information, including family medical history. If genetic information is then received inadvertently, the employer isn't liable.

• Genetic information must be kept confidential in separate medical files.

EEO-1 reporting

Private employers with 100+ employees must file an annual EEO-1 Component 1 report with the EEOC. It reports workforce data by job category, race/ethnicity and sex.

Historically, federal contractors with 50+ employees and contracts of $50,000+ also had to file. That requirement was tied to the contractor rules that changed in 2025–2026, so check the current EEOC filing instructions.

22.7 Leave and benefits laws

Family and Medical Leave Act of 1993 (FMLA)

★ Run FMLA alongside other leave. FMLA can run concurrently with workers' compensation leave, disability leave, PWFA and ADA accommodations, and state leave laws. When FMLA runs out, consider ADA leave before terminating.

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)

Patient Protection and Affordable Care Act of 2010 (ACA)

• Employer Mandate: Applicable Large Employers (ALEs) have 50+ full-time employees (including FTEs). Must offer affordable, minimum-value coverage to 95% of full-time employees.
• Full-time: Averages 30+ hours per week (or 130 hours per month).
• Affordable: Employee contribution for self-only coverage doesn't exceed set percentage of household income (approx 9-10%).
• Minimum Value: Plan pays at least 60% of covered costs.
• NFIB v. Sebelius (2012): Supreme Court upheld individual mandate as a tax but made Medicaid expansion optional for states.

Defense of Marriage Act (DOMA) and same-sex spouses

• United States v. Windsor (2013) struck down Section 3 of DOMA.
• Obergefell v. Hodges (2015) required recognition of same-sex marriages.
• HR Impact: Same-sex spouses are spouses for FMLA, COBRA, ERISA, and federal tax purposes.

22.8 Drug screening and medical marijuana

• No general federal law requires or prohibits private-sector drug testing (except DOT/Federal Contractors).
• Marijuana remains illegal under federal law. Employers may generally prohibit use/impairment at work.

22.9 Recordkeeping quick reference

22.10 Employer-size thresholds at a glance

• 1+: FLSA, EPA, USERRA, OSH Act, NLRA, IRCA I-9, EPPA, FCRA, ERISA
• 4+: IRCA anti-discrimination
• 15+: Title VII, ADA, GINA, PDA, PWFA
• 20+: ADEA, COBRA
• 50+: FMLA (within 75 miles), ACA employer mandate (50+ FTEs)
• 100+: WARN, EEO-1 report

22.11 Agencies quick reference

• EEOC: Title VII, ADA, ADEA, EPA, GINA, PWFA.
• DOL WHD: FLSA, FMLA, EPPA, Davis-Bacon.
• DOL OSHA: OSH Act, whistleblowers.
• DOL EBSA: ERISA, COBRA, HIPAA portability.
• NLRB: NLRA, LMRA.
• DHS/ICE: Immigration/I-9.

22.12 Other recent developments

• Non-competes: FTC 2024 ban was set aside by a federal court; remains a matter of state law.
• Speak Out Act (2022): Invalidates pre-dispute NDAs for sexual assault/harassment disputes.