Employer of Record Guide in 

United States of America

Vacation Leave

• Federal Requirement: None
• State Requirements: No state mandates paid vacation
• Common Practice: 2-4 weeks annually, increasing with tenure
• Accrual: Must be paid out upon termination in some states

Sick Leave

States with Paid Sick Leave Requirements (15+ states):

• Accrual Rate: Typically 1 hour per 30-40 hours worked
• Annual Cap: Usually 40-80 hours
• Usage: Immediate family care often included

Federal Requirement: None for private employers.

Maternity Leave

Family and Medical Leave Act (FMLA):

• Duration: Up to 12 weeks unpaid
• Eligibility: 12+ months employment, 1,250+ hours worked, employer with 50+ employees
• Job Protection: Same or equivalent position guaranteed

State Enhancements: Several states provide paid family leave (CA, NY, NJ, RI, WA, etc.).

Parental Leave

• FMLA: Covers both parents (12 weeks total per family event)
• State Programs: Paid parental leave in 13+ states
• Duration: Varies from 6-12 weeks paid leave

Bereavement Leave

• Federal: No requirement
• State: Oregon and Illinois mandate paid bereavement leave
• Common Practice: 3-5 days for immediate family

Personal & Family Leave

• Jury Duty: Protected in all states (pay requirements vary)
• Voting: Most states provide time off to vote
• Military Leave: USERRA provides job protection for military service

Summary

Termination Types

At-Will Employment:

• Standard in 49 states (Montana is the exception)
• Employers can terminate for any reason except illegal discrimination
• No cause required for termination

Wrongful Termination:

• Termination based on protected characteristics
• Retaliation for protected activities
• Violation of public policy

Notice Period Requirements

• Federal: No advance notice required for individual terminations
• WARN Act: 60 days' notice for mass layoffs (100+ employees)
• State Variations: Some states require final pay immediately or within specific timeframes

Severance Pay

• Federal Requirement: None
• Contractual: May be required if promised in employment agreements
• Common Practice: 1-2 weeks per year of service for voluntary programs

Final Pay Requirements

Varies significantly by state:

• Immediate: Required in some states for involuntary termination
• Next Payday: Standard in many states
• Within 72 Hours: Common requirement
• Unused Vacation: Must be paid in states where vacation is considered earned wages

Unemployment Insurance

• Eligibility: Generally available for involuntary termination
• Disqualification: Termination for misconduct may disqualify
• Employer Impact: Claims affect future unemployment tax rates

Federal Holidays

State and Local Holidays

States may recognize additional holidays:

• Juneteenth: Now federal holiday (June 19)
• State-Specific: Varies widely (e.g., Patriots' Day in Massachusetts)
• Local: Cities may have additional observances

Holiday Pay Requirements

• Federal: No requirement for private employers
• State: Few states mandate holiday pay
• Common Practice: Time-and-a-half for working holidays, or paid day off

Required Documents

Federal Requirements:

• Form I-9: Employment eligibility verification
• Form W-4: Federal tax withholding
• Social Security Number: Required for payroll

State Requirements:

• State Tax Forms: Withholding certificates
• New Hire Reporting: Must report new employees to state agencies

Work Authorization

• I-9 Verification: Required within 3 days of hire
• E-Verify: Mandatory for federal contractors and some states
• Acceptable Documents: Passport, driver's license + Social Security card, etc.

Background Checks

Federal Regulations:

• Fair Credit Reporting Act (FCRA): Governs background check procedures
• Ban the Box: Federal contractors cannot ask about criminal history on applications

State/Local Variations:

• Many states have "ban the box" laws
• Some limit credit check usage
• Marijuana conviction restrictions in legal states

Data Protection

Federal:

• No comprehensive federal privacy law
• HIPAA: Protects health information
• FCRA: Governs background check data

State:

• California (CCPA/CPRA): Comprehensive privacy rights
• Illinois (BIPA): Biometric data protection
• Other states: Emerging privacy legislation

Employment Contracts

• At-Will Presumption: Employment is presumed at-will unless contract states otherwise
• Non-Compete Agreements: Increasingly restricted or banned in many states
• Confidentiality: Generally enforceable if reasonable

Onboarding Timeline

Worker Classification

Employee vs. Independent Contractor: The Department of Labor uses an economic reality test considering:

• Control: How much control the employer has over work performance
• Investment: Who provides tools, equipment, facilities
• Relationship: Permanency and exclusivity of relationship
• Profit/Loss: Opportunity for profit or risk of loss
• Skill: Level of skill required and business-like initiative

Misclassification Risks:

• Back payment of wages, overtime, and benefits
• Tax penalties and interest
• Department of Labor investigations

Union Considerations

• Right to Organize: Protected under National Labor Relations Act
• Right-to-Work States: 27 states prohibit mandatory union membership
• Collective Bargaining: Union contracts override many standard employment terms
• Union Avoidance: Employers cannot interfere with organizing activities

Industry-Specific Regulations

Healthcare: HIPAA compliance, state licensing requirements Financial Services: FINRA registration, background check requirements Transportation: DOT regulations, drug testing requirements Technology: Export control regulations (ITAR, EAR)

Remote Work Considerations

Multi-State Issues:

• Tax Nexus: Working remotely may create tax obligations in multiple states
• Labor Law Compliance: Must follow laws where employee is located
• Workers' Compensation: Coverage required in employee's work location

Equipment and Expenses:

• No federal requirement to reimburse home office expenses
• State Requirements: California and other states require reimbursement of necessary business expenses

What the EOR Handles

Borderless AI manages:

• Multi-state compliance and registration
• Federal and state payroll tax compliance
• I-9 verification and record keeping
• Benefits administration across states
• Workers' compensation insurance
• Unemployment insurance management
• State new hire reporting
• Final pay compliance by state