Considering Expanding Your Business South of the Border?
July 24th, 2014
Guest blog post by: Karolynn St-Pierre, JD SPHR
Breaking into the U.S. market can be a highly rewarding endeavor for many Canadian businesses. With a population of just under 400 million and a GDP of over $15 trillion, the potential benefits of moving “South of the Border” can be great but not knowing the differences in human resources can trip up even the most conscientious business owner and HR professional.
Like Canadian provinces, every U.S. state follows different rules. However, the biggest challenge when looking south, is that labor laws exist at the Federal level (national law) and can vary from State to State. The applicable law is the regulation most friendly to the employee. For example, the Federal Minimum Wage in the U.S. is $7.25 per hour. In Georgia, the state minimum wage is $5.15 per hour and Washington the state minimum wage is $9.32 per hour. So, in Georgia you must pay the federal minimum wage of $7.25 for each hour worked and in Washington you must pay the state minimum wage of $9.32 for each hour worked.
When we speak with local HR professionals, they often ask about “at-will” employment. Almost every state (but not all), have at-will employment laws. This means that you can terminate an employee at any time for any reason and an employee can quit at almost any time for any reason. As you probably know, the U.S. has quite the reputation for being litigious and an employee is able to sue their employer for any reason. So while at-will employment means that someone can terminate for no cause, it is always recommended that an employer have the documentation to protect their reason to terminate an employee.
A typical benefit plan includes healthcare, dental care, optical coverage and time off (both sick and vacation). Like Canada, Paid Time Off, or PTO, programs are popular but not required. It is recommended that employees earn their PTO as they work and not in one lump sum because most States require that any time earned by an employee must be paid out on their final day.
There has been a lot of debate about U.S. healthcare. The U.S. has recently moved to a requirement that every resident living in the U.S. is required to have health insurance, which is not that easy to get in comparison with countries like Canada, where you can also get car insurance easily from online companies as auto insurance toronto. Until a business has 50 full-time (working more than 30 hours a week) employees they are not required to contribute to their employee’s healthcare. Of course just because you are not required to contribute doesn’t mean you can’t and it is a wonderful recruiting tool for businesses regardless of size. Once an employer reaches 50 full-time employees an employer is required to pay for 50% of an employee’s health insurance or face penalties.
Retirement plans also can vary in the United States. There is no law requiring a business to provide a retirement plan or a 401K, but they are always appreciated. There are other plans that exist depending on the size of the business which should be discussed with an accountant. Also, with every pay check employees and employers contribute to Social Security, which is the equivalent of an RRSP.
When you hire an employee in the United States it is not recommended to give an offer letter. Anything in writing has the opportunity to come back and become part of a legal case, so it is recommended that you put very little into writing. However, it is also understandable that sometimes an employee is not going to leave a job without something more substantial than a verbal offer of employment. In these situations it is recommended that following a verbal offer, a written letter to confirm the gross amount of the paycheck is issued. It is important to not require any counter signature or acknowledgement. In both cases, the courts have found that a signature will negate at-will employment laws and anything more than a paycheck salary listed could leave a business liable for an entire year’s salary even if an employee were to quit within the first 24-hours of working for the business.
There are fewer holidays in the U.S. Typically, it is up to the business to determine which holidays are acknowledged. On average the big ones tend to be:
- New Year’s Day (January 1)
- Memorial Day (first Monday in May)
- Independence Day (July 4)
- Labor Day (last Monday in September)
- Thanksgiving Day (the fourth Thursday in November)
- The Day after Thanksgiving (there are many businesses who remain open – much depends on the kind of business they are).
- Christmas Day (December 25)
These are just a guideline, and there are many other banking holidays, but the average business rarely acknowledges them.
Marijuana and Drug Testing
As you may know, two states (Washington and Colorado) have legalized the use of marijuana and 26 states have some legalization in the form of medication. One thing to consider is that marijuana is still federally illegal in the U.S. This is good news for employers. Today drug tests are unable to determine if an employee lives with a user, went to a concert last week or used while on a break at work. Because of that, Random Drug Testing is allowed in many states. Every state allows for an employer to test (and many require it) if an employee is in a car accident in a company vehicle. Additionally, a good Alcohol and Drug Policy will protect any employer when an employee is working while under the influence.
The U.S. Federal Government and every state are very interested in pursuing businesses who hire contractors and incorrectly classify them when they should, in fact, be an employee. There is a 20 question test that the Federal Government asks of the Contractor/Employee relationship. Some of the questions include:
- Is the business incorporated? – In other words, are you paying an individual or are you writing a check to a company?
- Does the contractor do business with more than one company?
- Is the contractor doing your main business? – if you are a structural engineering company, you can’t bring on a structural engineer unless it is for a particular short term project.
- Do you have a contract that has a specific statement of work with a beginning and an end date? (if they are working full-time, it can’t be longer than 6-months)
- Does the contractor set their own hours and use their own equipment?
This list is not comprehensive and some states ask additional questions beyond the Federal questions. Some of these questions are similar to Canadian questions, but contractors do not contribute to the state unemployment coffers nor do they contribute to Medicare (is a national social insurance program, administered by the U.S. federal government, that guarantees access to health insurance for Americans aged 65 and older who have worked and paid into the system, and younger people with disabilities).
There are many reasons to go south of the Border and capture some of the $15 million GDP for your own business, but there are many things to consider when you do. HR in the U.S. is a multi-headed beast—simply knowing the federal law is not enough. Employers also need to be aware of the applicable state and local laws and how they apply to their business. While it may seem overwhelming, consulting a U.S. HR professional and knowing the basic differences between Canadian and U.S. HR policies, regulations and laws can save you valuable time and money. There are many challenges when moving or expanding your business into the U.S.—don’t let human resources and employment law become one of them.
ABOUT KAROLYNN ST-PIERRE
Karolynn Humberd St-Pierre, is a Senior Human Resource Professional, author, and speaker known for her expertise in US human resources and its complexities. Her book, The Small Business Human Resource Bible has become a desktop guide for small business owners across the U.S.
In 2009 Ms. St-Pierre founded Symmetry Consulting. Symmetry partners with its clients so they can focus on their bottom line and business growth, while Symmetry manages their HR functions and ensures compliance with American labor laws.
An employment attorney by training, Ms. St-Pierre recently relocated to the Vancouver area with her husband and two children and continues to manage her U.S. business from her home office and travels to visit clients and speak regularly.
Prior to founding Symmetry Consulting, Ms. St-Pierre spent 15 years working for some the largest human resource consulting companies, providing advice to Fortune 500 companies including Microsoft, Coors, Target, and Ford Motor Company.