US employment law for German companies: how it differs from German law

US employment law differs from German law above all through at-will employment: according to USAGov, all states except Montana allow employment to be ended at any time for any reason, as long as the reason is not illegal. Much that German law guarantees by statute is left to the contract. These terms come up constantly:

• An offer letter is the employer’s written job offer. A signed contract can limit at-will termination if its terms create such limits; state notice and contract rules still require their own check.
• A separation agreement records the end of the employment; severance pay is a matter of agreement (US Department of Labor, DOL).
• The FLSA (Fair Labor Standards Act) sets minimum wage, overtime, recordkeeping and youth employment standards (DOL).
• The FMLA (Family and Medical Leave Act) provides unpaid, job-protected leave (DOL).
• The NLRA (National Labor Relations Act) protects the right to organise and bargain collectively.
• The EEOC (Equal Employment Opportunity Commission) is the federal agency that enforces federal anti-discrimination laws.
• An employee handbook is the employer’s written policy collection; according to the EEOC, written policies are optional.

Quick answer

At-will means that employer and employee can end the employment at any time and for any reason (USAGov). It needs no social justification of the kind the Kündigungsschutzgesetz requires; that comparison is ours, not a statement of a US source. The reason must not be illegal, though.

The exceptions to the at-will rule, as far as the sources support them:

• Discrimination: USAGov lists illegal reasons including race, sex, age (40 and over), national origin, disability and genetic information.
• Retaliation: illegal for reporting unsafe or illegal workplace practices (USAGov); Maryland adds workers’ compensation claims and enforcing overtime or minimum wage rights.
• Contractual limits: a signed contract can limit at-will termination if its terms create such limits; Maryland also names express agreements and policies.
• Public policy: only Montana’s statute is supported: a discharge in retaliation for refusing to violate public policy is wrongful. Judge-made doctrines in other states have not been checked.
• Montana: at-will termination applies during the employer’s probationary period; after it, the statutory wrongful-discharge grounds include lack of good cause.

The rules also differ by state: USAGov notes that federal and state agencies have laws about how and when employees can be fired.

Germany and the United States at a glance

The table is our own presentation: each cell reports only what its source says. Where our checks fell short, the cell says so.

Is there dismissal protection in the US?

German dismissal protection and US at-will rules use different structures. For Germany, check current sections 1 and 23 KSchG, including waiting-period and establishment-size rules. For the US, confirm current federal protections with the responsible agencies and check the work state’s law, contract, policies and any collective-bargaining terms. Maryland’s at-will explanation is one state example, not a nationwide substitute.

Before termination, check notice, severance and release requirements under every applicable source. Details: terminating employees in the US.

The US model is different from the German works-council system. Section 158(a)(2) prohibits employer domination of a labor organization. Do not reproduce a German works-council structure without US labor-law review.

How much vacation do employees get in the US?

For Germany, check the current sections 3 and 4 BUrlG and BMAS guidance for entitlement, conversion to the actual working week and the waiting period. For the US, define vacation, holiday and sick-leave terms in writing and verify current federal, state and local requirements for the work location.

So the number of vacation days sits in the offer letter, contract or policy, not in a federal statute. The DOL page does not mention state rules; check whether the work state requires more. More in vacation and holidays in the US.

Public holidays differ in a similar way. In Germany they are a matter for the Länder, and according to Destatis the number differs by Land. In the US, 5 U.S.C. 6103 establishes holidays for Federal employees, according to OPM; the source does not describe them as a duty for private employers.

Is there continued pay during illness?

The federal FLSA does not create a general paid-sick-leave entitlement for private-sector employees. State and local rules may require paid sick leave, so check the current law where the employee works. Under section 3 EFZG, the German comparison is continued pay for up to six weeks after the statutory waiting period.

The FMLA does not close the gap: it provides only unpaid leave. According to the DOL it covers private employers with 50 or more employees and gives eligible employees up to 12 workweeks in a 12-month period.

Health insurance also works differently. An applicable large employer, generally one averaging at least 50 full-time employees including full-time equivalents in the prior year, may owe an employer-shared-responsibility payment if statutory conditions occur. The IRS applies aggregation rules to related employers. Confirm the current calculation and any state requirement.

Do US employees need a written employment contract?

Under section 2 NachwG, essential terms must be documented within statutory deadlines. Text form and electronic delivery are generally possible subject to the section’s access, storage, printing, receipt and sector conditions. For a US hire, check the work state’s contract-form and notice rules rather than assuming one federal answer.

That does not mean there are no written-form rules. New York requires a written notice at hire including the pay rate (Labor Law section 195); according to the DLSE, California requires a notice at hire with the rate of pay and its basis. Both are state examples, not a federal duty.

In practice the terms matter. A signed contract can limit at-will termination if its wording creates such limits, and Maryland names a contract, agreement or policy as a possible departure. Draft duration, dismissal and notice terms carefully and check the governing state law.

What is an employee handbook?

An employee handbook is the employer’s written collection of rules and policies. It is not legally required: the EEOC writes that written policies help employees understand rules and expectations and can limit liability should a complaint arise.

Policies can nevertheless have legal effect. Maryland names an express agreement or policy as a possible departure from at-will, and in Montana a material violation of the employer’s own written personnel policy is a ground for wrongful discharge. Both statements apply only to those states, and none of the official pages we checked describes the implied-contract doctrine, so we do not present it.

Do not carry a German rulebook over unchecked. Have US counsel review a handbook for the work state, and do not write promises you do not intend to keep.

Why does employment law differ from state to state?

Because federal, state and local law can apply together. Check current minimum-wage, discrimination and paid-leave requirements with the responsible authorities for the work location rather than relying on the federal baseline alone.

California broadly restricts employment non-competes, subject to the current statutory text and exceptions. Confirm the rule and its application to the employee’s facts before carrying over a German clause. The federal FTC non-compete rule is not in effect and is not enforceable, so state law remains central.

The FTC’s nationwide ban is not in effect, and the FTC says so itself: the Non-Compete Clause Rule is not in effect and is not enforceable. On 5 September 2025 the FTC voted 3-1 to dismiss its appeal and accede to the vacatur, and a Federal Register notice dated 12 February 2026 concerns removing the rule. State law such as California’s continues to apply.

Which discrimination rules apply?

Section 1 AGG protects against disadvantage on grounds of race or ethnic origin, sex, religion or belief, disability, age and sexual identity, and section 7 bans it for employees. We did not check the AGG’s size thresholds.

In the US the bans sit in several laws. According to the EEOC, an employer is covered for race, colour, religion, sex (including pregnancy), national origin, disability and genetic information if it has 15 or more employees who worked for it for at least 20 calendar weeks in this or the last year; for age (40 and over) the threshold is 20. Part-time employees count, independent contractors do not. The Equal Pay Act covers virtually all employers.

For a German company: a 1993 EEOC guidance says Title VII applies to a foreign employer that discriminates within the United States, and the ADA generally likewise, absent constraints from treaty or binding international agreement. The guidance is old, so an individual case belongs with US counsel.

What does this mean for your hiring model?

US employment law changes what you must build into the contract, dismissal process and benefits. Which model you choose is a separate question: employee, contractor or EOR: how to choose compares the routes. Worker status depends on the applicable legal test and facts, so check the relevant federal and state authority; see W-2 vs 1099.

In Deel’s documented model, Deel is selected as legal Employer of Record (EOR). Confirm in writing the employing entity and the parties’ payroll, contract, supervision and compliance responsibilities. It may fit when employment is the right relationship and you have no suitable US entity. The documented flow asks for country, location, visa needs, role, seniority, job scope, compensation and work arrangement and includes stated role restrictions.

If the model fits after comparison, ask Deel about EOR options for your US state (opens in a new tab). Compare the answer with direct foreign employment and any suitable US group entity.

An EOR may not fit if you already have a US group entity, the direct route is manageable, or the provider does not cover the role or state. It replaces neither the review of the work state nor the review of your own role as a German company.

Further reading

• US overview: guides on hiring, law and payroll
• Hiring in the United States from Germany
• Terminating employees in the US
• Vacation and holidays in the US
• W-2 vs 1099: US employee or contractor
• US payroll for German companies
• Posting employees to the US

Key terms

Employee

A worker engaged under a local employment contract, with the employer responsible for payroll, social security contributions and compliance with local labour law.

Contractor

A self-employed individual or business engaged for specific services under a commercial contract, without the employment protections or payroll obligations that apply to employees.

Employer of Record (EOR)

A third-party provider that legally employs a worker on behalf of a client company in a country where the client has no local entity, handling local payroll, contracts and compliance.

Misclassification

Treating a worker as a contractor when, based on the actual working relationship, local law would classify them as an employee, which can create back taxes, penalties and employment claims.

Final checklist

• Fix the work state and locality before contract and policies take shape.
• Plan dismissals under at-will rules and their limits, not under the Kündigungsschutzgesetz.
• Make no promises about duration, dismissal grounds or notice in the offer letter that you do not intend to keep.
• Regulate vacation, holidays and sick days in the contract or policy and check the work state’s law.
• Check a non-compete carried over from Germany against the work state’s law before signing.
• Have US counsel review an employee handbook for the work state before use.
• Check whether the US headcount of the company group reaches the thresholds for health insurance and discrimination coverage.
• If you use an EOR, clarify in writing who the legal employer is and which tasks stay with the German company.