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Hiring and Firing

Common questions covered here
What do I need to know when it comes to hiring or firing a remote employee in the U.S.?
How do I keep track of employment laws for all the states where I have employees?
Do laws for hiring and firing employees vary by state?

Recruiting

In order to protect candidates from discrimination, U.S. federal law, as well as many state and local laws, prohibits companies from recruiting new employees in a discriminatory way,* making hiring decisions on a discriminatory basis or using hiring practices that have an especially negative effect on relevant groups,* and asking certain questions during interviews.*

Federal law prohibits or strongly discourages asking certain questions because of their connection to discriminatory hiring practices:

  • Whether a candidate has a disability. If the candidate’s disability is obvious or disclosed, it is permitted to ask about providing assistance with the application process or changing the environment or way in which the work is done to accommodate the candidate;

  • About the candidate’s genetic information;

  • About the candidate’s race, religion, or ethnicity;

  • About the candidate’s age, unless that information is being used to verify that the candidate meets any age-related legal requirements; and

  • About the candidate’s pregnancy or plans to start a family.

cautionState and local laws add to these bans, meaning that your interviews of remote employees may operate under rules you’re not accustomed to. These prohibitions include “ban-the-box” laws that prohibit companies from asking candidates about their criminal history (prior to a conditional job offer), and restrictions on questions about candidates’ salary histories.**

newStates and localities differ in their treatment of non-compete agreements, so if a candidate has such an agreement in place, you’ll want to consult applicable laws to determine whether it will prevent them from working for your company. As of April 2019, the Center for American Progress reported that three states (California, North Dakota, and Oklahoma) have outright bans on non-compete agreements (except in limited circumstances), while another 26 will enforce some non-compete agreements, but not others.

The Hiring Process

For all employees in the United States, employers must verify employees’ identity and employment authorization.* This process includes physically examining, with the employee physically present, each document the employee has provided. Doing so can be more difficult for remote employees because reviewing documents via webcam is explicitly prohibited, but employers can designate an authorized representative to perform the examination and fill out the necessary forms. Authorized representatives can include personnel officers, foremen, agents, or notaries public.**

A few things you’ll need to pay attention to for remote hiring:

  • Contracting. It’s important to make sure that your contract or offer letter with the employee spells out the relationship between the company and the employee, and provides for any state or local legal requirements.* If your remote employee is in a different place than the bulk of your workforce, this may mean that your contract with the remote employee differs in some ways from your standard employment contract.

  • New hire reporting. Employers are required to report basic information on new and rehired employees to the state where the employee works shortly after the hire or rehire is made. Federal law requires that reporting be completed within 20 days,* but some states require faster reporting.*

For the federal government, the purpose of new-hire reporting is to help locate noncustodial parents to establish and enforce child support orders.* States also have an interest in determining which of its residents are currently employed to appropriately administer unemployment benefits, workers’ compensation, and other entitlement programs.*

Firing

Certain reasons for firing employees are always illegal in the United States. Federal law prohibits employers from terminating employees because of their age, race, color, religion, sex, ethnic/national origin, disability, or veteran status.* Employers are also prohibited from firing an employee for asserting their right to be free from discrimination.* The Equal Employment Opportunity Commission (EEOC) refers to asserting these rights as “protected activity,” which can include:

  • “filing or being a witness in an EEO charge, complaint, investigation, or lawsuit

  • communicating with a supervisor or manager about employment discrimination, including harassment

  • answering questions during an employer investigation of alleged harassment

  • refusing to follow orders that would result in discrimination

  • resisting sexual advances, or intervening to protect others

  • requesting accommodation of a disability or for a religious practice

  • asking managers or co-workers about salary information to uncover potentially discriminatory wages.”*

newStates and localities can also enact anti-discrimination laws that make further reasons for termination illegal, and/or expand the employers included in these restrictions. For example, while there are ongoing cases disputing whether discrimination on the basis of sexual orientation and gender identity is prohibited by federal law, twenty-one states and D.C. prohibit such discrimination.*

importantThe National Conference of State Legislatures compiled a chart outlining state-level discrimination laws across the country; this is a useful place to start, but it’s wise to always check for updated information in any state where you’re hiring.

Except for Montana,* all states in the U.S. recognize at-will employment, which allows employers to terminate employees at any time, as long as the reason they’re firing the employee is not illegal.* In the states that recognize at-will employment (all states other than Montana), there are two ways that the freedom of employers to terminate employees is restricted: The employment contract can include an implied higher bar for termination, and/or state and local law can provide greater restrictions.

  • Implied contract. Even if it isn’t written down, if an employer has given an employee reason to expect a particular term of employment or only to be fired for just cause, then the parties may have what is referred to as an “implied contract” and the employer may not be able to terminate the employee at will. Most states recognize an implied contract exception, but states treat the exception differently, and this is a developing area.*

  • Public policy. This means that an employee cannot be fired if their termination would “violate a public interest.”* States can define this narrowly and broadly, but generally if the employee engages in one of the following four categories of conduct, the public policy exception applies:

    • refusing to perform an act that’s legally prohibited

    • reporting a legal violation

    • engaging in acts that are in the public interest, such as performing jury duty

    • exercising a statutory right, such as filing a worker’s compensation claim.

  • Implied covenant of good faith and fair dealing. A relatively small number of states include this final exception. As the National Conference of State Legislatures explains, “judicial interpretations of this covenant have varied from requiring just cause for termination to prohibiting terminations made in bad faith or motivated by malice.”

The flip side of the at-will employment coin is that employees are also free to leave at any time for any or no reason. The state-by-state exceptions that limit employers’ ability to terminate employees don’t apply to employees leaving, though, so this element of the relationship with your employees shouldn’t differ between on-site and remote.

When it comes to the firing process, there is no federal requirement as to how much notice a company needs to provide before firing someone, and the same is true for at-will employment states. However, some states require that the employers provide specific documents to the employee when they are terminated. For example, Illinois requires employers to provide a pamphlet, and California requires employers to provide notice of termination and information about unemployment benefits.

importantAfter firing an employee, you will need to be sure to issue their final paycheck following the applicable rules and regulations. For more information, see Payroll and Taxes.

As with individual employees, employers are prohibited under federal, state, and local law from laying off groups of employees for discriminatory reasons.*Federal law, through the Worker Adjustment and Retaining Notification Act (WARN), also requires employers with 100 or more employees to provide at least 60 calendar days’ advance written notice when laying off 50 or more employees at a single site, 50 or more employees in any locations if they constitute at least a third of the company’s workforce, or more than 500 employees.*

importantFor the first type of layoff—of 50 or more employees at a single site—remote employees may be counted toward the site from which they receive assignments or to which they report. Unfortunately, however, courts in different jurisdictions disagree as to how remote employees should be counted.*

Some states also have laws that adjust the circumstances in which an employer must give notice. For example:

  • California expands WARN to apply to companies with at least 75 employees and requires notice whenever 50 or more employees are laid off, regardless of their location or percentage of the workforce.

  • Illinois expands WARN to apply to companies with at least 75 employees and requires notice whenever 25 or more employees are laid off if they are at a single site and constitute at least a third of the company’s workforce at that site, or if 250 or more employees at a single site are laid off.

  • Tennessee expands WARN to apply to companies with at least 50 employees and requires notice whenever 50 or more employees at a single site are laid off.

Hiring Checklist

Thorough checklists for the steps you will need to take when recruiting and hiring include:

Recruiting

  • Learn what kinds of discrimination are illegal in the candidate’s state, and design policies to avoid these in hiring decisions.

  • Make sure your interview questions are in line with the laws in the state where the candidate lives, as well as federal law and your company’s state laws.

The Hiring Process

  • Determine whether the candidate has a non-compete agreement in effect, and if so, whether it is enforceable under state law.

  • Verify the employee’s identity and work authorization by physically examining the employee’s relevant documents with the employee present, or by designating an authorized representative to do so.

  • Make sure that your contract with the employee spells out the relationship between the company and the employee and provides for any state or local legal requirements.

  • Report the new hire to the state where the employee will be working by the deadline created by that state, 20 days or fewer from the date of the hire.

Firing

  • When considering terminating an employee, ensure that the reason for termination is allowable under federal and state law.

  • Research and comply with state laws that require employers to provide employees with certain documents when they are fired.

  • If the employee is being terminated as part of a layoff, review federal and applicable state rules that may require written notice 60 days before the employee will be terminated.

  • Issue the employee’s final paycheck on the timeline required by applicable law (see Payroll and Taxes).

  • If your company provides a group health plan, notify the plan that the employee has been terminated and, if your company administers the plan, notify the employee of their COBRA eligibility (see Benefits).

Compensation

Compensation is a complicated topic in its own right, and crossing state lines impacts what kind of pay and associated benefits you offer employees in a number of ways. You’ll need to factor in state and local laws regarding minimum wage and overtime, among other things. And to do that, you’ll need to know which kind of employees you have.

Exempt vs. Non-exempt Employees

Although it might be tempting to think of minimum-wage and overtime rules as applicable to all workers, this isn’t the case. Instead, they apply to some workers (non-exempt employees) but not others (exempt employees and independent contractors) based on classifications that are initially set at the federal level.*

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