Employee and Benefits Considerations When Doing Business in the United States Checklist

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Highlights

  • Expanding a business into the United States can be an exciting yet challenging enterprise that may take into consideration a multitude of compliance regimes in the arenas of employment, employee benefits and executive compensation.
  • This Holland & Knight alert endeavors to simplify those complex rules and regulations by providing a list that could help guide a company through a multitude of considerations, including identifying essential parties, processes and compliance concerns in employee and benefits.

Expanding your international business into the United States is an exciting but sometimes daunting venture when it comes to the myriad rules and regulations at play governing employees and benefits. This alert endeavors to simplify those complex rules and regulations in the fields of employment, employee benefits and executive compensation law. There are many laws that apply to the areas of employment and employee benefits. On the federal side, tax laws under the Internal Revenue Code (IRC), laws governing employee benefit plans under the Employee Retirement Income Security Act of 1974 (ERISA) and employment discrimination laws are a few of the areas to be considered. State and local laws applicable to the places where the business is located or where the employees reside also can come into play.

The below checklist should be considered a starting point, but by no means is a complete, exhaustive list of everything your company will need to undertake. This checklist will guide your company through a multitude of considerations, including identifying essential parties, processes and compliance concerns in employee and benefits.

1. Identifying the Employer

Identify the employer organization, whether it will be a subsidiary or related U.S. entity, a professional employer organization, or some other agency, including whether a new entity may need to be created to accomplish your business goals.

2. Identifying Employees and Other Service Providers

a) In what states will the employees and other service providers work

b) Who will be responsible for hiring, firing and employee oversight

c) Development of policies/procedures/practices

d) Registration to do business in U.S. states may be required based on the amount of business performed in a given state

e) Classification of individuals as an independent contractor vs. an employee has implications in state and federal tax and employment laws

3. Executive Compensation

Identifying key executives and common compensation expectations is important to securing desirable talent.

a) Equity and phantom equity awards, compliance with tax and securities laws, including state "blue-sky" securities laws

b) Short- and long-term bonuses, incentive arrangements and commissions programs\

c) Deferred compensation and special tax issues under IRC Section 409A

d) Implications of IRC Sections 280G and 4999, including for Non-U.S. entities with U.S. taxpayer employees, in transactions

4. Employee Benefits

Understanding benefits mandated by law, costs of compliance with mandated benefits, and the costs of providing and complying with rules relating to voluntary benefits is key to proper design of benefits programs. Understanding market trends and expectations of employees is also valuable in attracting qualified workers.

a) Retirement Benefits

  1. Tax-qualified retirement programs may include defined contribution (typically 401(k) plans) and defined benefit plans and are also subject to the ERISA
  2. Nonqualified retirement plans have restrictions to minimize negative tax impact and may generally be "top-hat" plans under ERISA

b) Health Benefits

  1. Patient Protection and Affordable Care Act (PPACA) imposes obligations on employers to provide health benefits to employees of certain large companies
  2. Plans may be under fully insured policies or employers can alternatively self-insure the benefits
  3. Subject to ERISA
  4. May include benefits to retirees, voluntary other than under the Consolidated Omnibus Reconciliation Act (COBRA)
  5. Dental and vision coverage are voluntary

c) Welfare Benefits

  1. Short-term disability (consider whether the state requires statutory disability coverage, which may be an insured or uninsured ERISA benefit and a payroll practice)
  2. Long-term disability
  3. Life insurance
  4. Severance
  5. Typically subject to ERISA

d) Common Fringe and Other Benefits

  1. Tax-preferred benefits, such as health savings and dependent care, transportation/commuter expenses and certain education assistance
  2. Relocation and non-business benefits such as car use, cellphone reimbursement and club membership are typically taxable benefits
  3. Adoption assistance
  4. Employee assistance programs

5. Restrictive Covenants

a) Confidentiality, non-competition and nonsolicitation, and intellectual property assignment agreements

b) Although generally permissible to some degree in all states, the terms and enforceability of restrictive covenants are highly dependent on applicable state laws and likely cannot be resolved in a one-size-fits-all template

6. Employment Terms

a) Use of employment agreements is voluntary in the U.S. and at-will employment is common

b) Use of offer letters to describe the material terms of employment is common

c) Employee handbooks generally outline broad-based terms of employment and are encouraged

7. Other Areas of Legal Compliance to Be Addressed at the Workplace

a) Working hours and entitlements to overtime pay

b) Wages and salaries

c) Leave and holidays

d) Prohibitions on workplace harassment, discrimination and retaliation

e) Union workers and collective bargaining agreements

f) Termination and notice requirements, including when closing plans or mass layoffs

g) Unemployment insurance

h) Social Security benefits

i) Accommodations for disabled workers

j) Parental leave

k) Health and safety in the workplace

l) Employee privacy rights

m) Background check compliance, which can also be highly state-specific

n) Visa and immigration law compliance

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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