An employment contract, used in the realm of labor law, serves as a type of agreement that establishes the rights and obligations of the parties involved in a work arrangement. This contract forms a legal bond between an "employee" and an "employer."
For US companies employing citizens and residents, the following documentation is mandated by the IRS:
Title 25, Chapter 4 (Unemployment Compensation)
Individual Income Tax – 2% to 5%
Minimum Wage – $7.25 (no State minimum, federal law applies)
Title 23, Chapter 20 (Alaska Employment Security Act)
Individual Income Tax – 0% (Statute Repealed)
Minimum Wage – $10.19
Individual Income Tax – 2.59% to 4.50%
Minimum Wage – $12.00
Title 11 (Labor and Industrial Relations)
Individual Income Tax Rate – 2% to 6.60%
Minimum Wage – $10.00
Individual Income Tax Rate – 1% to 9.3%
Minimum Wage – $11.00 – $14.00
For any employer who employs 26 or more employees, the minimum wage shall be as follows:
(A) From January 1, 2017, to December 31, 2017, inclusive,—ten dollars and fifty cents ($10.50) per hour. (B) From January 1, 2018, to December 31, 2018, inclusive,—eleven dollars ($11) per hour.
(C) From January 1, 2019, to December 31, 2019, inclusive,—twelve dollars ($12) per hour. (D) From January 1, 2020, to December 31, 2020, inclusive,—thirteen dollars ($13) per hour.
(E) From January 1, 2021, to December 31, 2021, inclusive,—fourteen dollars ($14) per hour. (F) From January 1, 2022, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.
For any employer who employs 25 or fewer employees, the minimum wage shall be as follows:
(A) From January 1, 2018, to December 31, 2018, inclusive,—ten dollars and fifty cents ($10.50) per hour. (B) From January 1, 2019, to December 31, 2019, inclusive,—eleven dollars ($11) per hour.
(C) From January 1, 2020, to December 31, 2020, inclusive,—twelve dollars ($12) per hour. (D) From January 1, 2021, to December 31, 2021, inclusive,—thirteen dollars ($13) per hour.
(E) From January 1, 2022, to December 31, 2022, inclusive,—fourteen dollars ($14) per hour. (F) From January 1, 2023, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.
Individual Income Tax Rate – 4.63%
Minimum Wage – $12.00
Individual Income Tax Rate – 3% – 6.99%
Minimum Wage – $11.00
Individual Income Tax Rate – 2.2% – 6.6%
Minimum Wage – $9.25
Individual Income Tax Rate – 0%
Minimum Wage – $8.56
Title 34 (Labor and Industrial Relations)
Individual Income Tax Rate – 1% – 5.75%
Minimum Wage – $7.25
Title 21, Chapter 383 (Hawaii Employment Security Law)
Individual Income Tax Rate – 1.4% – 11%
Minimum Wage – $10.10
Title 72 (Worker’s Compensation Law)
Individual Income Tax Rate – 1.125% – 6.925%
Minimum Wage – $7.25
Individual Income Tax Rate – 4.95%
Minimum Wage – $8.25
Title 22, Article 2 (Wages, Hours, and Benefits)
Individual Income Tax Rate – 3.23% plus additional taxes per county).
Minimum Wage – $7.25 ( recognizes federal wage laws)
Title III (Public Services and Regulation)
Individual Income Tax Rate – .33% to 8.53%
Minimum Wage – $7.25 ( – recognizes federal wage laws)
Chapter 44 (Labor and Industries)
Individual Income Tax Rate – 3.1% to 5.7%
Minimum Wage – $7.25
Title XXVII (Labor and Human Rights)
Individual Income Tax – 5%
Minimum Wage – $7.25 (recognizes federal wage laws)
Title 23 (Labor and Worker’s Compensation)
Individual Income Tax – 2% to 6%
Minimum Wage – $7.25 (recognizes federal wage laws)
Title 26, Chapter 7 (Employment Practices)
Individual Income Tax – 5.8% to 7.15%
Minimum Wage – $12.00
Individual Income Tax – 2% to 5.75%
Minimum Wage – $11.00 State-Wide (wages vary in Montgomery County & Prince George’s County – Dept. of Labor)
Title XXI (Labor and Industries)
Individual Income Tax – 5%
Minimum Wage – $12.75
Individual Income Tax – 4.25%
Minimum Wage – $9.45
Chapters 175-186 (Labor, Industry)
Individual Income Tax – 5.35% to 9.85%
Minimum Wage – $10.00 (employers earning $500,000+/year) / $8.15 (employers earning less than $500,000/year)
Individual Income Tax – 3% to 5%
Minimum Wage – $7.25 (no State minimum, federal law applies)
Title XVIII (Labor and Industrial Relations)
Individual Income Tax – 1.5% to 5.4%
Minimum Wage – $9.45
Individual Income Tax – 1% to 6.9%
Minimum Wage – $8.65
Individual Income Tax – 2.46% to 6.84%
Minimum Wage – $9.00
Title 53 (Labor and Industrial Relations)
Individual Income Tax – 0%
Minimum Wage – $8.25/$7.25 for employees with qualifying health benefits (see Annual Minimum Wage Bulletin).
Individual Income Tax Rate – 5% on interest and dividends only
Minimum Wage – $7.25
Title 34 (Labor and Workmen’s Compensation)
Individual Income Tax Rate – 1.4% to 10.75%
Minimum Wage – $11.00
Individual Income Tax Rate – 1.7% to 4.9%
Minimum Wage – $9.00
Minimum Wage in Local Municipalities:
Individual Income Tax Rate – 4% to 8.82%
Minimum Wage – $11.80
Local Wages:
Chapter 95 (Department of Labor and Labor Regulations)
Individual Income Tax Rate – 5.25%
Minimum Wage – $7.25 (federal law applies)
Title 34 (Labor and Employment)
Individual Income Tax Rate – 1.10% to 2.90%
Minimum Wage – $7.25
Individual Income Tax Rate – 2.850% to 4.797%
Minimum Wage – $8.70 (employers earning $319,000+/year) / $7.25 (employers earning less than $319,000/year)
Individual Income Tax Rate – .5% to 5%
Minimum Wage – $7.25
Volume 14, Title 51 (Labor and Employment)
Individual Income Tax Rate – 5% to 9.90%
Minimum Wage – Standard wage – $11.25 | Metro. Service Districts – $12.50 | Non-urban Counties – $11.00
Individual Income Tax Rate – 3.07%
Minimum Wage – $7.25
Title 28 (Labor and Relations)
Individual Income Tax Rate – 3.75% to 5.99%
Minimum Wage – $10.50
Title 41 (Labor and Employment)
Individual Income Tax Rate – 0% to 7%
Minimum Wage – $7.25 (no State minimum, federal law applies)
Title 60 (Labor and Employment)
Individual Income Tax Rate – 0%
Minimum Wage – $9.30
Title 50 (Employer and Employee)
Individual Income Tax Rate – 1% on interest and dividends only([2])
Minimum Wage – $7.25 (no State minimum, federal law applies)
Individual Income Tax Rate – 0%
Minimum Wage – $7.25
Individual Income Tax Rate – 4.95%
Minimum Wage – $7.25
Individual Income Tax Rate – 3.35% to 8.75%
Minimum Wage – $10.96
Title 40.1 (Labor and Employment)
Individual Income Tax Rate – 2% to 5.75%
Minimum Wage – $7.25
Individual Income Tax Rate – 0%
Minimum Wage – $13.50
Wage Rate Exceptions:
Individual Income Tax – For taxes payable starting Jan. 1, 2022, individual income tax rates will be:
| Not over $10,000 | 4% of the taxable income |
|---|---|
| Over $40,000 | $400, plus 6% of the excess over $10,000 |
| Over $40,000 but not over $60,000 | $2,200, plus 6.5% of the excess over $40,000 |
| Over $60,000 but not over $250,000 | $3,500, plus 8.5% of the excess over $60,000 |
| Over $250,000 but not over $500,000 | $19,650, plus 9.25% of the excess over $250,000 |
| Over $500,000 but not over $1,000,000 | $42,775, plus 9.75% of the excess over $500,000 |
| Over $1,000,000 | $91,525, plus 10.75% of the excess over $1,000,000 |
Minimum Wage – As of July 1, 2021, the minimum wage is $15.20. The wage was set at $15/hr on July 2020, and will increase each year by an amount linked to the Department of Labor’s Consumer Price Index for the region.
Individual Income Tax Rate – 3% to 6.5%
Minimum Wage – $8.75
Chapter 103 (Employment Regulations)
Individual Income Tax – 3.86% – 7.65%
Minimum Wage – $7.25
Title 27 (Labor and Employment)
Individual Income Tax Rate – 0%
Minimum Wage – $5.15 (however, employers must pay the federal minimum)
An at-will employment contract allows an employer to terminate an employee for any reason (without cause) while also allowing an employee to quit at any time. The term “at-will” or “without cause” means to terminate an employee for any reason other than disability, sexual or racial discrimination, retaliatory, or violation of public policy.
At-will employment, in its purest form, is when an employer and employee may terminate their relationship at any time and for any reason with no advance notice. If there is no written agreement between the employee and employer, the employee may be able to claim that the termination was not justified due to exceptions as regulated by State law.
Under federal laws, an employer cannot terminate an employee for any of the following:
If a state offers the public policy exception to at-will employment, employers may not fire an employee if the termination involves an employee’s compliance with state policy, such as refusing to engage in illegal activity at the employer’s request or exercising a legal right.
The public policy exception is widely recognized and is offered in all but the following seven (7) states: Alabama, Florida, Georgia, Louisiana, Maine, Nebraska, New York, and Rhode Island.
An employer can’t fire an employee when an implied contract (such as oral suggestions regarding job security or procedures) has formed between the employer and employee, even though no written document may exist. Cases of implied employment contracts can also arise from the language in an employee handbook that describes termination policies, such as a policy declaring that employees will not be fired except for good cause.
The implied contract exception is active in all but the following twelve (12) States: Delaware, Florida, Georgia, Indiana, Louisiana, Massachusetts, Missouri, Montana, North Carolina, Pennsylvania, Rhode Island, Texas, and Virginia.
The good faith and fair dealings covenant forbid employers from firing or demoting an employee when the termination is a result of employer malintent. If an employer fires an employee in an act of bad faith, the former employee may have grounds for a wrongful termination suit.
An example application of the good-faith exception is K Mart Corp. v. Ponsock, where an employee was terminated just before they were about to reach retirement age. This exception is only valid in the following eleven (11) States: Alabama, Alaska, Arizona, California, Delaware, Idaho, Massachusetts, Montana, Nevada, Utah, and Wyoming.
Below is a table that reveals the State laws for exceptions in regards to at-will employees without a written agreement.
| State | Public Policy Exception | Implied-Contract Exception | Good-Faith Exception |
|---|---|---|---|
| Alabama | No | Yes | Yes |
| Alaska | Yes | Yes | Yes |
| Arizona | Yes | Yes | Yes |
| Arkansas | Yes | Yes | No |
| California | Yes | Yes | Yes |
| Colorado | Yes | Yes | No |
| Connecticut | Yes | Yes | No |
| Delaware | Yes | No | Yes |
| Florida | No | No | No |
| Georgia | No | No | No |
| Hawaii | Yes | Yes | No |
| Idaho | Yes | Yes | Yes |
| Illinois | Yes | Yes | No |
| Indiana | Yes | No | No |
| Iowa | Yes | Yes | No |
| Kansas | Yes | Yes | No |
| Kentucky | Yes | Yes | No |
| Louisiana | No | No | No |
| Maine | No | Yes | No |
| Maryland | Yes | Yes | No |
| Massachusetts | Yes | No | Yes |
| Michigan | Yes | Yes | No |
| Minnesota | Yes | Yes | No |
| Mississippi | Yes | Yes | No |
| Missouri | Yes | No | No |
| Montana | Yes | No | Yes |
| Nebraska | No | Yes | No |
| Nevada | Yes | Yes | Yes |
| New Hampshire | Yes | Yes | No |
| New Jersey | Yes | Yes | No |
| New Mexico | Yes | Yes | No |
| New York | No | Yes | No |
| North Carolina | Yes | No | No |
| North Dakota | Yes | Yes | No |
| Ohio | Yes | Yes | No |
| Oklahoma | Yes | Yes | No |
| Oregon | Yes | Yes | No |
| Pennsylvania | Yes | No | No |
| Rhode Island | No | No | No |
| South Carolina | Yes | Yes | No |
| South Dakota | Yes | Yes | No |
| Tennessee | Yes | Yes | No |
| Texas | Yes | No | No |
| Utah | Yes | Yes | Yes |
| Vermont | Yes | Yes | No |
| Virginia | Yes | No | No |
| Washington | Yes | Yes | No |
| West Virginia | Yes | Yes | No |
| Wisconsin | Yes | Yes | No |
| Wyoming | Yes | Yes | Yes |
Sources: ["Employment at Will"] (https://www.bls.gov/opub/mlr/2001/01/art1full.pdf)
An internship contract allows an employer to hire an intern that agrees to work on an unpaid basis. The intern agrees to provide their services in exchange for on-the-job training, experience in the field, and educational credits (if applicable).
An intern is a person that agrees to work on an unpaid basis. The work that an intern can conduct can only “complement” and not “replace” a paid employee. Internship positions are typically between 3-6 months unless part of a University-related program.
When hiring an intern, an employer must follow these seven (7) rules:
Unpaid interns are protected in the nine (9) States of California, Connecticut, Illinois, Maryland, New York, Oregon, Texas, Vermont, Washington, and Washington D.C.
There is no federal law that protects individuals hired for internship positions.
No. If an intern is paid, then their agreement automatically converts to an Employment Contract.
Once a promise of payment is established, the intern converts to an employee and is entitled to all protections and benefits required under federal and state laws.
Here are some examples of internship arrangements that might be considered illegal in the United States, particularly when they fail to comply with the Fair Labor Standards Act (FLSA) guidelines:
An independent contractor is defined by the IRS as an individual engaged in certain activities characterized by a high degree of autonomy, including:
Essentially, an independent contractor operates under their own guidance, establishing their own procedures and standards for their work and its outcomes. Typically, if a person is compensated on a per-project or task basis, they are likely to be classified as an independent contractor. Conversely, if someone receives a salary, follows a predetermined schedule, and receives comprehensive instructions on how to conduct their workday, they are more apt to be recognized as an employee.
The IRS explicitly identifies certain professions as independent contractors by default, based on its regulations:
A non-compete agreement restricts an individual's ability to engage in a similar profession or trade within a designated time frame and geographic location. Such agreements are often utilized in various contexts, including employee recruitment, business transactions, and the dissolution of partnerships, aiming to safeguard a company's legitimate interests.
Non-compete agreements serve to limit a person's capacity to work in a competing role with another entity, typically their previous employer. These agreements are not indefinite but are enforced to protect a business's interests within a certain period and area.
Non-compete clauses are strategically applied in several situations, such as:
While non-compete agreements related to the sale of a business are universally accepted across states, restrictions on employee non-competes vary, with exceptions in states like California, North Dakota, Oklahoma, and Washington D.C., highlighting diverse legal landscapes.
A non-compete clause restricts a party from leveraging proprietary knowledge for personal advantage, often embedded within employment or business acquisition contracts. Despite their brevity compared to comprehensive non-compete agreements, well-drafted clauses effectively prevent the misuse of sensitive information.
Terminating a non-compete agreement typically requires consent from the prior employer for a liability release or pursuing legal remedies.
To negotiate a release of liability, an exchange, such as a financial settlement, may be necessary. It's advisable to discuss with the employer the reasons the non-compete may be considered invalid and to explore any compensation they might accept for relinquishing the agreement.
A Non-Disclosure Agreement (NDA) is a legal contract that prevents one party from revealing another's confidential information. Designed to protect sensitive data like trade secrets, this agreement is essential for maintaining a competitive edge and safeguarding valuable insights not intended for public disclosure.
Should an NDA's conditions be breached, the offending party may face several repercussions:
An NDA, or confidentiality agreement, forms a confidential relationship, legally barring the recipient of sensitive information, like financial data or trade secrets, from disclosing it. This contract enables parties to collaborate closely without the risk of confidential details becoming public.
An NDA's effectiveness might not have a predetermined end date unless explicitly stated. The laws governing the duration of these agreements can vary by state, affecting how long the confidentiality provisions remain enforceable.
Breaching an NDA is treated as a contractual violation rather than a criminal act, potentially leading to legal action and the penalties specified within the agreement, such as:
An NDA outlines various definitions and obligations, including:
By establishing a clear framework for confidentiality, NDAs play a crucial role in protecting business interests and fostering secure professional relationships.
Before diving into the specifics of an employment agreement, it's crucial to understand its purpose and significance. An employment agreement is a legally binding document that outlines the terms and conditions of employment between an employer and an employee. This agreement serves to protect the interests of both parties, ensuring clear communication and understanding of job expectations, compensation, benefits, and procedures for dispute resolution.
The first step in reviewing an employment agreement is to examine the fundamental aspects of the contract.
After a thorough review of the employment agreement, consider seeking legal advice for any clauses or terms that are unclear or seem unfavorable. A legal professional specializing in employment law can provide clarity, negotiate terms on your behalf, and ensure your rights are protected before you sign the agreement.
Hiring an employee in the United States involves several key steps to ensure compliance with federal and state employment laws. Here's a general overview of the process:
Clearly define the role, responsibilities, and qualifications needed for the position.
Draft a comprehensive job description that outlines the duties, necessary skills, experience, and educational qualifications.
Post the job on various platforms, such as company websites, job boards, professional networks, and social media.
Review applications, conduct initial screenings, and set up interviews with selected candidates. This may involve multiple rounds of interviews.
After narrowing down the candidates, conduct reference checks and, if necessary, background checks to verify the information provided by the candidates.
Choose the most suitable candidate based on qualifications, experience, and fit with the company culture.
Extend a formal job offer to the candidate, typically in the form of a written offer letter. This letter should include key details such as position, salary, benefits, and any other conditions of employment.
Prepare an employment contract that outlines the terms and conditions of employment. This contract should include details such as job responsibilities, compensation, benefits, work hours, confidentiality clauses, and termination conditions. Both the employer and the employee should review and sign the contract.
New employees must complete IRS Form W-4 for tax withholding purposes.
Once the offer is accepted, begin the onboarding process, which includes introducing the new employee to the company, completing necessary paperwork, and providing training and resources needed for the role.
In the United States, the distinction between part-time and full-time employment is important for both employers and employees, as it affects hours worked, benefits eligibility, and other employment-related aspects. Here's a breakdown of the differences:
Part-Time Employee: Often receive fewer or no benefits compared to full-time employees. Benefits such as health insurance, paid time off, retirement plans, and others may be limited or not offered. Full-Time Employee: Generally eligible for a full range of benefits provided by the employer, including health insurance, retirement benefits, paid vacation, sick leave, and others.
Both part-time and full-time employees are subject to overtime pay requirements as mandated by the Fair Labor Standards Act (FLSA) if they work over 40 hours in a workweek, unless they are exempt due to their specific job duties and salary.
The level of job security can vary for both part-time and full-time employees based on the company's policies and the nature of their employment contracts.
Part-Time Employee: Often have more flexibility in terms of scheduling. This arrangement is sometimes preferred by individuals who balance work with other commitments, such as education or family. Full-Time Employee: Typically has a fixed schedule, which might offer less flexibility but provides more consistent working hours.
Full-Time Employee: May have more opportunities for career advancement, professional development, and training within the company. Part-Time Employee: While there can be opportunities for growth, they might be limited compared to full-time positions.
Eligibility for unemployment benefits can differ, with full-time employees often having clearer pathways to these benefits compared to part-time employees, depending on the state laws and individual circumstances.
At-will employment, in its purest form, is when an employer and employee may terminate their relationship at any time and for any reason with no advance notice. If there is no written agreement between the employee and employer, the employee may be able to claim that the termination was not justified due to exceptions as regulated by State law.
In the United States, the distinction between an employee and an independent contractor is significant, primarily due to differences in tax implications, benefits, and labor laws. Here are the key differences:
Employee: Employers withhold income tax, Social Security, and Medicare from wages paid. Employers also pay unemployment tax on wages paid to an employee. Independent Contractor: Typically responsible for paying their own self-employment tax (which covers Social Security and Medicare taxes) and income tax. They do not have taxes withheld by their clients.
Employee: Typically eligible for benefits like health insurance, retirement plans, paid leave, and workers' compensation. They are also protected under federal and state employment laws (e.g., minimum wage, overtime pay). Independent Contractor: Generally do not receive benefits from clients and are not covered by most employment-related laws. They have more freedom to set their work hours and conditions.
The IRS has guidelines to help define whether an individual is an employee or independent contractor, focusing on the degree of control and independence. Misclassification can lead to legal and financial consequences.
The federal minimum wage in the United States is $7.25 per hour. In most states, the minimum wage is higher.
Sources: 29 U.S. Code § 206(a)(c)