Labor and employment laws in the US: A guide for hiring managers

Labor and employment laws in the US span a broad range of topics, from anti-discrimination to contract laws. Understanding your legal obligations can be difficult and time-consuming – especially since federal, state, and local laws sometimes conflict and are regularly updated. 

What’s worse: the costs of noncompliance can be high. They can result in lengthy investigations by government departments, civil penalties like fines, employee lawsuits, and even criminal charges.

That’s why we’ve prepared this guide to labor and employment laws for hiring managers. It provides a basic overview of these laws and suggests helpful resources where you can find more information. This way, you can understand your obligations and remain compliant.

Labor and employment laws for hiring managers to know: Key considerations

Below, we look at general categories of labor and employment laws, including:

• Laws that impact how you screen candidates 

• Laws that impact how you treat candidates 

• Laws that impact how you prepare employment contracts and onboard new employees

• Laws that prevent you from exploiting your hires

Labor and employment laws exist at the federal, state, and sometimes city levels. Generally, if these laws conflict, the law that’s the most generous to the employee applies. For example, the federal minimum wage is $7.25. If your state sets a higher minimum wage, you must pay employees at least this higher amount. 

This article provides general categories of laws to demonstrate the scope of labor and employment laws impacting hiring managers in the US.

We don’t provide an exhaustive list of laws. We also don’t cover industry-specific laws that may apply to your business. Also, keep in mind that some labor and employment laws apply to only government employees rather than the private sector. 

Laws that impact how you screen candidates during hiring

Various laws may affect your processes for screening job applicants.

Background check laws

Some laws dictate how you look into your candidates’ backgrounds. 

1. Ban the Box laws 

Ban the Box laws prevent you from including questions on job applications about candidates’ criminal convictions and arrests. These laws aim to make things fairer by ensuring that someone’s past criminal record won’t unfairly hold them back when they’re applying for a job. 

While no federal Ban the Box law currently applies to private employers, many states, cities, and counties have these laws. These laws generally include exceptions – for example, for roles involving work with children. 

2. Social media screening laws

Complying with social media screening laws is also essential. While no federal or state laws prohibit you from accessing publicly available information, around 28 states make requesting social media account login details from candidates illegal. Many laws go beyond this, placing further restrictions on employers and the steps they can take to screen applicants’ social media profiles. 

3. The Fair Credit Reporting Act (FCRA)

Various third-party services run background checks – also called consumer reports – for businesses. To do this legally, you must ensure you and the service comply with the FCRA. Your obligations under the FCRA include providing candidates with written notice that you may use the reports’ contents in employment decisions and seeking candidates’ written permission. 

4. Salary history bans

An increasing number of states and localities, including Connecticut and Massachusetts, have introduced laws banning employers from asking candidates for their salary histories or considering candidates’ salary histories when deciding compensation. These laws aim to reduce pay inequity. Some laws provide exceptions or allow you to ask for an applicant’s previous salary details later in the hiring process. 

Drug testing laws

Some employers require applicants to take drug tests as part of the hiring process. If you do, you must follow any relevant laws around whether, when, and how you conduct tests to protect applicants’ privacy. 

Federal law regulates drug testing in specific industries, like military contracting, nuclear energy, and transportation. 

For most private employers, drug testing laws are at the state level. While employers can generally require candidates to undergo drug testing, state laws place strict limits on this and specific procedures to follow. For example:

• In Kentucky, employers can drug test employees but must pay for the test if it’s a condition of employment. 

• North Carolina employers can also drug test candidates and employees. But they must test under reasonable, sanitary, and minimally invasive conditions only and notify candidates of their rights. 

• Ohio requires employers to drug test specific candidates, including ambulance drivers and contractors working on public improvement projects. 

Other state laws require you to notify candidates of the drug testing process or conduct drug testing only once you’ve made a conditional offer of employment. 

Anti-discrimination laws (which we discuss in the section below) also apply. Testing one applicant for a role means you should test all applicants. You should also follow the same testing procedures for each applicant.   

Laws that impact how you treat candidates during hiring

As a hiring manager, you should ensure that you and your team comply with anti-discrimination laws.  

Anti-discrimination laws

Numerous federal and state laws protect applicants from discrimination and ensure applicants have equal access to employment opportunities. These laws apply throughout the recruitment and hiring process. For example, they impact the way you can write your job descriptions, the questions you can ask during interviews, and more. 

Candidates can file complaints against your organization if they feel you’ve discriminated against them. Generally, retaliating against candidates who do this is illegal.

Here are some significant anti-discrimination laws.

1. Title VII of the Civil Rights Act

A primary federal anti-discrimination law is Title VII. If your organization has 15 or more employees, Title VII prohibits you from discriminating against candidates based on a “protected characteristic.” These characteristics include race, color, national origin, religion, or sex (which includes pregnancy, gender, and sexual orientation).

2. Equal Pay Act

Under the federal Equal Pay Act, you must pay men and women equally for equal work. This impacts how you structure your initial job offers. Pay refers to all forms of compensation, including wages, benefits, and bonuses. 

3. Age Discrimination in Employment Act (ADEA) 

The ADEA applies to organizations with more than 20 employees, protecting candidates and employees more than 40 years old from discrimination. 

4. Older Workers Benefit Protection Act (OWBPA)

The OWBPA requires you to provide equal benefits for both employees over 40 and younger workers. 

5. Americans with Disabilities Act (ADA) 

The ADA applies if your organization has 15 or more employees and prohibits discrimination against candidates and employees with disabilities. It also requires you to make reasonable accommodations for candidates and employees with disabilities. For example, you should ensure your interview location is wheelchair-accessible for candidates who use wheelchairs.

6. Immigration and Nationality Act (INA)

The INA requires you to confirm applicants’ abilities to work in the US legally (we include more information on Employment Eligibility Verification forms below). The act also prohibits you from discriminating against a candidate during the hiring process based on their national origin or citizenship status. For example, companies have been penalized under INA for advertising jobs to only applicants from certain countries or with certain immigration statuses.  

7. Genetic Information Nondiscrimination Act (GINA)

The GINA also applies to businesses with at least 15 employees. It protects candidates and employees from discrimination based on their genetic information, such as the results of a genetic test. 

8. Pregnant Workers Fairness Act (PWFA) 

The PWFA requires you to make reasonable accommodations for employees experiencing pregnancy, childbirth, or related medical complications. Reasonable accommodation during the hiring process may include ensuring pregnant applicants can drink water during their interview or providing them with parking close to the interview location. The PWFA applies to organizations with 15 or more employees. 

9. Uniformed Services Employment and Reemployment Rights Act (USERRA) 

The USERRA protects candidates and employees who are or were armed service members from discrimination. USERRA applies to all employers and requires you to reinstate employees on their return from armed services leave. 

10. State anti-discrimination laws

States and localities also usually have their own anti-discrimination laws, which may offer broader protections to candidates than the federal laws. For example, many states – including Colorado, Maryland, and New York – have CROWN (Create a Respectful and Open Workplace for Natural Hair) laws prohibiting race-based hair discrimination. For example, hiring someone on the condition that they avoid hairstyles like braids or cornrows would violate these laws. 

Some states also have pay transparency laws requiring employers to disclose salary information to candidates. This information can include pay ranges or specific salaries. These laws also explain when you must disclose this – for example, in a job advertisement or during interviews. 

Pay transparency laws help prevent pay discrimination. By requiring employers to be open about salary, these laws help ensure that employers offer candidates fair and equal pay – regardless of their personal characteristics.

Laws that impact how you prepare employment contracts and onboard new employees

As you prepare contracts for new hires and onboard new employees, ensure you comply with the laws we discuss below. 

Contract law

Your business may not be required to use written contracts. But if you are, ensure your contracts comply with the relevant federal and state laws. 

Written employment contracts typically set out employees’ titles and duties, their employment dates, the compensation and benefits they will receive, details of any probationary period, and bases for termination.

At-will employment

All states are “at-will” employment states. At-will employment allows employers and employees to terminate the working relationship at any time for any legal reason. This means you don’t need to show “just cause” (good reason) when terminating an employee as long as it isn’t for an illegal reason like discrimination. 

Many states identify exceptions to at-will employment that allow employees to sue for unlawful termination. Exceptions also apply at the federal level. They include:

• Public policy, where the termination goes against public policy

• Implied contract, where the employment contract, employee handbook, or another document removes the at-will presumption – for example, by stating the employer can fire the employee for just cause only

• Covenant of good faith, where the employer fails to act honestly and fairly when terminating an employee

Employment contracts can also replace the presumption of at-will employment by specifying the reasons why the parties can terminate the contract.

Restrictive covenants: Non-compete, nondisclosure, and non-solicitation agreements

Some employers regularly use restrictive covenants in their written employment contracts. These clauses or agreements restrict employees’ conduct, for example:

• Non-compete agreements prevent employees from accepting a role with a competitor or opening a competing business.

• Non-disclosure agreements prohibit employees from sharing confidential information they learn, like trade secrets. 

• Non-solicitation agreements ban employees from taking clients, contractors, other employees, and suppliers when they leave an organization. 

Various states limit the use of restrictive covenants and have specific criteria these covenants must meet to be enforceable. Generally speaking, restrictive covenants are valid only when their geographical and time limitations are reasonable and where they serve a legitimate business interest, like preserving client relationships.

Some states have banned the use of certain restrictive covenants. For example, California has banned the use of non-compete agreements. 

Employee classification laws

Employee classification laws examine the employment relationship and determine whether your workers are employees or independent contractors. This distinction is important since workers' statuses determine how they pay taxes, which benefits you must give them, and which protections they’re entitled to. 

For example, unlike independent contractors, employees get overtime pay (extra pay for working more than 40 hours in a workweek). Employers must withhold and pay employees’ income taxes, while independent contractors must manage and pay their own. 

Failing to classify workers correctly means owing back taxes and facing financial penalties. 

Unfortunately, employee classification laws are complex. States use different tests to determine workers’ classifications, which may differ from those used at the federal level. Furthermore, the test for determining whether a worker is an employee or independent contractor also changes depending on the purpose. For example, the test the Department of Labor (DOL) uses for labor law purposes differs from the test the Internal Revenue Service (IRS) uses for federal tax purposes. 

New hires

You must prepare several forms and reports as part of your new hire paperwork. 

These include a Form I-9 Employment Eligibility Verification confirming an employee's right to work in the US. You and the new hire fill out this form, and they must provide you with supporting documents. You don’t have to file this form, but you must keep a record of it for three years and provide it to the Department of Labor (DOL), Department of Justice (DOJ), or Department of Homeland Security (DHS) on request. 

The E-Verify platform allows you to verify employment eligibility for new hires online. Some states, including Alabama and North Carolina, require employers to use the E-Verify system. Otherwise, it’s voluntary. 

You must also file federal and state tax forms, including form W-4, for withholding tax.

Under federal law, you must report new hires to the state where they work within 20 days. You must provide information about the employee, including their name, address, social security number, and your federal employer identification number. The government uses this information to locate individuals when enforcing obligations like child support. 

If you hire employees in multiple states, report them in the individual states where they work or nominate one state to report all new hires. 

Also check the laws in the state where you or your employees are based, as some state laws impose a shorter timeframe to report new hires and require additional information. 

Leave and other benefits 

Federal, state, and local laws may require you to provide certain employee benefits as part of your hires’ employment. You might discuss these benefits with your candidates during the hiring process or include some of them in your new hires’ employment contracts.

Family and Medical Leave Act (FMLA)

At the federal level, the FMLA requires you to provide employees with 12 weeks of unpaid leave each year for:

• Their own serious health conditions

• A spouse’s, child’s, or parent’s serious health condition

• The birth or adoption of a child

• Circumstances resulting from a family member’s active military service

Employees caring for a family member who was seriously injured or became ill during military service can access up to 26 weeks of unpaid leave. 

Under the FMLA, you must offer job protection. This means you must reinstate employees to their positions – or equivalent ones – upon their returns from family medical leave. 

Other mandated leave

Other types of leave – including vacation, bereavement, domestic violence, volunteer, voting, school, and sick leave (paid or unpaid) – aren’t mandatory at the federal level. However, many states and localities have laws requiring employers to offer them. 

For example, in California, employers must give employees at least 24 hours of accrued paid sick leave every year. Nevada requires employers with 50 or more employees to let them accrue paid leave for each hour they work. 

Other regulated benefits

There are also laws relating to other benefits, including pension funds and healthcare coverage. Here are some examples:

• Affordable Care Act (ACA): Companies with 50 or more full-time employees must make affordable healthcare coverage available to them. This coverage must meet the affordability and minimum coverage requirements set out in the ACA. 

• Employee Retirement Income Security Act (ERISA): Employers offering employee welfare benefits programs – including retirement and welfare plans – must provide employees with the promised benefits. If you’re the plan administrator, you must comply with the administrative requirements set out in the ERISA. These include various reporting and disclosure obligations, including filing forms with the IRS and DOL. 

• Consolidated Omnibus Budget Reconciliation Act (COBRA): This law requires you to provide continued group healthcare coverage to employees who lose their jobs or have their hours reduced. COBRA coverage lasts for 18 or 36 months, depending on the reason. This law applies to businesses with 20 or more full-time employees for at least 50% of the previous calendar year.

• Federal Unemployment Tax Act (FUTA): Under this law, you’re required to pay unemployment taxes to fund unemployment insurance for employees who lose their jobs through no fault of their own.

Remember to check any employee statutory benefits at the state and local levels. For example:

• Many states have “mini-COBRA” laws that apply to employers with less than 20 employees.

• States also have their own unemployment insurance laws. 

• Each state has different workers’ compensation laws. These require certain employers to pay workers’ compensation insurance to cover employees when workplace injuries or illnesses prevent them from working. 

• Several states make it mandatory for employers to provide disability insurance, which covers employees who can’t work due to a non-work-related illness or injury. 

Termination and layoff

You may also be involved in employee termination or wish to include termination procedures in your employment contracts. If so, several laws apply to you. 

If your business has 100 or more employees and is considering a plant closure or mass layoff, it must comply with the Worker Adjustment and Retraining Notification (WARN) Act. This requires you to give employees at least 60 days written notice. 

Many states and localities have other laws relevant to terminations and layoffs, including:

• Final paycheck laws setting out when you must pay leaving employees their final wages

• The legal reasons you can terminate employees 

• Laws similar to the WARN Act that offer broader protections to workers

Remember that the discrimination laws discussed above also apply to termination decisions. 

Laws that prevent you from exploiting your hires

Some laws prevent you from benefiting unfairly from your workers. Hiring managers should be aware of these laws during the recruitment process and beyond. These laws help you treat employees ethically from the moment you hire them.  

Wage and hour laws

Wage and hour laws set out your obligations toward employees regarding their pay and work hours. These obligations impact your job offers, employment contracts, and more. 

Fair Labor Standards Act (FLSA)

The FLSA is the federal wage and hour law that sets out the wages you must pay certain employees, including the:

• minimum wage (currently $7.25 per hour)

• tipped minimum wage (currently, employers can pay employees who receive tips $2.13 per hour if that amount plus tips adds up to at least $7.25 per hour)

• overtime rate (currently 1.5 times employees’ regular rate of pay for any hours they work exceeding 40 hours in a week)

These minimum wage and overtime provisions apply to certain “non-exempt” employees only. You must learn how to classify employees under the FLSA to know who’s covered and avoid penalties. 

The FLSA also details your recordkeeping obligations regarding employee time and pay records, which you must keep for at least three years. These records must include details like employees’ names, their social security numbers, their daily and weekly hours, and their total earnings. 

The FLSA also outlines how much you can legally deduct from employees’ wages for things like uniforms, cash shortages, or damage to or loss of your organization’s property. 

State wage and hour laws

States also have their own wage and hour laws, as do some cities and counties. These may offer better employee protections than the FLSA. For example, California’s minimum wage is $15.50 per hour, while Ohio’s is $10.45 per hour. State and local wage and hour laws may also address issues not covered by the FLSA, such as mandatory rest and lunch breaks. 

Your state or city may enforce other laws affecting employees’ wages and hours, including:

• Reporting pay – the compensation owed to employees when they attend work but are sent home immediately or early

• Predictive scheduling laws that set out employer obligations around notifying employees of their schedules and employees’ right to ask for scheduling flexibility

• Payday frequency requirements that impact how often you must pay employees

• Payslip requirements, including the information to include on payslips (the documents you provide to employees detailing their earnings for a pay period)

At a federal level, the Consumer Credit Protection Act (CCPA) caps the amount employers can garnish from an employee’s weekly pay. Wage garnishments occur due to court orders requiring employers to withhold an employee’s wages to repay a debt, such as child support. 

Some states also have their own wage garnishment laws. 

Child labor laws

Child labor laws impact how young your new hires can be, what jobs you can hire them for, how you draft their employment contracts, and more. These laws apply to employees under 18. They address various factors, including:

• the minimum age for employment

• the hours minors can work (including how many hours they can work and when)

• the jobs and industries that minors can’t work in

• the minimum wage for minors

• authorization required for minors to work

The federal minimum employment age is 14 years (for non-agricultural jobs) under the FLSA. The FLSA also sets out various hazardous jobs and industries where minors can’t work, including construction or repair jobs, meat processing, and warehouse work (except for clerical and office work). 

States also have their own child labor regulations, which may differ from federal law. 

Where to go for further information

As you can see from the above information, there are various labor and employment laws for hiring managers to know. Understanding and applying them can be a complex and time-consuming process. Getting this process right is important. You should speak with an employment lawyer to get advice relevant to your business and its employees to ensure compliance. 

You can also learn more about the relevant laws via federal and state organization websites, including:

• The DOL administers many labor and employment laws and provides extensive resources on its website

• The Equal Employment Opportunity Commission (EEOC) is the key organization responsible for enforcing federal anti-discrimination laws. 

• For state labor laws, locate and contact your relevant labor office. 

Supporting compliance with pre-employment testing

There are several labor and employment laws for hiring managers to know. Various laws apply to all stages of the hiring process. These can feel overwhelming, but many helpful online resources are available. The most important step is speaking to a lawyer and doing research to understand the laws that apply to your organization and ensure compliance. 

Any pre-employment talent assessments you use in your hiring must also comply with relevant legal standards for personnel selection. TestGorilla offers over 400 legally defensible tests that deliver insights into your candidates’ role-specific skills, personalities, and cultural alignment. These tests reduce bias and ensure you select the best candidates for your open roles based on merit.  

Try our free plan today or take a product tour to learn more about how TestGorilla can help support compliant hiring practices. 

Disclaimer

The information in this article is a general summary for informational purposes and is not intended to be legal advice. Laws are subject to constant change, and their applications vary based on your individual circumstances. You should always seek legal advice from a qualified attorney about your legal obligations as a hiring manager. While this summary is intended to be informative, we cannot guarantee its accuracy or applicability to your situation.