Employers: What You Need to Know the NC Wage and Hour Act

The North Carolina Wage and Hour Act (NCWHA) establishes regulations on employment in the state, including minimum wage, employee age requirements and numerous other provisions. It is important that both employers and employees know their rights and responsibilities under the NCWHA.

Here are some fast facts you need to be familiar with as an employer running a small business or startup:

First Order of Business

The act tends to favor employers

For instance, an employer can reduce the promised wage paid to an at-will employee merely by providing written notice one day in advance of the change in pay.

The Act also includes employer-friendly provisions for seasonal employees, tipped employees, apprentices, and students, among others.

There are special exemptions and carve-outs for specific industries such as commercial fishing.

My personal favorite is the Act’s prohibition on nearly all child labor except for newspaper delivery—that’s allowed. I can’t help but conjure up an image from some bygone era of the young boy barking out “read all about it!”

Paychecks and Balances

While the Act is employer-friendly in many ways, under the NCWHA the business still must concern themselves with more than just the minimum wage—it’s possible that an employer can be in trouble for failing to pay a wage for all hours worked (even if, on average, the employee still earned the minimum wage when accounting for unpaid time).

The NCWHA also includes detailed provisions on when and under what conditions an employer can withhold money from an employee’s paycheck, as well as strict rules for various recordkeeping and notice posting requirements.

Generally, employers should be cautious when leaning towards not compensating employees for certain tasks. As a rule of thumb, if an employee is performing a task that benefits the business, the employer must pay wages to the employee. (Assuming for a second the person is an “employee” and not an “independent contractor,” which will be the subject of another blog post.) While paying employees for work that benefits the business may seem like common sense, employers regularly violate this rule.

Consider the example of an employer who allows employees the opportunity to participate in a day off from regular work to perform charity work, i.e., a day of charity sponsored in the name of the business. Because the business benefits from the goodwill associated with the sponsorship, the employer is obligated to pay a wage to the employee for this time, or risk liability under the NCWHA.

Nobody likes keeping records, but good recordkeeping can be essential to an employer defending a case against an employee about whether wages were paid for all hours worked. And in the event of poor recordkeeping by the business—if there is any question about the hours worked or the wages paid—the employer may lose any benefit of the doubt in terms of liability.

How It Plays out in Court

While the state does pursue limited enforcement on behalf of employees (which is explained further in the section below), the real threat to employers comes from potential liability in lawsuits brought by workers who retain a private attorney.

In contrast with the general rule that opposing parties pay their own legal fees, the NCWHA provides for the discretionary award of attorney’s fees to employees who win their cases in court. The practical effect is that the potential award of attorney’s fees means that lawyers are sometimes willing to take cases that otherwise might not be financial sense.

While an employer violation with regard to a single employee may be a relatively small amount of money, even a minor violation by an employer—when repeated with regard to multiple employees—could result in a class-action lawsuit and a sizeable judgment.

The size of the potential liability is magnified by the fact that the NCWHA usually requires the business to pay injured employees double their back wages, with interest..

The Strike of the Gavel

Now, back to the statement above that the state does pursue cases on behalf of employees in some cases. The North Carolina Commissioner of Labor is in charge of administration and enforcement. What does this mean? The state can recover unpaid wages and interest on behalf of workers, as well as civil penalties and fines (ranging from $500 to $2,000, based on the nature of the violation).

As a practical matter, however, employers may not fear the Wage and Hour Bureau regulators very much, as the Commissioner of Labor recently came under fire for what the Charlotte Observer categorized as her weak enforcement of the Act. (“At NC Department of Labor, little help for unpaid workers”)

The takeaway here is that the Wage and Hour Bureau has not aggressively pursued employers who fail to pay wages due to their workers.

The Big Picture

In many ways, the NCWHA tracks its federal statutory companion, the Federal Labor Standards Act (FLSA). The two laws are similar in that the NCWHA is interpreted by referencing the FLSA, which applies to certain companies in North Carolina that do business in multiple states. Of course, to further complicate matters, there are several important differences between the two statutes that might affect the outcome of an unpaid wages claim brought under each law, including important differences in the statute of limitations (two years under NCWHA, three years under FLSA) and the ease of forming a class action (called a “collective action” in the FLSA).

Spengler & Agans has experience handling NCWHA cases and can help advise your company how to comply with the law, as well as represent parties in NCWHA disputes.

Contact Spengler & Agans for a consultation on your wage and hour act issue. At Spengler & Agans, we advise and represent both employers and employees in North Carolina Wage and Hour Act matters.

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