USA Law and Practice Contributed by: G. J. Ligelis Jr., Christopher K. Fargo, Alyssa K. Caples and Margaret T. Segall, Cravath, Swaine & Moore LLP
10. Employment and Labour 10.1 Employment and Labour Framework US employment relationships are generally created voluntarily, without a written contract being required. The employment term can continue for an indefinite period and is generally freely terminable by either party, for any or no reason (other than certain statu - tory prohibitions, including anti-discrimination rules), unless the relationship is established and governed by an employment contract. In the absence of a writ - ten agreement, employers are not required to provide severance or termination pay. There is no mandatory notice period required by either party to terminate individual employment other than federal law requir - ing advance notice in connection with certain large- scale layoffs. A majority of states in the US recognise restrictive covenant agreements including those relating to non- competition, customer and employee non-solicitation, and confidentiality following employment. Other than in certain US states such as California, non-competi - tion agreements are generally enforceable subject to various limitations on their duration and scope (based on a reasonableness standard), and public policy con - siderations. However, this is rapidly evolving based on state and federal proposals. In April 2024, the FTC adopted a rule banning most post-employment non- compete agreements, but a federal court vacated the rule in August 2024, and the FTC dropped its defence of the rule in September 2025, though it continues to target overly broad restrictive covenants on a case- by-case basis. Several states are also proposing stricter limits on non-compete covenants, particularly for low-wage workers and certain industries. While US federal law establishes labour organising rights in the private sector, and union election peti - tions have seen a recent uptick, organised labour is relatively uncommon in the private sector, and tends to be found mainly in certain industries, such as rail - roads and airlines. 10.2 Employee Compensation There are no material statutorily required benefits in the USA for active employees, other than the Afford -
able Care Act, which mandates that employers with 50 or more full-time employees offer certain health insurance benefits. Federal and state minimum wage laws may impact compensation. Compensation for full-time US employees typically consists of cash salary or wages, participation in a defined contribution retirement plan (which may or may not include an employer contribution) and basic welfare benefits, including health insurance, which is often partially subsidised by the employer. Defined benefit pension plans are now fairly uncommon in the US private sector, despite occasional interest in reviv - ing such plans. Management-level employees com - monly receive annual cash-based incentive compen - sation, while equity-based incentive compensation is often reserved for officers and executive employees. Corporate transactions typically implicate US com - pensation arrangements only as a matter of contract. Employment agreements, incentive plans and other arrangements frequently contain provisions address - ing the impact (if any) of a transaction. It is uncom - mon for the mere occurrence of a transaction, includ - ing an acquisition, change-of-control, or investment transaction, to cause an amount to vest or become payable, commonly referred to as “single-trigger”. A transaction may instead cause severance protections to apply for a specified period of time following the corporate transaction if an employee is terminated without cause or resigns for good reason (ie,, a con - structive termination), commonly referred to as “dou - ble-trigger”. 10.3 Employment Protection Corporate transactions may generally be entered into and completed without the approval of, or consulta - tion with, US employees. US employees are not typi - cally consulted on transactions prior to their public announcement. Employment in the USA is generally “at will”, and the vast majority of US private sector employees are not represented by labour unions or works councils. US employees do not have a statutory right to transfer employment (or right to reject transfer) or mandatory severance benefits upon a corporate transaction.
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