---
name: employment-law
title: Key principles
description: Use this skill when drafting offer letters, handling terminations, classifying workers, or creating workplace policies. Triggers on offer letters, termination process, contractor vs employee, workplace policies, employment agreements, severance, non-compete, and any task requiring employment law guidance or HR legal compliance.
author: mkurman
author_url: https://github.com/mkurman/zorai/tree/main/skills/nontechnical/absolutelyskilled/employment-law
license: MIT
version: 0.1.0
execution_mode: open
jurisdiction: us
practice: employment
language: en
tags: [employment-law, offer-letters, termination, contractor, policies, compliance]
---

## Key principles

1. **Document everything** - Employment decisions that lack documentation become
   indefensible in litigation. Every performance issue, accommodation request, policy
   acknowledgment, and disciplinary action must be written, dated, and retained.
   If it is not in writing, it did not happen.

2. **Classify workers correctly from the start** - Misclassifying an employee as an
   independent contractor is one of the most common and costly employment law errors.
   Back taxes, penalties, benefits liability, and class action exposure can result.
   Apply the applicable classification test before engaging any worker.

3. **At-will does not mean no process** - Most US employment is at-will, meaning
   either party can end the relationship at any time for any legal reason. But
   terminating without process creates discrimination and retaliation exposure.
   A consistent, documented process protects the company and treats employees fairly.

4. **Consistency prevents discrimination claims** - Applying policies selectively -
   enforcing attendance rules for some employees but not others, offering severance
   to some but not others - creates disparate treatment claims. Whatever you do for
   one, document your rationale when you do differently for another.

5. **Consult counsel before terminating** - Termination is the highest-risk moment
   in the employment lifecycle. Wrongful termination claims, discrimination claims,
   retaliation claims, and WARN Act violations all originate here. A 30-minute
   attorney consultation before a complex termination is cheap insurance.

---

## Core concepts

### At-will employment

In most US states, employment is "at-will" - either party may end the relationship
at any time, for any reason that is not illegal. Exceptions include:

- **Discrimination** - Cannot terminate based on a protected class (race, sex, age,
  disability, religion, national origin, etc.)
- **Retaliation** - Cannot terminate for protected activity (whistleblowing, filing
  an EEOC complaint, taking FMLA leave, reporting wage violations)
- **Implied contracts** - Employee handbooks or offer letters that imply job security
  can erode at-will status
- **Public policy exceptions** - Vary by state (e.g., terminating for jury duty)

Outside the US, most jurisdictions have statutory notice periods, severance
requirements, and "just cause" standards. At-will is a US-specific concept.

### Worker classification tests

Three primary tests are used in the US depending on context:

**IRS Common Law Test (for federal tax purposes)**
- Behavioral control: Does the company control how work is done?
- Financial control: Is the worker economically dependent on one company?
- Type of relationship: Is there a written contract? Benefits? Permanent relationship?

**ABC Test (California AB5 and many other states)**
A worker is presumed an employee UNLESS the hiring entity proves all three:
- A: The worker is free from control in connection with the work
- B: The work is outside the usual course of the company's business
- C: The worker is customarily engaged in an independently established trade

**Economic Reality Test (federal FLSA)**
Focuses on economic dependence: does the worker depend economically on this company
(employee) or is the worker in business for themselves (contractor)?

### Protected classes

Federal law prohibits employment discrimination based on:
- Race, color, national origin (Title VII)
- Sex, pregnancy, sexual orientation, gender identity (Title VII + Bostock)
- Age (40+) (ADEA)
- Disability (ADA)
- Religion (Title VII)
- Genetic information (GINA)

State and local laws frequently add: marital status, political affiliation, criminal
history (ban-the-box laws), salary history, and more. Always check local law.

### Wage and hour basics

- **Minimum wage:** Federal minimum is $7.25/hr but most states and many cities are
  higher. The highest applicable rate governs.
- **Overtime:** Non-exempt employees must receive 1.5x their regular rate for hours
  over 40 in a workweek (FLSA). Some states require daily overtime.
- **Exempt vs. non-exempt:** The FLSA salary threshold (currently $684/week) and
  the duties tests determine exemption. Job title does NOT determine exempt status.
- **Pay frequency and final pay:** States dictate how often employees must be paid
  and when final paychecks must be issued (often immediately on termination in
  states like California).

---

## Common tasks

### Draft an offer letter

An offer letter sets expectations and establishes key terms. Use this template as
a starting point - always have counsel review for jurisdiction-specific requirements:

```
[Date]

[Candidate Name]
[Address]

Dear [Name],

[Company Name] is pleased to offer you the position of [Job Title] in the
[Department] department, reporting to [Manager Title].

START DATE: [Date], subject to successful completion of onboarding requirements.

COMPENSATION: Your starting annual salary will be $[Amount], paid [bi-weekly/
semi-monthly], equivalent to $[hourly rate] per hour. This position is classified
as [exempt/non-exempt] under the Fair Labor Standards Act.

BENEFITS: You will be eligible for the Company's standard benefits package,
including [health/dental/vision/401k], subject to plan terms and eligibility
periods. Details will be provided separately.

EQUITY: [Include if applicable: You will be granted an option to purchase
[X] shares of Company common stock at the fair market value on the grant date,
subject to the terms of the Company's equity plan and a 4-year vesting schedule
with a 1-year cliff.]

AT-WILL EMPLOYMENT: Your employment with [Company] is at-will, meaning either
you or the Company may terminate the employment relationship at any time, with
or without cause or advance notice.

CONDITIONS OF EMPLOYMENT: This offer is contingent upon:
- Satisfactory completion of a background check (if applicable)
- Proof of authorization to work in the United States (I-9 verification)
- Execution of the Company's standard Confidentiality and IP Assignment Agreement

This offer expires on [Date]. Please sign below to indicate your acceptance.

Sincerely,
[Name], [Title]
[Company Name]

______________________________
Accepted: [Candidate Name]   Date: ___________
```

**Key omissions to avoid:**
- Do not promise specific duration of employment
- Do not use language like "permanent position" or "job security"
- Do not list benefits in binding detail - reference the plan documents instead
- Do not state the position is anything other than at-will (unless intentional)

### Handle termination

Follow a structured process. See `references/termination-checklist.md` for the
complete step-by-step checklist. Summary:

1. **Pre-termination review** - Document the reason, verify it is not pretextual,
   check for protected class membership and any recent protected activity. Consult
   HR and consider legal review for complex cases.
2. **Calculate final pay obligations** - Determine what is owed: final wages,
   accrued PTO (if applicable in your state), expense reimbursements.
3. **Prepare separation paperwork** - Separation agreement (if offering severance),
   COBRA notice, unemployment notice, any required state-specific notices.
4. **Conduct the meeting** - Brief, respectful, with a witness present. Do not
   debate the decision. Have security/IT access revocation ready.
5. **Post-termination** - Preserve all relevant records, respond to unemployment
   claims accurately, honor any non-disparagement obligations.

### Classify contractor vs employee (IRS test)

Use this decision framework before engaging or continuing a contractor relationship:

| Factor | Points toward Employee | Points toward Contractor |
|---|---|---|
| Instructions | Company controls how/when/where work is done | Worker controls their own methods |
| Training | Company trains the worker | Worker uses their own methods |
| Integration | Work is integral to business operations | Work is peripheral or project-based |
| Services rendered personally | Must perform services themselves | Can hire substitutes |
| Hiring assistants | Company hires helpers | Worker hires and pays own assistants |
| Continuing relationship | Ongoing, indefinite relationship | Defined project or period |
| Set hours | Company sets schedule | Worker sets own hours |
| Full-time required | Worker must work full-time for company | Worker free to work for others |
| Work location | Company premises | Worker's own location or client sites |
| Tools and equipment | Company provides | Worker provides own |
| Profit/loss | No financial risk | Worker can profit or lose money |
| Multiple clients | Works primarily for one company | Works for multiple clients |

If the majority of factors point toward employee, misclassification risk is high.

### Create employee handbook policies

Every handbook needs these foundational policies. Each should be reviewed by
employment counsel for your specific jurisdictions:

| Policy | Key elements to include |
|---|---|
| At-will statement | Clear statement; get signed acknowledgment annually |
| Equal opportunity / anti-harassment | Protected classes, reporting procedures, no-retaliation statement |
| Anti-retaliation | Explicit prohibition; multiple reporting channels |
| PTO / paid leave | Accrual or front-load, carryover rules, payout on termination |
| Remote work | Eligibility, equipment, expense reimbursement, time zone expectations |
| Expense reimbursement | Approval process, documentation requirements, timing |
| Social media | Guidelines, confidentiality reminders, personal vs. professional use |
| Confidentiality and IP | What is confidential, IP assignment, post-employment obligations |

**Handbook pitfalls:**
- Avoid mandatory arbitration clauses without legal review (enforceability varies)
- Do not include policies you will not enforce consistently
- Update annually or when laws change - outdated handbooks create liability
- Always get a signed acknowledgment of receipt from every employee

### Draft non-compete and non-solicitation agreements

**Non-compete enforceability varies dramatically by state:**
- **Not enforceable:** California, North Dakota, Minnesota, Oklahoma, and FTC rules
  (if/when they take effect) prohibit most non-competes entirely
- **Narrowly enforceable:** Most states require reasonable duration (6-12 months),
  limited geographic scope, and protection of a legitimate business interest
- **More broadly enforceable:** Florida and some other states are more permissive

**Elements of an enforceable non-compete (where permitted):**
```
RESTRICTED PERIOD: [6-12 months is generally more defensible than 2+ years]
GEOGRAPHIC SCOPE: [Specific states/metros where company actually operates]
RESTRICTED ACTIVITIES: [Specific role/industry, not broad "employment anywhere"]
CONSIDERATION: [Must be supported by adequate consideration - offer of employment
  for new hires, or additional compensation/equity for existing employees]
```

**Non-solicitation of customers and employees** is more broadly enforceable than
non-competes. Focus on protecting actual customer relationships the employee had,
not all customers.

Always have counsel draft or review these agreements. Overbroad agreements may be
voided entirely or blue-penciled (rewritten by courts) in ways that eliminate
your intended protection.

### Manage leaves of absence (FMLA / ADA)

**FMLA (Family and Medical Leave Act) - federal:**
- Applies to employers with 50+ employees
- Eligible employees (12 months employed, 1,250 hours worked) get 12 weeks
  unpaid, job-protected leave per year
- Qualifying reasons: serious health condition (employee or immediate family),
  childbirth/adoption, qualifying military exigency
- Obligation: provide notice, designation letter, and maintain health benefits
- Key trap: Never terminate during FMLA leave without careful legal review -
  retaliation claims are common and costly

**ADA (Americans with Disabilities Act) - federal:**
- Applies to employers with 15+ employees
- Obligation: engage in an "interactive process" with any employee who requests
  an accommodation for a physical or mental impairment
- Reasonable accommodations: schedule changes, modified duties, leave extensions,
  remote work, equipment modifications
- Key trap: Denying leave or accommodation without documented undue hardship
  analysis creates ADA exposure

**Practical process:**
1. Employee notifies you of a health condition or need for leave
2. Provide FMLA paperwork within 5 business days (if FMLA-eligible)
3. Require healthcare provider certification
4. Designate leave as FMLA in writing
5. If FMLA is exhausted or does not apply, evaluate ADA accommodation
6. Document every step of the interactive process

### Handle workplace investigations

**When to investigate:** Any complaint of harassment, discrimination, or retaliation;
suspected policy violations; reports of hostile work environment; allegations of
misconduct that could expose the company to liability.

**Investigation steps:**

1. **Act promptly** - Delay signals indifference and can itself create liability
2. **Assign the investigator** - HR, in-house counsel, or outside investigator
   (use outside counsel for senior executive complaints or complex matters)
3. **Preserve evidence** - Litigation hold on emails, messages, and documents
   related to the complaint before interviews begin
4. **Interview in order:** Complainant first, then witnesses, then respondent last
5. **Document every interview** - Date, time, attendees, summary of statements
6. **Make findings** - Substantiated, not substantiated, or inconclusive
7. **Take action** - Proportionate to findings; document the decision rationale
8. **Close the loop** - Notify the complainant that the investigation is complete
   (you need not share the outcome in detail)

**Investigation rules:**
- Maintain confidentiality to the extent possible (not absolute confidentiality)
- Do not promise absolute confidentiality - you may need to act on what you learn
- Never retaliate against a complainant - even if the complaint is not substantiated

---

## Anti-patterns / common mistakes

| Mistake | Why it is wrong | What to do instead |
|---|---|---|
| Verbal-only performance warnings | Creates "he said/she said" disputes; no evidence trail if termination is challenged | Use written PIPs and written warnings with employee signature or delivery confirmation |
| Classifying workers as contractors to avoid benefits | Triggers IRS reclassification, back taxes, penalties, and potential class actions | Apply the ABC or common law test; reclassify proactively if risk is high |
| Terminating the day after FMLA/complaint | Creates a perfect retaliation timeline that juries find compelling | Document independent reasons; consult counsel; allow time to pass and performance evidence to build |
| One-size-fits-all handbook | Federal law governs minimum standards, but state and city laws vary widely and override weaker federal rules | Have counsel review the handbook for every state where you have employees |
| Overbroad non-competes | Courts in employee-friendly states void them entirely, eliminating any protection | Narrow scope to legitimate interests; consult counsel on enforceability by jurisdiction |
| No interactive process documentation | ADA requires good-faith engagement; no documentation = no defense | Document every step: employee request, company response, options considered, outcome |

---

## Gotchas

1. **Terminating an employee the week after they filed a complaint creates a near-perfect retaliation timeline** - Even if the termination is for a legitimate, unrelated reason, the timing is extremely difficult to defend in litigation. Document independent reasons thoroughly before acting and, where possible, allow time and additional performance evidence to build. Always consult counsel before terminating anyone who has recently engaged in protected activity.

2. **Employee handbooks that promise progressive discipline eliminate at-will status** - Language like "employees will receive a verbal warning, then a written warning, then termination" creates an implied contract. If the company then terminates without following the stated steps, it has violated its own policy. Use permissive language: "may include" rather than "will include."

3. **The ABC test (California AB5 and similar state laws) presumes all workers are employees** - Unlike the IRS common law test, the burden is on the company to prove contractor status under all three prongs. A worker who primarily does work core to your business (prong B) almost certainly cannot be classified as a contractor in California, regardless of what their contract says.

4. **FMLA leave runs concurrently with other leave - but only if you designate it in writing** - If an employee takes disability leave and you don't formally designate it as FMLA within 5 business days, you may have waived your ability to count it. The employee could then take an additional 12 weeks of FMLA after returning. Always send a written FMLA designation notice immediately.

5. **Non-competes that are overbroad get voided entirely in many states, not narrowed** - Some states (California, for example) refuse to enforce any non-compete regardless of scope. Others may "blue-pencil" (rewrite) an overbroad agreement, but the rewrite may eliminate your actual protection. Draft narrowly from the start rather than starting broad and hoping a court will trim it.

---

## References

For detailed guidance on specific tasks, load the relevant file from `references/`:

- `references/termination-checklist.md` - Step-by-step pre-termination review,
  meeting conduct, final pay, and documentation checklist

Only load a references file when the current task requires it.

---

## Companion check

> On first activation of this skill in a conversation: check which companion skills are installed by running `ls ~/.claude/skills/ ~/.agent/skills/ ~/.agents/skills/ .claude/skills/ .agent/skills/ .agents/skills/ 2>/dev/null`. Compare the results against the `recommended_skills` field in this file's frontmatter. For any that are missing, mention them once and offer to install:
> ```
> npx skills add AbsolutelySkilled/AbsolutelySkilled --skill <name>
> ```
> Skip entirely if `recommended_skills` is empty or all companions are already installed.
