Why do we need to consider the differences between UK employment law and US labour law?
With Britain and the European Union (EU) in talks for some months now after the historic Brexit vote, Britain must consider how to mitigate the problem of leaving the luxury of the single-market (which provided for the free movement of goods, capital, services and labour between EU member states). Apart from the obvious idea of trying to secure new trade deals with individual EU states, Britain might negotiate trade agreements with the US.
Therefore in light of a possible strong trade relationship post-Brexit, it is a good time to look at how UK employment law differs from that of the US. There is a common presumption that because of our shared language and relationship, American laws and practices work in symphony with UK laws. Although historically US law emanates from English common law, this assumption is far from correct and there have been many examples of businesses making critical mistakes because of this presumption.
Therefore we thought it best to summarise some of the main areas of difference in employment and labour laws that businesses from the UK thinking of entering the US market should be aware of:
- Paid holiday leave
US workers are not legally entitled to any holiday pay, however most US employers (probably through commercial competition) will offer workers paid time off. Although the number of days off will differ from employer to employer, on average a US employer will offer 10 working days for their workers. The UK in comparison, legally entitles employees to 5.6 weeks paid holiday per year (28 days including public holidays for a full-time worker).
- Sick Pay
There is no federal law that requires workers to be offered sick leave. However many state laws require sick leave to be given. The precise terms will differ from employer to employer, and in accordance with individual state rules and regulations. By way of contrast, the UK requires all employees (provided they qualify) to be entitled to Statutory Sick Pay (SSP) and employees are entitled to this for up to 28 weeks. The current SSP rate employers must pay to employees who qualify for SSP is £89.35.
In the US, employers who have 50 or more full-time workers (full-time workers being defined as those who work 30 hours or more per week) are required to provide ‘health care coverage’ to employees (including dependants). Employers with 50 or more full-time workers who fail to provide adequate ‘health care coverage’, will owe an employer shared responsibility payment to the government. The UK has the National Health Service (NHS) which is publicly-funded; therefore employers in the UK do not need to contribute to the healthcare of employees, although sometimes private-healthcare can be added as a benefit.
- Laws governing the employment relationship
In the US, there are few laws governing the employment relationship. However UK employment law provides for pregnancy leave, sickness leave and pay, protection of employees on a sale of business (TUPE), dismissal, notice periods and redundancies to name a few.
- Employer terminating employment
In the US, there is the concept of ‘at will’ employment, which allows employers to terminate the employment relationship at any time, without notice, good cause or prior warning provided it is not a violation of a ‘protected class’ (these classes include race, sex, religion or national origin). The majority of employees in the US are ‘at will’. Under UK employment law, employees have pretty much the same lack of employment rights until they have two years’ service. Employers therefore can generally dismiss employees with less than two years’ service without notice, any prior warning or reason (provided there is no discrimination and the reason for termination is not for whistleblowing or a similar, ‘automatic’ reason).
- Written contract
In the US, there is no legal requirement for a written document or contract as proof of the employment relationship. Sometimes an offer letter is issued which address the main terms such as salary, title, bonus (if any) and holidays. UK employees must be provided with a written statement setting out the fundamental terms of the contract. Typically employees are given very detailed employment contracts.
- Age Discrimination
In the US, federal protection is given to applicants and employees who are aged 40 or over. Whereas in the UK, protection is given to employees and applicants of all ages. There is also a clear difference in the amount of money awarded for discrimination, although in both countries awards for discrimination are uncapped. In the US, discrimination claims can reach millions of dollars following long (often years) legal disputes and great expense. In the UK, discrimination awards are not that high; they rarely reach the six-figure mark.
Employers in the US can generally order an employee to do as much overtime as it wants. UK employment law limits the hours of work an employee can be obliged to work to 48-hours. So employers cannot require employees to work over this amount. However those employees who want to work more than 48-hours can sign an ‘opt-out’ agreement to work more than this, and senior staff are not covered at all. So in reality, the 48-hour week is a law without teeth.
We shall wait and see the specific terms of Brexit. However if there is a trend of UK businesses deciding to operate within the US post-Brexit, then they will need to comply with US labour laws and recognise the distinctions between US and UK employment laws.
By Zahid Reza
Image used under CC courtesy of Nicolas