You can be well protected against employee lawsuits, too

In our series on the 10 most important facts about entering the US market, we explain which risks are real and how you can counter them as you expand into the USA.

When you look into market entry strategies, you come across a lot of information on the legal landscape, including employee lawsuits. Here is why potential claims from your staff shouldn't scare you.

1Employee lawsuits in the USA

Let's start with the five most common reasons employees sue in the USA. They are mainly claims for damages over:

1. Personal injury
2. Overtime pay
3. Discrimination based on, for example, origin, skin color, sex, disability or age
4. Sexual harassment
5. Wrongful termination

Cases like these can be legally complex. But foreign companies and their subsidiaries can minimize the risk of employee lawsuits with careful planning. So what exactly should you watch out for?

Personal injury: These claims usually fall into two categories.

• Workers' compensation claims for direct injuries at work: here the employer is liable for medical costs and lost wages.
• An injured employee can also sue the company for negligence: if successful, this can lead to liability and damages for pain and suffering.

To protect yourself, you should at least take out workers' compensation insurance. Each state decides whether it is mandatory; in Texas, for example, private employers can opt out in most cases. General liability insurance is also advisable, covering the employer against the financial risks of such claims. On top of that, set out precise rules for training on machinery and other potentially dangerous equipment, and put them in writing. Also find out to what extent this machinery must be maintained and/or officially inspected.

Overtime pay: Overtime claims usually arise under the Fair Labor Standards Act and state wage laws. As an employer, get familiar with the legal requirements up front. Careful records of working hours and breaks can also protect you from liability.

Discrimination: The best way to prevent discrimination claims is to know the legal requirements for hiring, firing and any other significant change to employment. An attorney specializing in employment law can help clarify the details where needed. Here too: the more clearly your records document relevant decisions and processes, the better for the company.

Sexual harassment: This can be direct (usually sexualized remarks toward a female employee) or indirect, for example a work environment where sexuality is raised or displayed for no reason. These lawsuits can be avoided too. Every employer should have a code of conduct covering these and similar issues. It could be part of onboarding and, where appropriate, signed by employees as standard. That reduces the risk and protects the employer from potential damages claims.

Wrongful termination: Well-drafted employment contracts protect companies from claims by employees who say they were unfairly dismissed. Employment can be structured so that you can terminate an employee with or without cause, as long as this doesn't violate anti-discrimination laws or involve a special legal situation, such as firing a whistleblower. You can also sign fixed-term employment contracts. During that term, you can only dismiss the employee for good cause (for example, theft or similar misconduct). Also follow the rules on termination (such as written form and any notice periods). Beyond contracts, companies should keep detailed personnel files recording misconduct, written warnings and so on.

There is dedicated insurance for discrimination and wrongful termination disputes. If you are sued, it covers your defense and any damages paid to employees.

2What this means for your US business

As you can see, the risks of each type of employee claim can be significantly reduced, and often eliminated, through careful planning, thorough documentation and the right insurance. Potential employee claims are therefore no reason to hold back from entering the US market and doing business in the USA. Companies large and small from around the world can successfully expand into the USA if they follow the advice above or bring in an employment attorney for added protection.

Here are all ten facts about entering the US market:

No. 1: "Entering the US market costs less than you think."

No. 2: "Forming a company in the USA is easy and fast."

No. 3: "There are many ways to enter the market."

No. 4: "Government rules for forming a company are simpler than many think."

No. 5: "The USA offers excellent intellectual property protection."

No. 6: "The USA offers a reliable legal framework for small and medium-sized businesses."

No. 7: "With the right strategy, you'll quickly find qualified staff for your US venture"

No. 8: "You can be well protected against employee lawsuits, too."

No. 9: "Business risks in the USA are easy to avoid."

No. 10: "Good legal and financial services in the USA aren't expensive."

In short

• The most common employee lawsuits in the USA involve personal injury, overtime pay, discrimination, sexual harassment and wrongful termination.
• Workers' compensation insurance, general liability insurance and written rules for working with machinery protect you against personal injury claims.
• Overtime claims arise under the Fair Labor Standards Act and state law; carefully documented working hours protect you.
• Well-drafted employment contracts, an anti-harassment code of conduct and detailed personnel files reduce the risk of termination and discrimination claims.
• Dedicated insurance for discrimination and wrongful termination claims covers your defense and damages.

How we help you

• PayrollPayroll, payroll taxes and filings for your employees in the USA.
• US market entrySubsidiary, staff, taxes: your start in the US market.
• Form a CorporationThe US corporation (Inc) for growth, investors and your visa.
• Company formation consultationEntity type, state and tax consequences, before you commit.