Hiring in the United States: a founder's compliance guide.

The United States is the easiest country in the world to hire someone — and the easiest country to get sued by them. There's no national 'employment contract' culture, no statutory severance, no mandatory 13th-month pay. But there's a 50-state patchwork of wage laws, a federal minefield around classification, and an enforcement system where a single misclassified worker can cost you $50,000 in back wages and penalties.

If you're hiring your first US employee from outside the country, this is the map. If you've been hiring informally and 'figuring it out,' this is the audit.

The legal frame: 'at-will' is real, but it's not a license

Every US state except Montana follows at-will employment — either side can end the relationship at any time, with or without cause, with or without notice. Founders hear this and assume firing is risk-free. It isn't. At-will sits underneath a thick layer of federal and state protections: you can't fire someone for their race, religion, sex, age (40+), disability, pregnancy, national origin, or for reporting a safety violation. Document the business reason for every termination. 'At-will' is a defense — it isn't a strategy.

The five federal laws that actually run your day-to-day

• FLSA (Fair Labor Standards Act) — federal minimum wage ($7.25/hr, but most states are higher), overtime at 1.5× for non-exempt workers over 40 hrs/week, and the exempt/non-exempt classification test.
• Title VII / ADA / ADEA — anti-discrimination protections covering race, sex, religion, disability, age 40+. Applies once you hit 15 employees (20 for age).
• FMLA (Family and Medical Leave Act) — up to 12 weeks unpaid, job-protected leave. Kicks in at 50 employees.
• I-9 / E-Verify — every new hire must complete Form I-9 within 3 business days verifying work authorization. Audit penalties run $281–$2,789 per form.
• ACA (Affordable Care Act) — at 50+ full-time-equivalent employees you must offer health insurance or pay penalties (~$2,970 per employee per year).

Employee vs. contractor — the misclassification trap

The single most expensive mistake US founders make is paying their first 'hires' as 1099 contractors to skip payroll tax and benefits. The IRS, the DOL, and most states each have their own test (control, integration, economic dependence), and the 2024 DOL rule made the standard stricter still. If the person works set hours, uses your tools, follows your processes, and depends on you for most of their income — they are an employee. Reclassification means back taxes, back overtime, penalties, and very often a class action.

The state-by-state reality (this is the hard part)

Federal law is the floor. States stack their own rules on top — and the gaps are huge. California requires meal breaks, paid sick leave, and final-paycheck-on-the-day-of-termination. New York requires written wage notices and salary disclosure in job postings. Washington and Colorado require pay range disclosure. Texas barely adds anything. Before you hire anyone, look up the state's labor agency — not the federal DOL.

The first-90-day paperwork pack (don't ship a hire without it)

• Offer letter — at-will language, comp, start date, contingencies. Reviewed by a US employment lawyer once, then templated.
• Form I-9 + supporting docs — completed within 3 business days of start.
• Form W-4 (federal tax withholding) + state equivalent.
• Direct deposit authorization.
• IP assignment & confidentiality agreement (PIIA) — critical, often forgotten.
• Employee handbook acknowledgement — even a 10-page one is better than none.
• State-required new-hire notices (varies — California has 4+, Texas has ~1).
• Benefits enrollment (if applicable) within plan window.

Payroll, taxes, and the EIN reality

You cannot legally pay a US W-2 employee from a personal account or a non-US entity. You need: a US legal entity (usually a Delaware C-corp or LLC), an EIN from the IRS, state employer registration in every state where you have an employee, workers' comp insurance (mandatory in 49 states), and unemployment insurance registration. Use a PEO (Justworks, Rippling, Gusto, TriNet) for the first 10–20 employees — they handle the multi-state registration nightmare for ~$50–150/employee/month.

Terminations — at-will doesn't mean reckless

• Document the business reason in writing before the meeting. Performance, role elimination, or restructure — name it.
• Pay all final wages by the state-required deadline. California: same day. New York: next regular payday. Texas: 6 days. Don't guess — look it up.
• Offer COBRA notice (health insurance continuation) within 14 days for groups of 20+.
• Get a signed separation agreement with release of claims if you're paying severance. Employees 40+ get 21-day consideration + 7-day revocation under OWBPA.
• Collect company property, revoke access, run an offboarding checklist.

Take this home — the founder's US hiring checklist

• Set up a US entity, EIN, and PEO before your first W-2 hire — not after.
• Treat the employee vs. contractor question as a one-way door. When in doubt, classify as employee.
• Build your offer letter, PIIA, and handbook with a US employment lawyer once. Use them forever.
• Look up the specific state's labor agency for every state you hire in. Don't trust federal-only.
• Document every performance issue in writing. Every one. Even the small ones.
• Keep payroll, I-9, and timecard records for at least 4 years (IRS) and 3 years (FLSA).

Before you act — read this

Official sources to verify (keep this list bookmarked)