Understanding your Employment Contract

When you read a job announcement or you receive your first job offer, you might not know exactly how things work in the US: what are your rights, which benefits can you expect, what salary wage can you be entitled to…? Since I moved in the US, I have had three different positions with three different companies, each of which offering a different range of benefits. In this article, you’ll find the conclusions I came to from my work experiences, which hopefully may help you navigate through the American employment system.

How do the American employment contracts work?

To begin with, there are two main categories of employees in the US: the exempts and the non-exempts. I personally started my professional life here as a non-exempt and have now been an exempt employee for a few months. So, what are the big differences between those two categories?

Non-exempt employees are paid per hours worked. In this category – and in California only –, any hour worked beyond 40 hours per week or 8 hours per day shall be paid 1.5x the initial hourly rate. Beyond 12 hours per day, the hourly rate is doubled. In addition, if a non-exempt employee works more than 6 days a week (in the US, the first day of the week is Sunday), the rate of the first 8 hours of the 7th day are multiplied by 1.5, then by 2 beyond 8 hours. If these regulations seem to give some protections to the employees, it is quite easy for an employer to bypass them. For example, if you start your week on a Tuesday and work until the Saturday of the week after – i.e. during 12 consecutive days – and you don’t go beyond 40 hours per week or 8 hours per day, your hourly rate will remain unchanged because you didn’t work more than 6 days per week. Another example: should you be asked to work from 4 p.m. to 8 a.m. the next day, your hourly rate remains again unchanged despite the fact that you worked 16 consecutive hours. As you may have guessed from these examples, there is no bonus wage if you do night or weekend shifts.

Exempt employees receive a regular monthly (or bi-monthly) wage, which is usually higher than the hourly rate received by non-exempt employees. In exchange, hours are not counted and, if their job requires exempt employees to work more than 40 hours per week or 8 hours per day, they cannot ask for a bonus wage for those extra hours worked. However, the negotiated contract usually includes benefits that non-exempt employees do not have.

The non-exempt category can be divided into two other subcategories: temporary and regular employees. Some employers who will hire you as a temporary staff may change your status into regular after a certain amount of time spent in their company, but there is no such law that forces them to do so. Usually, temporary employees are not offered a benefits package, whilst regular ones would at least receive some paid time off.

I should also mention a third subcategory which may be offered to you (and which, for me, is the worst one): some workers can be enrolled as on call. This means that you would be working for the company only when they need you and they call you. Outside of these periods, you would remain unemployed for days, sometimes weeks and, of course, you should not expect any benefits with this type of contract.

How do I know how much I am worth in the US?

The first thing that you need to keep in mind when you negotiate your salary is the minimum wage applied in California, which is way higher than the federal minimum wage of $7.25/hour: the state minimum wage is currently (January 2020) at $12/hour for businesses with less than 25 employees or $13/hour for businesses with 26+ employees, and is set to reach $15/hour by 2023. However, since the cost of living is so high in Los Angeles, the county has decided to apply a higher hourly rate as well, which is currently at $13.25 or $14.25, depending on the size of the company. On July 1, 2020, this rate will increase to $14.25 or $15/hour.

Now that you have these numbers in mind, I would suggest you to go to Glassdoor’s website and try to compare the different salaries for a specific position or within a company. When offered a salary, do not hesitate to negotiate it, especially if it is way below the market average.

Keep also in mind that not all the employers offer benefits, and this may considerably decrease your yearly wage if, for example, you need to take unpaid time off. Here is a list of benefits that employers usually offer to exempt employees:

  • Paid sick leave: actually, this is required by law in California. Any person who has worked more than 30 days in a year is eligible to this benefit, regardless of their category of employment (exempt/non-exempt). The minimum an employer should give you is 24 hours/year, that you will accrue throughout the year. The city of Los Angeles as well as some other cities in LA county have specific regulations that oblige the employers to give you up to 48 hours/year. These hours can roll over to the next year, but you usually have a cap when your sick hours do not accrue anymore. You cannot use them by half hours, but you can use them by brackets of as little as one hour. By law, you have no obligation to prove that you are sick when you use them. If you don’t use all of the hours you accrued by the time you leave your job or your contract expires, you will lose them.
  • Federal holidays: there is no obligations for your employer to pay you on federal holidays, even when your company closes and that you cannot come to work. If you are required to work on a federal holiday, you will not receive a bonus wage or a deferral, except when your employer decides so. It is up to your employer to decide which federal holidays they wish to give you or not.
  • Paid time off (PTO): again, this is up to your employer to offer you some paid time off or not. Usually, you will accrue a percentage of hours per hour worked, which means that you have to “save” them prior to use them (note that some companies may agree that you take them before you earn them). It is common that you receive up to 10 days of paid time off when you start a new job as an exempt employee. PTO rolls over to the next year (anything that is unused cannot be lost, per California law), but there can be a cap as for sick days. If you are offered paid time off, your employer may choose to not give you paid sick days (as long as you have a minimum of 24 hours of PTO).
  • 401K plan: this is a retirement plan. Enrolment is not mandatory, but if you choose so, a percentage of your gross salary can be put on an “account” with a high interest rate. This amount will not be subject to taxes until you withdraw it from your account when you are a retiree. Some employers will choose to match part of the amount you put aside, others will not.
  • Medical / dental / vision insurance: these insurances and what they cover vary a lot from one employer to another. So far, I have been employed by three different companies that all offered a medical insurance, but none was as good as the one offered by Caltech/JPL (one was even ridiculously expensive and offered a minimum coverage). You can always decide to enroll or not, so you can stay on your spouse’s insurances should the coverage be better.
  • Paid family leave: there is no regulations here, so again, it is up to your employer to offer it to you or not. California State does offer a compensation for family leave if you are eligible, but if you choose to take some time off when you give birth/adopt or care for a seriously ill relative, your job is not protected by law. You can find more information here.
  • Short-term and long-term disability leave: some employers pay the cost in full; others just offer to enroll at a lower cost (it never cost me more than $30/month for both). When you fall ill or get injured, those insurances will pay a percentage of your salary (usually between 50 and 80% of your gross income) for a specified amount of time. Short-term disability (STD) can usually be used for maternity leave, but some employers may choose to opt out. There is a waiting time period (typically 2 weeks and all your paid sick leave must have been used beforehand) and the duration is typically between 13-26 weeks. Long-term disability (LTD) begins once your STD benefits have been used (LTD typically lasts more than 6 months). The waiting period is normally covered by STD (as long as you are enrolled). Also note that some employers may require that you be hired for a certain amount of time before you can claim for STD.

What are your rights and obligations when you quit a job or when you get fired?

In the US, your job is not protected. This means that, when you decide to quit your job, you can quit the very same day. Note that your contract may include a clause where you are being asked to give your employer a notice period (typically 2 weeks) when you wish to end your contract. Conversely, when your employer doesn’t need your services anymore, they can fire you immediately as well. In cases when you are terminated through no fault of your own, you might be eligible for California’s Unemployment Insurance, through which you can receive benefit payments for a certain amount of time. You can find more info here.

Also note that, under California law, earned vacation time is considered wages, which means that upon termination of employment, your employer must pay all paid time off that you accrued but did not use. However, this does not apply to paid sick leave.

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