Under the Fair Labor Standards Act (FLSA) and the North Carolina Wage and Hour Act, employees are either exempt or non-exempt. An employee’s classification by default is “non-exempt” – meaning that if the employee works more than 40 hours per week (or, in some industries, exceeds the hours in an approved 8/80 schedule), the employee is entitled to overtime pay at a rate of one-and-a-half times their hourly rate. However, there are several exceptions to this for learned professionals, highly compensated executives, computer professionals, some creative positions, and administrative positions.

Employees who are exempt can be paid a salary – provided the salary meets the minimum threshold – and are not eligible for overtime. Misclassification of employees as exempt when they should be non-exempt can result in fines, back pay, additional punitive damages in the form of treble or double damages, and attorney’s fees.

Employment contracts are not required in North Carolina. In fact, in the absence of a contract for a definite period of time, all North Carolina employees are employed “at will”. If employers enter into contracts with employees they must be:

• in writing;
• signed; and
• for a definite period of time.

Under North Carolina law, there are no limitations to how many hours adults can work in a working week. However, as mentioned in 1.1 Employee Status, all non-exempt employees must be paid overtime (one-and-a-half times their hourly rate) for any time more than 40 hours per week. Youth employees may only work a maximum of 18 hours during the school week, when school is in session. Youth employees must also be given a rest break of at least 30 minutes after five consecutive hours of work. Flexible work arrangements are allowed. While there is no employment law defining full-time versus part-time employment, IRS regulations require that full-time employees work – on average – at least 20 hours per week or 130 hours per month.

North Carolina and Federal Minimum wage is USD7.25 per hour. As of 1 July 2024, the new threshold for exempt salaried employees is USD43,888 per year, and that will increase to USD58,656 per year on 1 January 2025. This means that in order to be considered an exempt salaried employee, the employee in question must meet one of the duty exceptions outlined in 1.1 Employee Status and be paid at least USD58,656 per year. Otherwise, employees will need to be paid overtime for any hours exceeding 40 hours per week. Any earned but unpaid commissions or bonuses will need to be paid out upon termination, unless the employer has an advance written policy notifying employees that any earned commission or bonus will be forfeited upon termination.

Employers may, but are not required to, provide for paid vacation or sick time. Any accrued paid sick or vacation time must be paid out upon termination, unless the employer has an advance written policy informing the employee of the forfeiture of these accrued benefits upon termination. Employers are required to provide unpaid leave as required for Family and Medical Leave Act (FMLA) or Americans with Disabilities Act (ADA) qualifying events. Employers must give unpaid time off to vote and four hours per school year for a parent to volunteer in their child’s school. Confidentiality and/or non-disparagement clauses are allowed in employee agreements or severance agreements, within the confines of National Labor Relations Board (NLRB) guidance.

The Federal Trade Commission (FTC) recently decided to ban non-compete agreements (issued on 23 April 2024). The FTC’s new rule makes it unlawful, in violation of Section 5 of the Federal Trade Commission Act (FTCA), to enter into non-compete agreements with workers on or after the date the decision was released. As for non-compete agreements that existed prior to the decision’s release, the FTC has adopted two different approaches. Non-compete agreements entered into by senior executives prior to the date of the new decision shall remain in full force. However, non-compete agreements entered into by other workers prior to the date of the new decision shall be deemed unenforceable. While there are several legal challenges to this FTC ruling, employers should be prepared to review and revise their non-compete agreements as appropriate in anticipation of this sweeping federal regulation.

Setting aside federal law, to be enforceable under North Carolina law, restrictive covenants must be:

• in writing;
• part of an employment contract or in connection with the sale of a business;
• supported by valuable consideration;
• reasonable as to time and territory; and
• reasonable as to scope of activities covered by the restriction.

Valuable consideration is a key component of an enforceable non-compete under North Carolina law. Continued employment is insufficient consideration. Instead, there must be some new consideration – a promotion, a raise, a bonus, or some combination thereof – for a restrictive covenant to be valid under North Carolina law for a current employee.

Although North Carolina does not have a hard-line rule on the reasonableness of time restrictions, generally North Carolina courts approve of two-year restrictions. The duration and geographic scope of a restrictive covenant are considered together to determine if it is reasonable. Courts may approve longer restrictions if the geographic territory is relatively small – likewise, courts may approve broader geographic territories if the duration of the restriction is relatively short. Regardless, courts rarely approve restrictions of five years or more.

Courts will look at the following six factors when determining whether a non-compete or non-solicitation agreement is reasonable as to time and territory:

• the geographic area of the restriction;
• the area where the employee was assigned to, and actually did, work;
• the area in which the company does business;
• the nature of the business; and
• the nature of the employee’s duty and the employee’s knowledge of the business operation.

Additionally, the scope of the activities covered by the non-compete must be tied to the work performed for the employer. Courts have refused to enforce non-competes that prevent an employee from doing any work for a competitor, regardless of whether it is the same nature of the work performed for the employer. Additionally, non-competes that preclude “direct or indirect” competition have been unenforceable owing to the scope preventing, for example, ownership of a mutual fund holding shares of a competitor.

Non-solicitation clauses have gained renewed attention in light of recent legal developments calling into question the longevity and effectiveness of non-competition agreements. The enforceability of non-solicitation clauses under North Carolina law is analysed in the same way as other restrictive covenants – ie, they must be in writing, part of a contract for employment, for valuable consideration, and reasonable as to time and territory. Non-solicitation agreements tailored to the employer’s customers and employees are routinely upheld, even when there is no geographic restriction. Even so, employers should limit those restrictions to customers and employees of the employer for a period of time (usually a year) prior to termination, as North Carolina courts deem the look-back period part of the temporal restriction that needs to be reasonable to be enforced.

Protection of personal data has become a focus of legislative efforts at all levels. With increased scrutiny on data privacy practices arising in European countries, many states across the USA are beginning to follow suit. Now more than ever, employers must be cognisant of previously established privacy-related laws, along with industry trends towards over-inclusivity.

Industry groups such as the International Association of Privacy Professionals (IAPP) offer more in-depth guides for navigating privacy concerns across various employment sectors.

Federal Considerations for Multi-state and Multinational Employers

Common privacy issues and areas global employers should consider include:

• employee health information and records;
• records relating to and obtained via background checks;
• response standards and mechanisms for data breaches;
• possession and use of student or education-related data; and
• the use of and marketing or sale of Personally Identifiable Information (PII).

The following examples of laws and areas of work may carry increased potential implications of employee personal privacy issues:

• the Health Insurance Portability and Accountability Act (HIPAA) and the protections of employee personal health records;
• the ADA, which regulates when, how, and for what purposes an employer may access employee health information;
• the FMLA and the limits on obtaining and/or disclosing certain information relating to covered employee leave;
• the Fair Credit Reporting Act (FCRA) and its applications to conducting employee background checks;
• the Family Educational Rights and Privacy Act for any company operating in spaces including student data; and
• enforcement actions by various federal agencies including the FTC, the Department of Health and Human Services (DHHS), the Consumer Financial Protection Bureau (CFPB), the Federal Communications Commission (FCC), the Equal Employment Opportunity Commission (EEOC), and others.

With ever-increasing data breaches, many global employers have also instituted internal policies and response mechanisms, with some even hiring designated privacy teams. Currently, there are no federal laws regarding standardised responses relating to data breaches. It is in this area that many employers look abroad for guidance.

A growing trend in data privacy has seen companies turning to foreign and domestic guidance in crafting privacy policies and dealing with related issues. In recent years, an increasing number of employers have begun self-certifying pursuant to the strict General Data Protection Regulation (GDPR) standards via either contractual commitments or participating in the federal government’s Data Privacy Foundation certification (“US Privacy Shield”).

While there is no absolute way to guarantee universal compliance, global employers operating in the USA should strongly consider opting for stricter self-governance and applying standards that may be stricter than required. The GDPR’s standards – along with compliance with long-standing laws such as those discussed earlier – are quickly becoming a recommended industry norm, especially if an employer is involved in any way with the retention or handling of employee health records and data.

State Law Considerations for Employers

If the GDPR is considered the benchmark for international privacy laws, then California and the California Consumer Privacy Act (CCPA) can rightfully be seen as the domestic guidepost not only for states looking to enact their own privacy laws, but also for employers seeking to be proactive in their compliance and policies. California was the first state to enact comprehensive data privacy legislation, signing the CCPA into law on 8 June 2018 (effective 1 January 2020). Since then, 18 other states have followed suit, signing into law their own comprehensive data privacy laws – many of which are modelled on the CCPA. Included in this list are states such as Delaware, with its reputation for attracting foreign and domestic companies alike. Proposed bills in six additional states – North Carolina, Illinois, Massachusetts, Michigan, Ohio, and Pennsylvania – would grant rights similar to those found in existing data privacy legislation. 

Global employers operating in the USA are well-advised to stay abreast of all evolving data privacy regulations and laws. Failure to comply has and may continue to result in serious fines and penalties, in addition to loss of customer and employee trust and goodwill.

Employment of foreign workers in the USA is strictly controlled, with clearly outlined categories of temporary work visas. Unless a person is a “US worker,” which for the most part includes US citizens, nationals or Permanent Resident Card (“Green Card” holders), as well as a much smaller group granted temporary protected status, refugee status or political asylum, a foreign worker must generally have either a valid work-authorised visa or an Employment Authorization Document (EAD) to engage in productive employment in the USA.

The term “work permit” is used globally and suggests an ability to gain generalised employment authorisation. This is not a term found in the US immigration system, which is much more discerning and limited. Under the Immigration and National Act (INA), Congress and the agency (the legacy Immigration and Naturalization Service (INS), now known as the United States Immigration and Naturalization Services (USCIS)) delineates very specific categories of temporary visas that generally favour professional-level positions, with candidates who have traditional post-secondary educational credentials (namely, a bachelor’s degree or higher). As a result, not every foreign worker can be employed in the USA. The alphabet soup of visa categories attempts to cover a range of potential activities in the USA by the global community and it extends beyond just work visas, including students, diplomats, and religious workers (among others).

The list of work visas (eg, E-3, H-1B, L-1 and TN) falls far short of US employer needs, particularly today in an economy where the USA continues to have low rates of unemployment, resulting in a shortage of available workers. The work visa categories themselves are also limited in terms of what positions can be sponsored. There is no solution to fill the ranks for occupations across a broad spectrum of industries, including science, technology, engineering and mathematics (STEM)-related occupations to fill much-needed software engineering, IT and data analytics-related roles (to name a few). It is fair to say that virtually every company in the USA has needs in these areas and for years many have had to look to non-US workers to fill their ranks. Many times, these individuals are already in the USA, often as F-1 students who are identified as top job candidates through standard on-campus recruiting efforts and the like.

Beyond these professional-level roles, other sectors of the economy – for example, construction, farming, manufacturing and the meat and poultry industry – have significant needs for workers. The USA provides only a couple of solutions for these types of roles, including the H-2A and H-2B visas, which are for temporary peak and seasonal positions. The only long-term solution in these areas is to sponsor a foreign worker for a Green Card, which is not terribly practical as it could take between two and three years to obtain and the candidate may not be able to work for the company in the USA in the interim.

A related concept is that of the “business visitor” who can enter the USA for a short period to engage in a limited set of brief activities, such as meetings, conferences, training, contract negotiations and some other related matters – all of which must stop short of productive employment or work. Obtaining a B-1/B-2 visa (B-1 for business, B-2 for tourism) can often be obtained much more easily than a work-authorised visa, so it can seem attractive for a foreign worker to use it as a workaround. The US government is well aware of abuses of the B visa, and the US Customs and Border Protection Agency (CBP) is generally on high alert to sniff out potential offenders.

A wrench can be used as a simple way to differentiate between appropriate business visitor activities and work. As a business visitor, a foreign national can meet with colleagues or customers and talk about a project involving the eventual use of wrenches, learn about how to use wrenches, negotiate and sign a contract that involves wrenches, but the moment a foreign worker starts turning a wrench to achieve a productive end and gets paid for that service, they have entered the realm of work that requires employment authorisation. In reality, there are many occupations that do not fit neatly into the wrench example and the determination of the appropriateness of a B entry is usually made subjectively by an individual officer who has quite extensive discretion. “Work” is a four-letter word to the CBP and a foreign worker who utters it as the intended scope of their trip to the USA may be taken quite literally and possibly denied entry.

There are penalties for employing foreign workers without valid work authorisation if such unauthorised work is discovered, so it is important to put appropriate limitations in place for business visitors and to secure a work-authorised visa when there is productive employment involved. Employers should also keep in mind that only physical presence in the USA triggers the need for a work visa, so if they would like to employ someone remotely from another country, they are free to do that – at least from an immigration perspective. There could be other implications relating to employment law in the person’s home country, and other practicalities such as processing payroll, tax deductions, and benefits, so it is important to vet those as well.

All foreign workers seeking to engage in productive employment (work) in the USA must either apply for an appropriate visa that grants work authorisation or have an otherwise valid form of employment authorisation, such as an EAD. Most work visa categories are company-sponsored, a process that usually starts with a petition filing by the employer on behalf of the foreign worker with USCIS. At a high level, a typical work visa is obtained through the following three steps:

• USCIS petition filing by the employer;
• visa appointment/interview with a US consulate or embassy to obtain a visa sticker in the passport; and
• entry to the USA and issuance of an I-94 admission record.

It is important to remember that not every foreign worker will qualify for a visa, so it may be just a select few who can proceed through these steps. Additionally, there can be pitfalls along the way. By way of example, USCIS could ask additional questions at Step 1 and issue a Request for Evidence, or Notice of Intent to Deny, which will delay the process while the company and its counsel prepare a response and attempt to overcome the stated deficiencies. The primary visa category used by companies to employ foreign workers in professional level positions is the H-1B. There is annual allocation of H-1B visas each year (85,000) and, based on demand for the past 20 years or so, USCIS conducts a lottery to distribute them. In most years, the chances of selection are in the range of 30%, so even when a company chooses to offer immigration sponsorship, there are no guarantees it will be successful.

Additionally, after USCIS approves the petition, the foreign worker schedules and attends a visa appointment. The US State Department, which runs the US consulates and embassies throughout the world, will conduct a background check and may otherwise review the foreign worker’s “admissibility” to the USA across three broad areas, including economic, health and security-related grounds. If there is something suspicious (or blatant) in the foreign worker’s history or profile, the US consulate could decide not to issue the visa. If approved, the US consulate issues a visa sticker in the passport, which acts like a ticket for entry to the USA.

The last step is for the foreign worker to enter the USA. The admission process involves the person interfacing with CBP officers, who are stationed at all ports of entry, including international airports and land-border crossings. The CBP processes the foreign worker for admission and, if entry is allowed, they will receive an I-94 admission record. The I-94 is the most crucial of the documents in the visa process, as it is the primary document used to demonstrate work authorisation for I-9 purposes, and its expiration controls the foreign worker’s duration of stay in the USA. The I-94 also facilitates Social Security Number applications, as well as issuance of state driver’s licences. Most foreign workers will begin paying taxes immediately, including Federal Insurance Contributions Act (FICA) withholdings, whether or not they intend to live permanently in the USA and take advantage of Social Security and Medicare benefits into retirement.

A separate group of foreign workers may be in the USA and already have an independent basis for work authorisation. By way of example, they could have a family-sponsored Green Card application pending that provides an interim EAD until the permanent residency process is complete and the Green Card issued. These individuals will not need employment sponsorship for a work visa, but that could vary depending on the facts.

Foreign workers are required to report any US address changes to USCIS within ten days of moving. Otherwise, however, the USA does not have any further registration requirements – such as with the local police department – that are seen in some other countries.

Mobile or remote work has become commonplace in the post-pandemic world. While mobile work provides new opportunities and flexibilities for employers and employees, employers must manage the legal complexities of such arrangements to ensure compliance with relevant laws and regulations. Some key areas to consider are as follows.

Wage and Hour Compliance

Mobile workers are subject to the same compensation and overtime laws (federal and local) as in-office employees. The challenge this poses to employers offering mobile work arrangements is tracking working and non-working time. As many have come to find, the line between being “off the clock” and “on the clock” is often blurred. Employers should clearly outline a time-keeping policy requiring accurate recording of all time worked and requiring advance approval before working any overtime, including minor tasks such as after-hours communications. The policy should set out disciplinary steps for violations.

Health and Safety

Employers are responsible to ensure a safe and healthy working environment – even for mobile/remote employees. By way of example, the Occupational Safety and Health Act (the “OSH Act”) requires employers to ensure a safe work environment, including ergonomic considerations and addressing potential hazards in the home workspace.

Further, workers’ compensation benefits cover injuries “arising out of and in the course of the employment”. There is no limitation based on where a work-related accident occurs. Employees have the burden of proof to show that an injury is work-related – although arguably even a broken bone from a fall when the employee is walking between their home office and the kitchen could fall within the coverage.

Thus, the health and safety of remote workers should be expressly addressed to the extent feasible in order to limit the employer’s potential liability. Best practices for employers include providing guidance on ergonomic considerations (workstation set-up and equipment provision), mental health support (resources and regular check-ins), safety policies and training (specific “at home” or “mobile” work policies),  and regular reviews/risk assessments.

Privacy and Data Security

Mobile work brings increased dangers of privacy and data breaches. Employees often have access to sensitive or proprietary business information, trade secrets, and other sensitive materials, personnel information, and confidential customer data.

Employees should establish protocols for access, storage, transmission and use of this data. Best practices include data encryption, strict access controls (eg, multi-factor authentication), data minimisation (eg, regular review and deletion of unnecessary data), employee training, remote-work policies, and use of company-issued devices. Further, given the increase of data breach incidents during the past few years, employers would be wise to establish a clear data-breach response plan.

Employers must also consider the privacy of the mobile employee. Although monitoring a mobile employee’s activities is often an appropriate and even necessary measure to ensure and assess performance, such measures should avoid invading a remote employee’s privacy. By way of example, the Electronic Communications Privacy Act (ECPA) prohibits the interception and monitoring of electronic communications without consent. If employers intend to monitor such communications, they must ensure that they have provided notice and obtained consent. Any monitoring or surveillance should also not infringe on employees’ rights to engage in protected activities under the National Labor Relations Act (NLRA).

Tax Obligations and Social Security

Employers must carefully plan and manage tax obligations and compliance for mobile employees. This is because companies with mobile employees located in difference states or countries may trigger withholding requirements for the employer. By way of example, a remote worker’s presence in a state can create a “nexus” with that state, which may subject the employer to state income tax, sales tax, and other business tax obligations. In other words, in determining tax obligations, employers must give careful attention to the location of the mobile employee – not just the location of the employer. Navigating the tax implications of remote work can be complex and employers are advised to consult tax professionals to ensure compliance and optimise outcomes. 

Employers must navigate similar issues in the landscape of social security. Although the rules differ from those applicable to income tax, employers with cross-border remote workers could be responsible for social security taxes/contributions in the home country, the host country, or both. Compliance with these regulations requires careful planning and often the assistance of legal and tax professionals to ensure that both employers and employees meet their social security obligations.

Employers may, but are not required to, provide sabbatical leave. Sabbatical leave can take many forms and can arise for a variety of reasons. Although not uniformly defined, a sabbatical is typically an extended leave of absence from work done in order to pursue personal or professional interests. Employers may grant an employee sabbatical leave for reasons such as personal travel and studies or so the employee can pursue an additional degree or specialised education. Depending on the employee’s purpose in requesting the leave, a sabbatical may range in length from a couple of weeks to several months or up to a year.

Most employers address sabbatical leave in their handbooks or policy guidelines. By way of example, an employer may set standard procedures for requesting the leave, such as a required advance notice period or a written submission justifying the nature or purpose of the leave. Similarly, an employer may choose to specify purposes for sabbatical leave, such as allowing it for educational or professional study purposes but not for personal travel. A good example of how the federal government addresses sabbatical leave can be found in Section 3396 of Title 5 of the US Code, which specifies certain employees who may receive sabbatical leave for certain specified purposes.

Another relevant consideration for employers looking to establish a standard sabbatical leave policy is how the employee taking the leave will be paid. Many employers offer incentives for certain purposes, such as reimbursement of educational expenses or travel. Employers should still take care to ensure compliance with all applicable wage and hour laws – for instance, an employer should pay special attention if the employee’s leave is taken for purposes contemplated by the FMLA. Although some employers may allow employees to take qualifying FMLA leave concurrently with approved sabbatical leave, it is recommended to have clear policies and procedures in place to ensure all statutory requirements are met.

Finally, if an employer is confronted with an instance where they are denying an employee’s request for sabbatical leave, it is important to remember that any denial should be done for legitimate, non-discriminatory reasons. This consideration further reinforces the recommendation to have a clearly defined sabbatical leave policy.

As employees return to the office (some part-time), many employers are leasing less office space in favour of new work ideas such as desk-sharing or “hoteling”, whereby no one person is assigned a single workspace but instead have non-assigned spaces where employees can work on the various days they come in. Other employers are opting to simply rent portions of a collaborative workspace from places such as We Work instead of having dedicated private office space. If employers choose either of these options, they should be mindful of how they are asking employees to safeguard confidential information. By way of example, employers should institute policies regarding printing and proper secure disposal of confidential company information or regarding taking phone calls out of non-employees’ earshot.

North Carolina is a “Right to Work” state, which means that employees cannot be forced to join a union or pay dues in order to become or remained employed. Union activity nationally has been on the rise, with 1,316 petitions filed in 2023. Compared to other states, North Carolina does not have many unions – in fact, the state only has 404 unions, employing 1,318 people across the state. These are primarily large, nationwide unions.

However, despite the small number of unions in North Carolina, there has been increased unionising activity. A large hospital system in the state unionised in the past few years, and the United Auto Workers union initiated a strike at the Daimler Truck auto manufacturing plant in High Point earlier this year.

Employee representative bodies, also called employee resource groups or affinity groups, are a growing trend among employers. One of the most significant benefits of affinity groups is their power to connect people and promote inclusion among groups that are often under-represented in the workplace. The connection experienced in these groups translates remotely across physical offices and organisational groups – they can bring together employees at different levels and across departments and build a sense of shared community and belonging.

However, employers should be aware of legal issues surrounding these groups. By way of example, affinity groups should be open to everyone and treated equally. Employees who do not feel welcome to join an affinity group or to attend its events may feel excluded – or even threatened – by this employer-backed organisation. Employers must ensure they properly compensate non-exempt employees for time spent attending or participating in workplace affinity group meetings or activities. Moreover, employers risk violating federal labour law if they bargain with affinity groups regarding employees’ terms and conditions of employment by:

• dominating or interfering with the formation of an affinity group and treating it as a labour organisation; or
• failing to bargain with a union that already represents employees.

Employers often sponsor, contribute funds to, or otherwise support workplace affinity groups. As a result, an employer risks committing an unfair labour practice (ULP) by treating the affinity group like a labour organisation and “dominating” or “interfering” with it.

The NLRA gives employees the right to bargain collectively with their employer through a representative or, typically, a labour union. The employer and collective employees can negotiate over employment benefits such as pay structure, health insurance and grievance procedure. The NLRA imposes an obligation on both parties to bargain in good faith about wages, hours, and other terms and conditions of employment until the parties agree on a “collective bargaining agreement”. If the parties reach a stand-off or “impasse” before they can come to terms on an agreement, the employer may impose any terms and conditions offered to the collective employees before the impasse was reached. Once an employment contract is in place, neither the employer nor the employees may deviate from its terms without the other party’s consent.

In North Carolina, the negotiation of collective bargaining agreements between public employers and employees is prohibited by law. However, public employees do retain the right to organise or otherwise join employee associations. This means that public employees can negotiate with their employer for benefits, but any collective bargaining agreement entered into between the parties would be deemed void as an illegal contract.

Motivation and Procedures for Dismissal

As North Carolina is an “at-will employment state”, employers do not need grounds for terminating employment. This means that no motivation is required to justify the termination of an employee.

There are exceptions to the employment-at-will doctrine. These exceptions are:

• the employee has contracted for a definite term of employment;
• the employee’s termination is in violation of state or federal anti-discrimination statutes; and
• the employee’s termination violates North Carolina public policy.

Contracts for a definite term of employment

Regarding the first exception, employers should communicate details surrounding the employment relationship explicitly at its inception to better maintain control of the termination process and to prevent unwanted litigation. The employer also needs to determine the likelihood of an employment dispute and document the termination accordingly. If the employer is already on notice of the likelihood of dispute, counsel should be consulted to review the evidence supporting a termination and to ensure that no relevant documents or communications are deleted.

Violation of federal or state anti-discrimination law

Regarding the second exception, employers must ensure that the rationale for ending the employment relationship does not violate federal or state law. The employer may not terminate someone owing to their membership of a protected class or in retaliation for the exercise of certain rights, for example. Employers should be cognisant of certain protections for individuals over the age of 40 under federal and North Carolina law. The federal Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA) prohibit discrimination based on age.

When an employer grants a release or is involved in a settlement with an employee over the age of 40, the ADEA and the OWBPA require the employer to give the employee 21 days to consider and accept the terms of any agreement. The ADEA and the OWBPA also require employers to allow the employee seven days to rescind the agreement after signing. When an employer undertakes a reduction in the force or a group lay-off, the ADEA and the OWBPA require the employer to provide affected employees with certain statistical information regarding the other individuals affected by the termination.

Violation of North Carolina public policy

Within this third exception, North Carolina Courts have recognised three distinct scenarios where termination of employment was in violation of public policy in the state. These scenarios where termination would violate public policy are when:

• the termination stems from an employee refusing to break the law at the request of the employer;
• where the employee was fired for “engaging in a legally protected activity”; and
• “based on some activity by the employer contrary to law or public policy”.

Employees who maintain a claim for wrongful termination in violation of public policy can sometimes provide more expansive remedies than those available under federal law.

Group Redundancies

In North Carolina, a “group lay-off” is when a group of 20 or more workers are either partially or totally terminated from their employment at the same time. The North Carolina Supreme Court held in Gorski that when a group lay-off occurs, the employer must notify the local employment security office prior to the termination date and allow the employees to collect up to four weeks’ pay without the employee having to prove that they are available to work.

North Carolina is an at-will employment state. This means that unless an employer contracted with an employee to work for a certain period of time, with certain terms calling for a specific period of notice, an employer can terminate an employee’s employment at any time for any non-discriminatory purpose. This means that an employer can give little to no notice prior to termination.

As mentioned in 7.2 Notice Periods, North Carolina is an at-will employment state, so an employer who does not enter into an employment contract with an employee giving that employee the right to only be terminated “for cause” can terminate an employee at any time for any non-discriminatory purpose. For employees with a contract containing a “for cause” termination provision, the employer must follow the terms of those procedures carefully. In drafting “for cause” provisions, employers should carefully consider the terms to make them tailored to the specific industry and favourable to the company. Before sending out an employment contract with a “for cause” termination provision, it is advisable for companies to speak with a local employment lawyer.

Termination agreements are generally enforceable in North Carolina. This stems from North Carolina’s interest in allowing freedom of contract, specifically in the context of modifying at-will employment agreements. Agreements providing for severance in the event of termination are common and courts generally hold them to be enforceable. In the past, termination agreements providing for restrictive covenants such as non-compete provisions have been enforceable by North Carolina courts. By way of example, in United Laboratories, Inc v Kuykendall, the North Carolina Supreme Court upheld a non-compete provision contained within a sale representative agreement as enforceable, despite the discharged employee arguing otherwise.

As discussed in 2.1 Non-competes, the FTC has taken action to hold non-competes unlawful for all except senior executives. Despite the new rules regarding non-compete agreements, employers still have a means of lawfully protecting themselves and their investments. The FTC recommends non-disclosure agreements as an alternative to non-compete agreements in order to lawfully protect an employer’s IP and investments in skills training. The FTC also points to both federal and state trade secrets laws as a form of governmental protection of employers.

Another form of agreement that can arise following the termination of employment is a release agreement, whereby an employee releases bringing any past and future legal claims that they may have grounds to bring against their former employer. In North Carolina, it is common practice to enter into a general release of claims agreement, which includes a non-exhaustive list of released claims. These general releases may include the release of claims such as wrongful discharge, emotional distress, and claims under the North Carolina Persons with Disabilities Protection Act (PDPA). However, it is unlawful in North Carolina to agree to release certain claims, including claims under the North Carolina Wage and Hour Act (NCWHA), workers’ compensation claims or rights to benefits under the North Carolina Workers Compensation Act, and waiver of unemployment benefits. The inclusion of one of these claims in a general release agreement can render an otherwise enforceable agreement invalid.

Protected classes under federal law include race, colour, national origin, religion, sex (including pregnancy, childbirth and other related medical conditions), sexual orientation and gender identity, disability, age (40 years of age or older), citizenship status, and genetic information. Therefore, and despite the “at will” element of North Carolina law, employers cannot dismiss or terminate protected employees without a non-discriminatory reason.

Some specific protections that employees and employers should be cognisant of include protections for individuals affected by pregnancy, childbirth, or related medical conditions and individuals over the age of 40. By way of example, the Pregnant Workers Fairness Act (PWFA) recently went into effect and requires employers to provide reasonable accommodations to individuals affected by pregnancy, childbirth, or related medical conditions, unless the accommodation causes the employer undue hardship. The PWFA prohibits employers from retaliating against qualified individuals who have sought reasonable accommodations.

Further, as discussed in 7.1 Grounds for Termination, employers must provide employees over the age of 40 with 21 days to consider and accept the terms of any agreement under the ADEA and the OWBPA, along with seven days to rescind the agreement after signing. When an employer undertakes a reduction in force or group lay-off, the ADEA and the OWBPA require the employer to provide affected employees with certain statistical information regarding the other individuals affected by the termination.

North Carolina employees have a private right of action for wrongful termination in violation of the following federal claims:

• the ADA, which prohibits discrimination against disabled workers or candidates;
• the Pregnancy Discrimination Act (PDA), which prohibits termination based on pregnancy-related facts;
• the PWFA, which expands the rights of workers affected by pregnancy, childbirth, or related medical conditions;
• Equal Employment Opportunity (EEO) laws;
• the ADEA, which prohibits discriminating against employees based on age (more specifically, if they are aged 40 or older); and
• Title VII of the Civil Rights Act (“Title VII”), which prohibits:
1. wrongful termination due to classification of a protected class including race, colour, religion, sex (including pregnancy, gender identity, and sexuality), and national origin; and
2. retaliation for reporting unsafe, illegal work practices or for any asserted protected rights.

North Carolina specific laws largely mirror federal laws, with the addition of the following state claims.

• The North Carolina Equal Employment Practices Act (EEPA) prohibits discrimination based on race, religion, color, national origin, age, sex, or handicap (disability).
• The PDPA prohibits discrimination against persons with disabilities.
• The Retaliatory Employment Discrimination Act (REDA) prohibits retaliation based on an employee’s good faith participation in certain activities, including:
1. filing or threatening to file a wage and hour claim;
2. filing or threatening to file a workplace health and safety claim;
3. filing or threatening to file a workers’ compensation complaint or claim;
4. on the basis of genetic testing,
5. possessing the sickle cell trait;
6. being a haemoglobin C carrier;
7. National Guard service;
8. participation in the juvenile justice system;
9. seeking domestic violence protective orders;
10. pesticide exposure; and
11. reporting activities of their employers under the Paraphernalia Control Act.

Employees can seek compensatory damages, including lost pay and lost benefits, as well as punitive, mental anguish, emotional distress, or pain and suffering damages for employer actions that are particularly egregious.

As mentioned in 8.1 Wrongful Dismissal, under federal Title VII, it is unlawful to discriminate on the basis of race, colour, national origin, religion, sex (including pregnancy, childbirth and other related medical conditions), sexual orientation and gender identity, disability, age (40 years of age or older), citizenship status, and genetic information. The EEPA also allows for a private right of action for discrimination claims brought pursuant to the same protected classes as Title VII. Under North Carolina law it is also unlawful to terminate someone for any reason that violates North Carolina Public Policy, which includes public policy set forth in the EEPA.

The statute of limitations for these state law claims is three years, meaning that employees could bring claims of discrimination past the traditional statute of limitations under Title VII. North Carolina courts have adopted similar tests to the federal McDonnell Douglas framework for state discrimination claims. Like federal claims, damages can include back pay and front pay, as well as compensatory damages, emotional distress damages and – in some instances – punitive damages.

During COVID-19, most North Carolina counties conducted hearings virtually via Webex. Most counties have returned to full in-person hearings. However, several of the larger, more urban counties such as Mecklenburg and Wake (Charlotte and Raleigh areas respectively) are conducting some portion of their hearings via video. Trials in North Carolina are not being conducted virtually. As of 1 July 2024, remote notarisation for affidavits needed in court proceedings is allowed. This makes it significantly easier for witnesses to prepare affidavits. The North Carolina Secretary of State maintains a searchable database to locate eNotaries, making it easy for employers to locate one, should the need arise.

North Carolina does not have any forums specific to employment disputes; however, employment disputes are frequently litigated in the North Carolina Business Court, which has mandatory jurisdiction over cases involving trade secrets. Unlike most cases filed in North Carolina superior courts, only one judge is assigned to each case in the North Carolina Business Court, and those judges are particularly familiar with the law and cases falling under their jurisdiction. 

Class actions claims are available under both federal and state law. Typically, class action employment claims involve claims of wage and hour violations, employment discrimination, or Employee Retirement Income Security Act (ERISA) violations.

Ever since the passage of the Federal Arbitration Act (FAA), which provides that arbitration agreements are generally enforceable, the frequency of arbitration provisions in employment contracts has steadily risen. Arbitration provides many desirable features, such as the following, that many employers prefer.

• Confidentiality – unlike a case in court, arbitration filings are typically not publicly available, leading to increased privacy during the litigation. Similarly, some arbitration agreements contain confidentiality provisions to ensure the matter is not publicised.
• Expeditious and cost-effective resolution – arbitration awards are generally afforded the same binding effect as a court order or jury verdict. However, the resolution itself can often be attained much quicker than a typical court case.
• Standard rules and procedures – although formal rules of evidence and civil procedure do not typically apply in arbitration, many established arbitration organisations such as the American Arbitration Association (AAA) have thorough sets of rules governing their proceedings.

Arbitration agreements can be effective tools for privately handling everything from contractual disputes to statutory discrimination claims. However, the FAA has several express carve-outs for certain types of claims for which a pre-dispute arbitration agreement either is not effective or cannot be used to waive any party’s rights. These claims include those arising under certain sections of the Dodd-Frank Act, as well as those provided by certain Commodity Futures Trading Commission (CFTC) regulations.

While arbitration agreements are common tools to determine the forum for a dispute before it arises, there are a few important considerations for employers looking to implement them. By way of example, the agreement must be mutually agreed upon; it cannot be the product of force or coercion on the employee. Similarly, although the agreement may be drafted to set a specific forum, rules, and type of arbitration or arbitrator, the terms cannot excessively favour the employer at the expense of the employee.

Drafting a pre-dispute arbitration agreement can be helpful to an employer for many reasons. However, it is recommended that employers speak with counsel to ensure the agreement is enforceable and effective.

Prevailing party costs are governed by statute in North Carolina. Currently, the North Carolina Court of Appeals has conflicting opinions as to whether awarding costs to prevailing parties under the main costs statute, North Carolina General Statutes Section 6-20, is mandatory or discretionary. The North Carolina Supreme Court has yet to take up this issue. But what is clear is that once a court moves forward with awarding prevailing party costs, those costs are limited to very specific enumerated categories under North Carolina General Statutes Section 7A-305. And counsel seeking recovery of costs must usually prove that the costs incurred were reasonable and necessary expenses in prosecuting or defending the case. The enumerated categories most pertinent to employment law litigation include:

• witness fees;
• expenses incurred in service of process by certified mail or by publication;
• costs on appeal of the original transcript of testimony;
• personal service and civil process fees;
• mediator fees;
• deposition stenographic and videographic fees;
• deposition transcript costs; and
• expert witness fees.