Which US employment and payroll laws apply to workers in Latin America?

US employment law is mostly territorial. A company in Texas that hires a developer who lives and works in Mexico does not carry US wage-hour, anti-discrimination and payroll-tax rules with it: each statute defines its own reach, and for a worker who is not a US citizen and works outside the United States, most of them stop at the border. The local rules take over. In Mexico, for example, any personal, subordinated work for a salary is an employment relationship whatever the contract is called, and the law presumes one exists between whoever performs personal work and whoever receives it.[12]

This page goes statute by statute, with the section that sets each limit. It covers the US side only: being outside US law does not make a contractor in Latin America safe from being treated as an employee under local law.

No. The Fair Labor Standards Act’s minimum wage, overtime, recordkeeping and child labor sections (29 U.S.C. 206, 207, 211 and 212) do not apply to an employee whose services during the workweek are performed in a workplace within a foreign country.[1] The exemption follows the place of work, not the employer or the worker’s nationality, so the federal minimum wage of $7.25 an hour does not follow a US company’s hires to Latin America.[13]

The test is applied week by week: the statute looks at where the employee’s services during the workweek are performed, so a week spent working in the United States, such as an onsite visit, can fall under the FLSA.[1]

Only US citizens. Title VII defines an employee in a foreign country to include a US citizen,[14] and it does not apply to an employer with respect to the employment of aliens outside any state.[15] The ADA and the ADEA extend to US citizens working abroad in the same way.[16][17] The EEOC’s own summary: non-US citizens are not protected by US equal employment opportunity laws when employed outside the United States, and US employers do not have to comply with Title VII, the ADEA or the ADA abroad where compliance would violate the law of the country where the workplace is.[2]

Coverage also depends on size. Title VII and the ADA apply to employers with 15 or more employees, the ADEA to employers with 20 or more.[14][16][17] When a US employer controls a corporation incorporated abroad, the practices of that corporation are presumed to be the employer’s own.[15]

Not for a non-US citizen who works there. For Social Security and Medicare (FICA), employment means service performed within the United States, whatever the citizenship or residence of employer and employee, or service outside the United States by a US citizen or resident as an employee of an American employer.[3] A Mexican or Colombian national working in their own country falls in neither group. FUTA covers service outside the United States only when performed by a US citizen as an employee of an American employer.[4]

For comparison, a US employee costs the employer 6.2% Social Security tax on wages up to $184,500 in 2026 and 1.45% Medicare tax on all wages, and the same amounts are withheld from the employee.[18] FUTA is 6% of the first $7,000 of each worker’s wages, with a credit of up to 5.4% for state unemployment tax, so as little as 0.6%, or $42 a year per worker.[19][20][4] None of it applies to a non-citizen working in Latin America; their own country’s social security system applies instead, and the Mexico guide lists what an employer pays there.

As a rule, no. Compensation for labor or personal services performed outside the United States is income from sources outside the United States,[5] and the IRS states that wages earned by nonresident aliens for services performed outside the United States are foreign-source income, not subject to federal income tax reporting and withholding.[6]

For an independent contractor, IRS Publication 515 says that a foreign person who gives you a valid Form W-8 is exempt from backup withholding and Form 1099 reporting.[7] Without it, the IRS presumption rules decide the payee’s status, and if they point to a US payee the payment falls under Form 1099-NEC reporting and backup withholding at 24%.[7][21] A Form W-8BEN stays valid until December 31 of the third year after it is signed.[22] The W-8BEN manual shows how to collect it line by line, and the W-8BEN-E manual covers contractors who invoice through a company.

USCIS describes Form I-9 as required for every person hired for employment in the United States after November 6, 1986, as long as the person works for pay.[8] A developer hired to work from Medellín is not hired for employment in the United States. The Occupational Safety and Health Act applies to employment performed in a workplace in a state, the District of Columbia and listed US territories,[23] which leaves out a home office in Bogotá or São Paulo.

Much more US law follows a US citizen abroad. Title VII, the ADA and the ADEA protect US citizens employed abroad by a US employer or by a foreign company it controls.[2] Social Security and Medicare apply to service outside the United States by a US citizen or resident as an employee of an American employer, a term that includes any corporation organized under US or state law,[3] and FUTA applies to US citizens employed abroad by an American employer.[4]

Social security agreements keep the same work from paying into two systems; the IRS describes their purpose as avoiding double taxation of income with respect to social security taxes.[24] In Latin America, the United States has agreements in force with Chile since December 1, 2001,[9] Brazil since October 1, 2018[10] and Uruguay since November 1, 2018.[11]

Two matter in almost every hire:

• Sanctions. US persons, wherever located, are generally prohibited from transactions, direct or indirect, with people and companies on OFAC’s SDN List, other blocked persons and those covered by comprehensive country or region embargoes.[25] The OFAC manual walks through the search for each contractor.
• Ownership of the work. Under the US Copyright Act, a work made for hire is either a work prepared by an employee within the scope of employment, or a specially ordered or commissioned work in one of nine listed categories, such as a translation or a compilation, with a written agreement signed by both parties.[26] Software is not on that list, so for an independent contractor’s code, the agreement needs an express assignment of rights rather than a work-for-hire clause alone.

For labor law, the country where the work is done, with its own test. In Mexico, personal, subordinated work for a salary is an employment relationship whatever the contract is called, and the law presumes an employment relationship between whoever performs personal work and whoever receives it, so the client has to prove the work was independent.[12] A US-law contractor agreement does not change that. The Mexico guide covers the test, the employer costs and what a misclassified contractor can claim, and Latin American labor law and US companies compares the tests in Mexico, Colombia, Brazil and Argentina.