I have touched upon legalese with regards to shares and stock options in a previous post.
Evidently, reading the fine print can come in handy with employment contracts as well.
In much of Europe, employment relationships are governed by an elaborate system of laws. It is easy to assume that a similar basic level of "decency" in how people are employed exists in other countries. After all, we are in a civilized country ruled by law, aren't we?
But when it comes to employment in the U.S., the employment contracts (with all their references to employee handbooks and policy papers) really do contain the agreement.
Danes will look in vain for anything resembling Funktionærloven or Ferieloven, the laws governing how employment contracts for white collar work and vacation are regulated in Denmark. Typically, you will see no compensation if you should be laid off because you are employed "at will". (Assume that any compensation negotiated in the case of layoffs may come with a requirement that you will not sue your employer.)
If your contract says you can have paid time off, that is the paid time off you can have. It may have to cover any sick days as well. It may be none if you haven't negotiated any. (If your contract says that there is no limit to your paid time off, it will be naive to assume that this should be taken literally.)
Fully or partly paid ma/paternity leave? Only the most advanced companies offer any and it is not required by law.
Some of the laws that do influence employment relate to:
- For foreigners: Are you allowed to work here or not, and in which capacity?
- Do you belong to a protected category for which Equal Employment Opportunities or other protection rules apply?
- Do you fall into the exempt or the non-exempt category when it comes to overtime payment?
- What is your employment status? Temp, contractor, employee...?
- Does your employer pay your taxes into the IRS, Social Security etc?
- Does your employer pay for the mandatory Workers Compensation Insurance befitting the activities taking place?
What comments can be added to the points listed above?
On work visas, this recent article related to foreign workers refurbishing the Tesla plant in Fremont, CA, illustrates how you can get on the wrong side of regulations. I am sure Tesla could have done without this coverage. What would happen if it was you or your company? When you hire contractors for working in the U.S. do you specify that they must be legally employed?
On EEOC rules, Europeans are generally not a protected minority. Unless they are women. Or over 40 years old. Or have a handicap - in which case the Americans with Disabilities Act (ADA) assures right to reasonable accommodations.
"Exempt or non-exempt" relates to overtime payments. By recent presidential decree, all employees earning less than $47,476 per year will from Dec. 1st, 2016, have a right to overtime payment if they work more than 40 hours/week. This is a long overdue regulation of the old limit that hadn't been changed for eons - and it doesn't compensates fully for the changes in prices since.
You can make more than the limit and still have a right to overtime payment. To be non-exempt, if your rutines are given by your supervisor and you have very little autonomy, it doesn't matter if you earn a quite high salary - you should still get overtime payment. But these rules are bent regularly by employers.
Are you hired as an independent contractor? Are you a "Temp"? There are well defined rules for what types of relationship belongs in which category and what should make you a regular employee. Since employees often have rights to medical insurance, retirement funds, stock options, and other protections, your status has implications. These rules are also bent regularly by employers - also by big companies.
The last two issues are more tricky. Naturally, your employer should pay your taxes into the correct coffers and keep you insured. But unfortunately, some employers disregard the law. If an employer doesn't send the money withheld from your pay check to the IRS/Social Security and the company goes into bankruptcy, you may be liable for the taxes that haven't been paid. You will then have a claim against the company - and good luck with that if it is in bankruptcy.
With tight cash flow in e.g. a start up company, this is unfortunately not something you should think is a purely theoretical risk. But it is very difficult for a normal employee to check. (And for the small startup, it actually is fairly complicated to figure out all details because there can be quite many different jurisdictions with different rules to satisfy. Hire help.)
On the same note, if the company goes "belly up", there is no security net like the in Denmark mandatory Bankruptcy insurance (Lønmodtagernes Garantifond). Employees' claims against the company are not even privileged claims. You really do want to have your own "rainy day fund".
Workers Comp is typically not something one thinks about unless one works in construction or production. But you can still get injured at work even if most of the time is spent in front of a computer.
Imagine that your employer decides to send you rapelling or white water rafting as part of a team building exercise. Perhaps somebody even asks you to sign a waiver before these interesting activities take place. You are used to seeing these waivers when you do something exiting on weekends - but did you just sign away your right to compensation if you injure yourself during an employer organized outing? And just as importantly, does your company carry insurance that lets its employees throw themself off tall cliffs? Rest assured that roofing companies pay more for their Workers Comp insurance than do those that employ office workers.
If you are the entrepreneur with a startup, not insuring your employees for what you expose them to may make you personally liable since you also expose your shareholders to a financial risk you probably haven't disclosed. Do you have a "Directors and Officers Insurance" for the case when your fiduciary duties have been violated?
These are some of the things that can - and according to Murphy's Law sometimes will - go wrong. But when they do; when the employer exposes employees to hazardous working conditions or doesn't protect them adequately from sexual harassment or... we can always take the employer to court, individually or as a group.
More and more employers make you sign employment agreements where any such claims have to be settled by arbitration. And while I generally agree that, as a society, America is much too litigious and that we should be able to use mediation more often, there is a difference between using this as the first step and arbitration being the only step possible.
In court or by arbitration, you want a lawyer by your side. The costs of legal representation may often keep people from challenging unfair practices. Some lawyers will represent a class action lawsuit if they get a cut of a rewarded compensation - or nothing if they lose the case - but they won't do that for one person. There is not a big enough upside even if you win your arbitration case.
You may be right. That is not much consolation if your employer can behave with impunity because you realistically have no way and nowhere to address the wrongs.
Sick and tired of your employer - and perhaps them of you - you may part ways. But then what are you going to do? Perhaps you can't work in your field because your contract also included a non-competition clause. In some cases, these clauses can be negated in court because they are to broad or run for too long. Oh, I forgot, you can't take your employer to court.
Have you really read your employment contract? Don't ask me, I am not a lawyer - I just follow the news and listen to what problems people tell me about. But it seems that as long as employees keep signing away their rights, they will have fewer and fewer rights.