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State snapshot

Key considerations
Which issues would you most highlight to someone new to your state?

The Controlled Substance Examination Act, the Wage and Hour Act, and the Retaliatory Employment Discrimination Act.

What do you consider unique to those doing business in your state?

North Carolina has one of the lowest rates of union activity in the nation.

Is there any general advice you would give in the labor/employment area?

The three most important things an employer can do to lessen the risk of employment liability are as follows:

  • Ensure that all employment-related decisions are based on a legitimate business reason.
  • Document everything relating to performance, discipline, and termination.
  • Treat employees fairly.

Emerging issues
What are the emerging trends in employment law in your state, including the interplay with other areas of law, such as firearms legislation, legalization of marijuana and privacy?

It is not likely that marijuana will be legalized or decriminalized in North Carolina in the near future. There has been a proliferation of National Labor Relations Board filings by disgruntled employees or ex-employees, so employers doing business in North Carolina need to ensure that their handbooks and policies do not contain language that National Labor Relations Board could use to find an unfair labor practice.

Proposals for reform
Are there any noteworthy proposals for reform in your state?

Not at this time.

Employment relationship

State-specific laws
What state-specific laws govern the employment relationship?

In general, employment relationships are terminable at will, and the employer or the employee is entitled to terminate the employment relationship for any lawful reason. However, exceptions exist:

  • employers and employees can contract into a not at-will employment relationship;
  • a position may be made not at-will by statute; and
  • there is a common law claim for wrongful termination in violation of public policy.

Please note that one of the implications of House Bill 2 was the elimination of the state law “wrongful discharge in violation of public policy” cause of action that had allowed employees to sue former employers for discriminatory firings for up to three years after their termination dates. On July 1 2016 the legislature restored the wrongful discharge claim eliminated by House Bill 2. House Bill 169, “An Act to Restore the State Tort Claim for Wrongful Discharge,” restored a fired employee’s right to sue alleging he or she was illegally fired based on race, religion, color, national origin, age, sex, or disability. The new law restored all previous aspects of the wrongful discharge claim except that now the cause of action has a one year statute of limitations, reduced from the previous three year period.

In addition, a number of statutes address the employment relationship, including the following.

(a) North Carolina Wage and Hour Act

The North Carolina Wage and Hour Act requires North Carolina employers to honor employees’ rights to:

  • minimum wages;
  • overtime;
  • wage payments and benefits, including vacation, holiday, and sick pay; and
  • fair working practices (for youths and minors).

(b) Occupational Safety and Health Act of North Carolina

Operating in concert with the Federal Occupational Safety & Health Administration, the Occupational Safety and Health Division of the North Carolina Department of Labor is divided into five main bureaus—the Agricultural Safety and Health Bureau; the Compliance Bureau; the Consultative Services Bureau; Education, Training, and Technical Assistance; and Planning, Statistics, and Information Management—and seeks to ensure safe and healthy working conditions for employees in North Carolina.

(c) North Carolina Equal Employment Practices Act

Operating in concert with federal statutes, the North Carolina Equal Employment Practices Act makes it illegal for any employer with 15 or more employees to discriminate against an employee or job applicant on the basis of race, religion, color, national origin, age, sex, or disability.

(d) Retaliatory Employment Discrimination Act

The Retaliatory Employment Discrimination Act gives aggrieved employees—and the Department of Labor acting on its own volition—the authority to seek civil damages or injunctive relief when an employer discharges, suspends, demotes, relocates, or takes action adverse to the employment interests of an employee when that employee files or threatens to file a claim or complaint or takes other protected actions. Examples of protected activities include an employee exercising or threatening to exercise his or her rights under:

  • North Carolina’s Workers’ Compensation Act;
  • the Wage and Hour Act;
  • the Occupational Safety and Health Act; or
  • the Mine Safety and Health Act.

(e) North Carolina Persons with Disabilities Protection Act

The North Carolina Persons with Disabilities Protection Act makes it unlawful for a business with 15 or more employees to discriminate against any individual on the basis of a disability.

Who do these cover, including categories of workers?

North Carolina’s employment laws govern all employees, but do not generally apply to persons properly classified as independent contractors.

Misclassification
Are there state-specific rules regarding employee/contractor misclassification?

The misclassification of employees as independent contractors creates significant risk to employers under North Carolina law. Employers that regularly employ three or more employees must be covered by workers’ compensation insurance or be qualified as self-insured. An employer that misclassifies its employees as independent contractors and does not carry the required workers’ compensation insurance coverage will be potentially subject to payment of an employee’s workers’ compensation claim, monetary penalties, and criminal charges. Other consequences of misclassifying employees include employer liability for unpaid payroll taxes to the North Carolina Department of Revenue and unemployment benefits.

Contracts
Must an employment contract be in writing?

Employment contracts need not be in writing to be legally enforceable; however, restrictive covenants such as non-compete agreements must be in writing and signed by the employee in order to be enforceable.

Are any terms implied into employment contracts?

Employment contracts contain implied terms of good faith and fair dealing “to effect the intention of the parties and which are not in conflict with the express terms.” (Maglione v. Aegis Family Health Ctrs., 168 N.C. App. 49, 56 (2005) (quoting Lane v. Scarborough, 284 N.C. 407, 410 (1973))). These duties are predicated on the underlying premise that each party to the employment contract “has a duty to adhere to the presuppositions of the contract for meeting this purpose” (Maglione, 168 N.C. App. at 56 (citing Weyerhaeuser Co. v. Building Supply Co., 40 N.C. App. 743, 746 (1979)). Accordingly, a court may read implied terms into an employment agreement depending on the nature and substance of the contract.

Are mandatory arbitration agreements enforceable?

The North Carolina Court of Appeals recently affirmed the state’s policy toward arbitration, holding, that “the public policy of our State favors arbitration” (King v. Bryant, 737 S.E.2d 802, 807 (2013)), when and where “the parties entered into an enforceable agreement to arbitrate" (id.). The enforceability of arbitration agreements is dictated by the laws and principles of contract. Crossman v. Life Care Ctrs. of Am., Inc., 738 S.E.2d 737, 740 (2013). Mandatory arbitration agreements are enforceable to the extent that they conform to the basic expectations of enforceable contracts. The enforceability of mandatory arbitration provisions is a fact-sensitive inquiry and does not lend itself to consistent application of well-established, black-letter law.

Because mandatory arbitration agreements can be the product of unequal balances of power between two parties, unconscionability (i.e., where the contract is “so one-sided that the contracting party is denied any opportunity for a meaningful choice” Brenner v. Little Red School House, Ltd., 302 N.C. 207, 213 (1981)) is often a basis for finding that a mandatory arbitration agreement is unenforceable. Therefore, employers should ensure that the mandatory arbitration clause is the product of a procedurally fair bargaining process and is substantively fair on its face and in practice.

How can employers make changes to existing employment agreements?

Either the employer or the employee’s ability to modify the employment agreement is generally the same as any party’s right to modify contracts.

A written contract may be modified or waived by a subsequent parol agreement, or by conduct that naturally and justly leads the other party to believe the contract has been modified or waived. This principle has been sustained even where the instrument requires any modification of the contract to be in writing. It has likewise been sustained where a contract contained a provision saying, "No salesman or agent of the company shall have the right to change or modify this contract" (42 East, LLC v. D.R. Horton, Inc., 722 S.E.2d 1, 6-7 (2012) (internal citations omitted)). 

Thus, employment contracts may be amended only by express modification or by modifications implied by the actions of all parties to the contract.

Hiring

Advertising
What are the requirements relating to advertising open positions?

North Carolina has no statutory requirements applicable to private employers regarding advertising for open positions, but employers should be aware of Fourth Circuit case law holding that failure to advertise open positions could merit relief under Title VII of the Civil Rights Act of 1964 if there is proof of a systematic practice causing artificial, arbitrary, and unnecessary barriers for minorities, which bear a causal relationship to the plaintiff’s inability to gain employment (Thomas v. Washington County School Bd., 915 F.2d 922 (4th Cir. 1990)).

North Carolina has legislation governing the posting of jobs by a “job listing service.” A “job listing service” is defined as a business operated for profit, which publishes vacant positions with any employer other than itself and which charges fees to applicants for its services and which does not perform any activities of a private personnel service other than publishing job listings (N.C. Gen. Stat. § 95-47.19). A job listing service is prohibited from publishing or causing to be published “any information which it knows or reasonably ought to know is false or deceptive or which it has no reasonable basis for believing to be true” (N.C. Gen. Stat. § 95-47.26). A job listing service is also prohibited from:

  • publishing false information;
  • posting vacancies for a business where workers are on strike or lockout, unless the applicant is informed about this in the publication;
  • posting vacancies for an employer engaged in “unlawful or immoral” activity;
  • posting vacancies about an employer in which the listing service has a 10% or greater financial interest; or
  • posting vacancies about an employer that the listing service knows or has reason to know is in financial or other difficulty likely to lead to imminent cessation (N.C. Gen. Stat. § 95-47.28).

Background checks
What can employers do with regard to background checks and inquiries?

(a) Criminal records and arrests

No state legislation restricting background checks or inquiries into criminal records and arrests exists. Employers must comply with the Federal Fair Credit Reporting Act. Employers are prohibited from making applicants pay the cost of obtaining criminal records as a condition of hiring (N.C. Gen. Stat. § 14-357.1).

(b) Medical history

No state legislation restricting inquiries into medical history exists. However, employers should be aware that it is unlawful for any employer with 25 or more employees to require any applicant to pay the cost of a medical examination or the cost of providing any records required by the employer as a condition of hire (N.C. Gen. Stat. § 14-357.1). The North Carolina Department of Labor takes the position that such records are not just medical records, but also any required records including, but not limited to, criminal records. Any employer that violates this section may be fined. It is the North Carolina Department of Labor’s position that Section 14-357.1 does not apply where the medical examination or records are required by law, rather than by the employer.

(c) Drug screening

Employers are permitted to conduct drug screenings of prospective employees pursuant to, and in compliance with, the Controlled Substance Examination Regulation Act (N.C. Gen. Stat. § 95-230, et seq.) and the related regulations codified in 13 NCAC .0400, et seq., which include the following:

  • At the time of providing a sample for testing, the prospective employee must be provided with written notice of his or her rights and responsibilities under the act.
  • A preliminary screening procedure that uses a single-use test device may be used for prospective employees.
  • Samples for prospective or current employees may be collected onsite or at an approved laboratory.
  • If a screening test for a prospective employee produces a positive result, an approved laboratory shall confirm that result by a second examination of the sample, using gas chromatography with mass spectrometry or an equivalent scientifically accepted method, unless the prospective employee signs a written waiver at the time or after he or she receives the preliminary test result.
  • Applicants and employees have a right to retest a confirmed positive sample at the same or another approved laboratory.
  • A retest must be requested in writing, specifying to which approved laboratory the sample is to be sent.
  • The applicant or employee is responsible for all reasonable expenses for chain of custody procedures, shipping, and retesting of positive samples related to this request.
  • Employers are prohibited from imposing the costs of drug screening tests as a condition of hiring (N.C. Gen. Stat. § 14-357.1).

In addition, the Occupational Safety and Health Administration ”has issued a final rule which impacts drug testing in every state, and it is clear in the commentary to the final rule that blanket post accident or injury testing is prohibited.

(d) Credit checks

No state legislation restricting background checks or inquiries into credit histories for hiring purposes exists.

(e) Immigration status

No state legislation restricting background checks or inquiries into immigration status exists. Employers with 25 or more employees are required to use E-Verify for all new hires (N.C. Gen Stat. § 64-25, et seq.).

(f) Social media

No state legislation restricting the use of social media in background checks or inquiries for employment purposes exists.

(g) Other

There is limited statutory immunity for employers that disclose truthful information about a current or former employee’s job history or job performance to a prospective employer. This immunity does not apply when the information disclosed by the employer was false and the employer knew or reasonably should have known that the information was false (N.C. Gen. Stat. § 1-539.12). North Carolina also has a blacklisting law prohibiting employers from preventing or attempting to prevent a discharged employee from obtaining employment (N.C. Gen. Stat. § 14-355).

Wage and hour

Pay
What are the main sources of wage and hour laws in your state?

The North Carolina Wage and Hour Act (N.C. Gen. Stat. § 95.25.1, et seq.) and accompanying regulations (13 NCAC 12.0101, et seq.) are the primary sources of wage and hour law. These laws require, among other things:

  • written notice of promised wages and the date and place for payment of wages at the time of hire;
  • 24 hours’ advance written notice of reductions in pay during employment; and
  • written policies on forfeiture of vacation, bonus, and commissions.

The statutes and regulations also contain youth employment rules.

Commission and bonus programs are construed against the employer when ambiguous. Employers that ignore the Wage and Hour Act do so at their own peril, since the act provides for double damages, attorney’s fees, and civil penalties. Employees claiming a violation may also file an administrative charge, which the North Carolina Department of Labor will investigate.

What is the minimum hourly wage?

Minimum wage is the same as required under the Fair Labor Standards Act. At present, the minimum wage is $7.25 per hour (N.C. Gen. Stat. § 95-25.3).

What are the rules applicable to final pay and deductions from wages?

Final pay must be made on the next regular payday following termination (N.C. Gen. Stat. § 95-25.7). However, wages based on bonuses, commission, or other forms of calculation may be paid on the first regular payday after the amount can be calculated. There are also detailed rules about withholding wages and making deductions from wages (N.C. Gen. Stat. § 95-25.8). When the amount or rate of the deduction is known and agreed on in advance, the employer must have a written authorization, which: is signed on or before the payday from which the deduction will be made; indicates the reason for the deduction; and states the dollar amount or percentage of wages to be deducted. If the deduction is made for the employee’s convenience, the employee must be given a reasonable opportunity to withdraw the authorization. When the amount of the proposed deduction is not known in advance, the employer must obtain a written authorization which is signed before the payday on which the deduction is to be made and indicates the reason for the deduction. Before making a deduction, the employee must be given written notice of the amount of the deduction and his or her right to withdraw the authorization and a reasonable opportunity to withdraw the authorization. Any withholding of wages for the employer’s benefit must also meet the following requirements: In weeks without overtime, wages may not be reduced below minimum wage. In weeks with overtime, deductions may be made only from wages for non-overtime hours, which may not be reduced below minimum wage. No deduction can be made from overtime. An employer may withhold from wages for cash shortages, inventory shortages, or loss or damage to the employer’s property, provided that the rules in paragraphs 1 and 2 above are met and the employee is given seven days’ prior written notice of the amount of the deduction. The seven-day rule does not apply when the deduction is made from the wages of a terminated employee. If the employee is charged with a crime as the result of the cash shortage, inventory loss, or loss or damage to the employer’s property, no written authorization is required, but the deduction must comply with the rules in paragraph 2 above. If the employee is found not guilty, any amounts withheld must be reimbursed to the employee. Loans or advances of wages are not subject to the written authorization rules in paragraph 1 above.

Hours and overtime
What are the requirements for meal and rest breaks?

There are no required meal or rest breaks under the Wage and Hour Act.

What are the maximum hour rules?

There are no maximum hour limits under the Wage and Hour Act.

How should overtime be calculated?

An employer must pay one and one half the regular rate of pay for each hour worked over 40 hours in the working week (N.C. Gen. Stat. § 95-25.4). However, employees of seasonal amusement or recreational establishments receive overtime only after working more than 45 hours in the working week.

What exemptions are there from overtime?

Businesses “engaged in commerce or in the production of goods for commerce” as defined in the Fair Labor Standards Act (FLSA) are exempt from the overtime and minimum wage provisions of the state Wage and Hour Act (but will be covered by the overtime requirement of the FLSA). There are numerous other exemptions for specific industries, which are listed in Section 95-25.14 (N.C. Gen. Stat. § 95-25.14).

The Department of Labor recently issued new updates to its regulations and what satisfies wage amounts under the salary basis test. These changes should be reviewed to ensure that each employee still satisfies the new requirements before taking advantage of this exemption from the state Wage and Hour Act.

Record keeping
What payroll and payment records must be maintained?

Employers must retain all records, posted notices, and writings required by the Wage and Hour Act and the rules and regulations promulgated there under for three years (13 NCAC 12.0802).

Discrimination, harassment and family leave

What is the state law in relation to:
Protected categories

(a) Age?

The North Carolina Equal Employment Practices Act (N.C. Gen. Stat. § 143-422, et seq.) states that it is the public policy of North Carolina to protect employees and those who seek employment from discrimination on the basis of age by employers that regularly employ 15 or more employees. The North Carolina courts have recognized a cause of action for wrongful discharge in violation of public policy. Section 143-422 of the act provides one possible source of public policy to support a wrongful discharge claim.

(b) Race?

The North Carolina Equal Employment Practices Act (N.C. Gen. Stat. § 143-422, et seq.) makes it illegal for any employer with 15 or more employees to discriminate against an employee or job applicant on the basis of race.

(c) Disability?

The Persons with Disabilities Protection Act (N.C. Gen. Stat. § 168A-1, et seq.) prohibits employers with 15 or more full-time employees within North Carolina, employment agencies, and labor organizations from employment discrimination against qualified persons with disabilities. The statute defines a “person with a disability” as an individual who:

  • has a physical or mental impairment that substantially limits one or more major life activities;
  • has a record of such an impairment; or
  • is regarded as having such an impairment.

The law also requires employers, employment agencies, labor organizations, places of public accommodation, or covered governmental entities to provide reasonable accommodation for qualified persons with disabilities. The law also prohibits retaliation against any person who has opposed practices made unlawful by the statute, or who has participated in proceedings under the statute.

(d) Gender?

The North Carolina Equal Employment Practices Act (N.C. Gen. Stat. § 143-422, et seq.) makes it illegal for any employer with 15 or more employees to discriminate against an employee or job applicant on the basis of biological gender.

(e) Sexual orientation?

No state statute addresses discrimination based on sexual orientation or gender identity, although some cities and counties have included sexual orientation and gender identity in local laws prohibiting discrimination. On March 23 2016 North Carolina amended this law to explicitly state that local government units may not pass laws or ordinances that conflict with North Carolina discrimination laws regulating discriminatory practices in employment and may not include additional protected classes, such as gender identity and sexual orientation.

(f) Religion?

The North Carolina Equal Employment Practices Act (N.C. Gen. Stat. § 143-422, et seq.) makes it illegal for any employer with 15 or more employees to discriminate against an employee or job applicant on the basis of religion.

(g) Medical?

  • Law regarding laboratory tests for HIV or AIDS (N.C. Gen. Stat. § 130A-148)—this statute prohibits discrimination in employment based on infection with HIV or AIDS. The law also defines when it is permissible for employers to require persons to submit to AIDS testing, and the specific circumstances under which a job applicant may be denied employment based on a positive AIDS test result, or when an employee may be transferred or terminated due to HIV or AIDS infection.
  • Genetic Testing Law (N.C. Gen. Stat. § 95-28.1A)—this statute prohibits employers from denying employment to any person or discharging any person from employment based on the person having requested genetic testing or counseling services, or on the basis of genetic information obtained concerning the person or a member of the person’s family.
  • Law regarding discrimination on the basis of sickle cell trait or hemoglobin C trait (N.C. Gen. Stat. § 95-28.1)—this statute prohibits employers from denying employment to any person or discharging any person from employment based on the fact that the person possesses sickle cell trait or hemoglobin C trait.

(h) Other?

  • Law regarding discrimination against lawful use of lawful products (N.C. Gen. Stat. § 95-28.2)—this statute prohibits employers from failing or refusing to hire a person, or discharging or otherwise discriminating against any employee with respect to any term or condition of employment, because that person or employee engages in or has engaged in the lawful use of lawful products if the activity:
    • occurs off the employer’s premises;
    • occurs during non-working hours; and
    • does not adversely affect the employee’s job performance or the person’s ability to properly fulfill the responsibilities of the position in question or the safety of other employees. 
  • Law on retaliatory employment discrimination (N.C. Gen. Stat. § 95-240, et seq.)—the Retaliatory Employment Discrimination Act gives aggrieved employees—and the Department of Labor acting on its own volition—the authority to seek civil damages or injunctive relief when an employer discharges, suspends, demotes, relocates, or takes action adverse to the employment interests of an employee when that employee files or threatens to file a claim or complaint or takes other protected actions. Examples of protected activities include an employee exercising or threatening to exercise his or her rights under North Carolina’s:
    • Workers’ Compensation Act;
    • Wage and Hour Act;
    • Occupational Safety and Health Act; or
    • Mine Safety and Health Act.

Harassment
What is the state law in relation to harassment?

The North Carolina Equal Employment Practices Act does not specify whether that law prohibits harassment against employees on the basis of race, color, sex, or other protected category. Some North Carolina courts have held that employees cannot state a claim of harassment under that law. However, it is possible for employees to assert other claims under North Carolina law which relate to allegations of harassment, including:

  • intentional and negligent infliction of emotional distress;
  • assault and battery; and
  • negligent retention and supervision.

Therefore, employers should be aware of these potential claims in the context of a harassment case. 

Family and medical leave
What is the state law in relation to family and medical leave?

North Carolina does not have a statute specifically regarding family and medical leave. However, certain state statutes provide rights regarding other forms of leave.

(a) Jury duty leave (N.C. Gen. Stat. § 9-32)

This statute prohibits employers from demoting or discharging any employee because that person has been called for jury duty or is serving jury duty.

(b) School leave (N.C. Gen. Stat. § 95-28.3)

This statute requires that employers grant four hours of leave per year to any employee who is a parent, guardian, or person standing in loco parentis of a school-aged child in order to attend or otherwise be involved in that child’s school. The statute also provides that school leave can be subject to the following conditions:

  • The leave must be at a mutually agreed time between the employer and the employee.
  • The employer may require the employee to request the leave at least 48 hours before the leave.
  • The employer may require the employee to furnish written verification from the child’s school that the employee attended or was otherwise involved at that school during the time of the leave.

The statute also prohibits employers from discharging, demoting, or otherwise taking adverse action against an employee who requests or takes school leave. Employers are not required to pay employees for school leave.

(c) Domestic violence victim leave (N.C. Gen. Stat. § 50B-5.5)

This statute prohibits employers from discharging, demoting, denying a promotion, or disciplining an employee who has taken reasonable time off from work to obtain or attempt to obtain assistance as a victim of domestic violence.

(d) North Carolina military leave and reinstatement (N.C. Gen. Stat. § 127A-202, et seq. 127B-14)

This statute requires employers to grant unpaid military leave to any member of the North Carolina National Guard who has been called into service. The law defines the employee’s job reinstatement rights on conclusion of military service. The law also prohibits employers from discharging an employee because he or she has taken military leave. In addition, an employer cannot deny any of the following because of a person’s membership in the North Carolina National Guard:

  • initial employment;
  • re-employment;
  • retention in employment;
  • promotion; or
  • any benefit of employment.

Privacy in the workplace

Privacy and monitoring
What are employees’ rights with regard to privacy and monitoring?

North Carolina law does not provide employees with a specific right to privacy in the employment context. While there is no statute addressing employees’ right to privacy, an employee could make a successful common law claim for invasion of privacy or intentional infliction of emotional distress in extreme (and rare) circumstances.

With respect to monitoring, North Carolina follows the “One-Party Consent Rule” (N.C. Gen. Stat. § 15A-287), which provides that employee communications—both oral and electronic—may be intercepted (monitored or recorded) when one party to that communication consents to the interception or when the nature and circumstances of the communication do not give rise to an expectation of privacy. 

Consent may be obtained by prior warning that an employee’s communications may be monitored. Employees may be warned in their employment contract, a public posting, or any other means reasonably calculated to notify them that their conversations and communications may be monitored. For instance, in North Carolina v. Price, 170 N.C. App. 57, 66 (2005), the North Carolina Court of Appeals affirmed the trial court’s finding that an employer’s telephone surveillance was proper because the parties knew “that the call was subject to monitoring and recording and that they consented, at least impliedly, by continuing with the conversation in the face of that warning”.

Are there state rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

North Carolina does not restrict employers from requesting access or requiring access to employee or applicant social media accounts.

Bring your own device
What is the latest position in relation to bring your own device?

The State of North Carolina—one of the state’s single largest employers—is in the process of considering its own bring your own device (BYOD) policy. As of this year, the state’s chief information officer plans to permit state employees to conduct state business on personal laptops, and will continue to develop rules and regulations that govern BYOD in the state-employee context. There have been no significant developments in the private sector with respect to BYOD.

Off-duty
To what extent can employers regulate off-duty conduct?

Employers may not discriminate against employees or potential employees for the lawful use of lawful products if the activity occurs off the employer’s premises during nonworking hours and does not adversely affect:

  • the employee’s job performance;
  • the employee’s ability to properly fulfill the responsibilities of the position; or
  • the safety of other employees (N.C. Gen. Stat. § 95-28.2).

For example, it would be unlawful for an employer to discriminate against an of-age employee or a candidate for employment for purchasing and drinking a beer off-duty. On the other hand, this statute does not protect the unlawful use of lawful products, and an employer may terminate or consider as a factor in hiring whether the employee or job seeker has been convicted of driving while intoxicated.

Employers may make an employment decision based on an activity that “adversely affect[s] the employee’s job performance or the person’s ability to properly fulfill the responsibilities of the position in question or the safety of other employees.” Specifically, employers may restrict the lawful use of lawful products when:

  • the restriction relates to a bona fide occupational requirement and is reasonably related to the employee’s employment activities;
  • the restriction relates to the fundamental objectives of the organization; or
  • termination or discipline is related to the employee’s failure to comply with the requirements of the employer’s substance abuse prevention program or the recommendations of substance abuse prevention counselors employed or retained by the employer (N.C. Gen. Stat. § 95-28.2(c)).

Gun rights
Are there state rules protecting gun rights in the employment context?

Private employers are conclusively given the authority to regulate or restrict an employee’s ability to carry a gun onto the employer’s premises, even when the employee has a valid concealed-carry permit when and where the private employer conspicuously posts a notice or statement stating that concealed carry is prohibited (N.C. Gen. Stat. § 14-415.11(c)(8)). Although the statute does not address open carry, employers presumably have the right to restrict or prohibit guns on company premises.

In 2015 House Bill 699, the Gun Rights and Privacy Act, was introduced in the North Carolina House of Representatives. In its current form, there are no changes that would affect an employer’s rights to ban guns on their premises.

Trade secrets and restrictive covenants

Intellectual Property
Who owns IP rights created by employees during the course of their employment?

IP rights are often divided into copyright, patents, trade secrets, and trademarks:

  • Copyright—where an employee makes a creative work (e.g., a photograph, movie, text, or music) while on the job, the employer often owns the copyright as a “work made for hire.”
  • Patents—when an employee makes a discovery or invention while on the job, the business is more likely to own the patent rights if the employee was specifically hired to be an inventor or researcher. In that situation, the courts are more likely to find that the inventor “impliedly assigned” his or her rights to the employer. However, if a general employee discovers or invents something by accident, there is a significant chance that the employee may own the patent rights.
  • Trade secrets—state law governs trade secrets. Generally, an employer is likely to own all of the trade secrets of its business.
  • Trademarks—an employer that sells goods or services owns the business’s trademark rights. If an employer and employee dispute trademark ownership, their dispute is likely to involve other areas of law. For example, if an employee claims limited rights in some aspect of a business’s trademark (e.g., a logo), that claim might fall under copyright or breach of contract. If an employee seeks full IP rights in an employer’s trademark, the employee may be seeking something much greater—an ownership interest in the business itself. 

The effectiveness of contracts governing an employee’s rights to inventions created during his or her employment is governed by statute. N.C. Gen. Stat. § 66-57.1 states that:

“Any provision in an employment agreement which provides that the employee shall assign or offer to assign any of his rights in an invention to his employer shall not apply to an invention that the employee developed entirely on his own time without using the employer's equipment, supplies, facility, or trade secret information except for those inventions that (i) relate to the employer's business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by the employee for the employer.”

Any provision in an employment agreement that is contrary to these statutory restrictions is unenforceable because it violates state public policy.

In addition, an employer may not condition employment on an employee’s execution of an agreement that would violate N.C. Gen. Stat. § 66-57.1 (N.C. Gen. Stat. § 66-57.2). In addition:

“An employer, in an employment agreement, may require that the employee report all inventions developed by the employee, solely or jointly, during the term of his employment to the employer, including those asserted by the employee as nonassignable, for the purpose of determining employee or employer rights.” (N.C. Gen. Stat. § 66-57.2).

Restrictive covenants
What types of restrictive covenants are recognized and enforceable?

Covenants not to compete are enforceable when they are reasonable, although they are not favored. To be enforceable, a covenant not to compete must be:

  • in writing;
  • part of the contract of employment or sale of a business;
  • based on valuable consideration;
  • reasonably necessary for the protection of the company’s interests; and
  • reasonable in relation to time and territory.

In North Carolina, continuation of at-will employment is not a valuable consideration to support a covenant not to compete. The covenant must be signed before or at the start of at-will employment, or other consideration must be given to the employee, such as a bonus, raise, or promotion.

Covenants prohibiting solicitation of employees and contractors are enforceable when reasonable and are analyzed under normal breach of contract law.

Confidential information non-disclosure and non-use covenants that are limited to a company’s legitimate business interests need not be limited by time or area. Violations of these types of covenants are analyzed under normal breach of contract law.

Non-compete
Are there any special rules on non-competes for particular classes of employee?

The North Carolina Rules of Professional Conduct that govern attorneys prohibit the use of non-compete covenants between attorneys.

Covenants not to compete restricting physician employment are not per se unenforceable in the state. When considering whether such covenants violate public policy and are unenforceable, the courts consider:

  • whether there is a risk of substantial harm to the public that would be created by the shortage of specialists in the field in the restricted area;
  • the impact of establishing a monopoly;
  • the impact on fees in the future;
  • the availability of a doctor at all times for emergencies; and
  • the public interest in having a choice in the selection of physicians.

Under state law, reasonable covenants not to compete are enforceable against independent contractors.

Labor relations

Right to work
Is the state a “right to work” state?

Yes.

Unions and layoffs
Is the state (or a particular area) known to be heavily unionized?

No. North Carolina is one of the least unionized states in the country.

What rules apply to layoffs? Are there particular rules for plant closures/mass layoffs?

The federal Worker Adjustment and Retraining Notification (WARN) Act governs employers’ obligations in certain plant closure and mass layoff situations. North Carolina has no state-level WARN Act equivalent. However, the North Carolina Employment Security Commission Regulations require special notice be given to the state unemployment agency before laying off 20 or more employees. Additionally, the commission requires an employer with 100 or more employees to file a Notice of Temporary Layoff whenever there is an individual or group temporary layoff (N.C. ESC Regs. §§ 9.10, 9.11).

Discipline and termination

State procedures
Are there state-specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

No state laws or regulations governing the procedures that private employers must follow with regard to discipline and grievance exist. Nonetheless, to avoid discrimination, retaliation, and similar claims, several steps are prudent. Any situation with an employee that could result in discipline should be thoroughly investigated. This includes gathering all relevant evidence, interviewing the witnesses, and obtaining written statements from witnesses. The employer should prepare a thorough and comprehensive list of questions for the employee who is the subject of the investigation. That employee should always be given a chance to tell his or her story and otherwise answer the accusations and questions. Employees should also be allowed to prepare a statement of their position. It is also advisable for employers to record the conversation (North Carolina is a one-party consent state not requiring the consent of the recorded party). The employer should then review all the evidence to ascertain what version of events or set of allegations is corroborated. Employers should be cautious when preparing reports or findings, as they need to be carefully and exactly worded and should avoid making legal conclusions. If there is corroborated evidence of a violation of the employer’s rules, the disciplinary action form should be crafted precisely. If there is more than one infraction (as there often is), the employer should list all the violations on the disciplinary action form. Lastly, any discipline should be administered professionally; the affected employee should not be degraded. Written discipline should be made in a constructive nature for the benefit of the employee. It should also be made clear to the employee that the employer had no choice but to take this action if it is to apply its rules consistently. If the employer has an internal appeal process or open door policy, the employee should be made aware of that right.

At-will or notice
At-will status and/or notice period?

North Carolina is an at-will employment state. No notice of termination is required absent a contractual obligation.

What restrictions apply to the above?

North Carolina recognizes that at-will employees may bring a common law claim for wrongful discharge in violation of public policy. The Retaliatory Employment Discrimination Act limits an employer’s right to terminate an employee for conduct protected by the statute.

Final paychecks
Are there state-specific rules on when final paychecks are due after termination?

Employees whose employment is discontinued for any reason must be paid all wages due on or before the next regular payday either through the regular pay channels or by mail if requested by the employee. Wages based on bonuses, commissions, or other forms of calculation must be paid on the first regular payday after the amount becomes calculable when a separation occurs. Earned vacation pay, bonuses, and commissions may not be forfeited unless the employer has a policy that results in forfeiture and the employee has been notified of the employer's policy (in accordance with N.C. Gen. Stat. § 95-25.13). Employees not so notified are not subject to such loss or forfeiture.