Labor and Employment Law Scorecard

Keeping Track of Labor and Employment Laws that Apply to the Growing Business
A guide to regulation of employment for the sole proprietor, mega-company, and all employers in between
By Wm. Joseph Austin, Jr.

The “scratch golfer” has a zero handicap.  There is no such thing as a “scratch employer.”  The word “employer” itself denotes a person or business that employs at least one other person.  If you or your business fits that description, please read further.

Regulation of employment in fact begins with one employee.  It increases as legal thresholds are crossed with three, four, ten, 15, and 20 employees, and so on.  Not knowing the significance of these numbers—for that matter not knowing who counts as an employee—can have detrimental consequences to the growing business. Mom and Pop or Two Guys in a Garage may think they have a single employee when the business actually has three, including them.  In that case they must comply with the North Carolina Workers’ Compensation Act.  Failure to do so creates exposure to significant penalties. 

Our “Labor and Employment Law Scorecard” provides a step-by-step guide to the growing list of labor and employment laws, federal and state statutes, and additional common law requirements that apply to North Carolina employers, from the sole proprietor to the mega company. Some basic principles all must bear in mind include the following:

  • North Carolina is still an at-will state.  This means that employment for an indefinite term (no set end date) may be terminated at the will of either the employer or the employee.  However, the general rule is subject to federal and state exceptions. Discrimination is prohibited on the basis of protected characteristics, traits, and conditions.
  • An unfit employee may create liability on the employer for injury done to a customer or another member of the general public. The prudent employer will not only take precautions to hire competent employees but will also remain alert to signs that an incumbent employee has become a threat to the safety of others.
  • Properly classifying workers as employees or independent contractors is subject to legal requirements that are not optional to the employer or the worker even if they are in perfect agreement between themselves. The law, whether through the IRS, Department of Labor, Industrial Commission, or a court of law, has the last say.  Misclassifying employees as independent contractors can expose the employer to substantial tax penalties as well as to bankrupting claims for back wages and overtime pay.  The employer who says, “I don’t have any employees, just independent contractors,” or relies on so-called “1099 employees” may reap the benefits of a profitable business plan for a time, only to be overtaken eventually by catastrophic legal exposure.
  • Discrimination, harassment, and retaliation are not only illegal under the Equal Employment Opportunity (EEO) statutes listed below that have numerical thresholds, such as Title VII (15 employees), but also under other civil rights laws such as Section 1981 (race) and common law (for example, intentional infliction of emotional distress in the case of sexual harassment).  Potential liability then begins with the first hire.  Similarly, under the Public Policy Exception to the At-Will Rule no employer can terminate any employee who engages in oppositional behavior that is protected under North Carolina public policy (e.g., refusing to give perjured testimony in behalf of the employer in a court proceeding).   
  • Written, signed agreements are required to make noncompetition covenants enforceable.  A properly drawn employment agreement is one way to get this done.  An employment agreement may also incorporate protection for the employer’s trade secrets and other proprietary information under a covenant sometimes called a nondisclosure agreement (NDA).  The inventor of the modern equivalent of the Pepsi formula may need a helper to produce the product.  An enforceable noncompete and NDA will protect the entrepreneur from the disaster of the once trusted protégé taking proprietary information and intellectual property across the street and competing head to head.
  • As the number of employees grows and people come and go, an employee handbook is the most efficient way to communicate workplace rules and payroll practices.
  • Wage and hour laws are exacting and specific.  They not only contain minimum wage and overtime requirements but also record-keeping provisions that the employer must comply with.  Well-intentioned short cuts may only increase the noncompliant employer’s liability.
  • Use and abuse of social media in the workplace is also a growing concern for many employers.  Policies and practices for regulating employee social media communications, on and off the job, must be crafted and implemented with knowledge of the concerted activity provisions of the National Labor Relations Act.
  • The National Labor Relations Act (NLRA) is usually thought of in the context of labor-management relations where employees are unionized or organizing a union.  These preconceptions are true as far as they go, but the NLRA also protects employees (subject to exceptions for agricultural laborers, domestic servants, railway workers, and government employees) who engage in other concerted activities to improve pay and working conditions (Section 7 concerted activities).  If employees suffer adverse job action when they have acted in concert (two or more working together to improve working conditions) they may file an unfair labor practice charge with the National Labor Relations Board.  The NLRA may also protect the employee who posts (and those who “like”) comments on social media about working conditions.  Forewarned is forearmed, an up-to-date social media policy that complies with the latest NLRA authorities is advisable.
  • Similarly, employers are rightly concerned about employee use of the employer’s own information technology systems, such as computers, email, and smartphones, which are an integral part of doing business in the 21st century.  Employee abuse of these systems can be a waste of company time, resources, and worse. Companies, large and small, must know the legal methods available to minimize these risks.
  • Although the culture is awash in tweets, twitters, and texting, employees can be exquisitely sensitive to incursions on their privacy rights, both real and perceived.  Better to know in advance what the law limits and what it actually allows an employer to monitor, record, or punish.   
  • Additional employment-related laws, executive orders and regulations apply to federal contractors.  These laws are significant and add multiple obligations on the employer who contracts or subcontracts to do work on federal projects.
  • Most of the EEO laws which are listed below do apply in public as well as in private employment.  There are additional laws that apply only in public employment, such as the State Personnel Act, which includes the whistle-blower protection for employees who engage in oppositional behavior to public employer misconduct.  Another example is the Federal Bankruptcy Act, which adds protection from discrimination to applicants for public employment who have filed for federal bankruptcy (only incumbent employees in the private sector receive this protection).

Whether you employ one or one thousand, these points will need to be addressed.  Sooner is better than later as the “stitch in time” adage holds true from top to bottom.  What follows in our “Labor and Employment Law Scorecard” is a synopsis of the laws and other regulations that apply sequentially as the roll of employees grows from one to one hundred and beyond. 

Beginning with the very first employee you hire, the following laws will apply:

Section 1981, Civil Rights Act of 1866Race discrimination is strictly prohibited at work.
Consumer Credit Protection Act of 1968 (CCPA)Protects employees whose wages have been garnished. 
Employee Polygraph Protection Act (1988)Not a prohibition but Draconian regulation on the use of lie detector tests in the workplace.
Employee Retirement Income Security Act (ERISA) (1974)Sets standards for voluntarily established pension and employee welfare benefit plans.  It also provides fiduciary responsibilities for those who manage and control plan assets and gives the right to sue for benefits and breach of fiduciary duty.  Requires plans to provide participants with information about plan features and funding.
Equal Pay Act of 1963 (EPA)Wage discrimination on the basis of sex is prohibited. Equal pay for comparable work is the watchword.
Fair Credit Reporting Act (FCRA) (1970)Regulates employers who hire outside agencies to collect background information on prospective and current employees.  Creates specific notice, disclosure, and consent requirements when obtaining information and taking adverse action based on the information collected.
Fair and Accurate Credit Transactions Act (FACTA)“Disposal Rule” requires employers to carefully dispose of employee consumer credit information to prevent identity theft.
Fair Labor Standards Act (FLSA or Wage and Hour Law) (1938)Sets the minimum wage and overtime rates (1.5 times regular rate for hours worked in excess of 40 per week for non-exempt employees).
Federal Insurance Contributions Act (FICA) (1935)  Requires collection of taxes from both employers and employees to fund the Social Security and Medicare programs.
Health Insurance Portability and Accountability Act of 1996 (HIPAA)  Protects individuals’ health records.  Limits the use and release of health records.  Safeguards the privacy of health information.
Immigration Reform and Control Act of 1986 (IRCA)Prohibits hiring unauthorized workers. Requires employers to verify every employee’s identity and legal entitlement to work in the U.S.
Occupational Safety and Health Act (OSHA) (1970)Regulates workplace safety and health practices, including ensuring that work environments are free of recognized health hazards; also requires reporting to OSHA in the event of employee fatality or hospitalization of three or more employees.
Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)Prohibits discrimination against employees who return to civilian employment after serving in uniformed services.
Federal Bankruptcy ActProtects incumbent employees of private employers from discrimination related to filing for bankruptcy.
N.C. Gen. Stat. § 9-32Prohibits discharge or demotion of any employee called for jury duty.
N.C. Gen. Stat. § 14-45.1Physician, nurse, or other health care provider may refuse to participate in an abortion on ethical or moral grounds with impunity.
N.C. Gen. Stat. § 58-53-1, et seq.; Group Health Insurance Continuation and Conversion PrivilegesProvides continuation of group health insurance coverage (hospital, surgical, or major medical) to employees for 18 months after termination of employment or loss of plan eligibility.
N.C. Gen. Stat. § 75-4; Sandhills Home Care, LLC, v. Companion Home Care-Unimed, Inc., 2016 NCBC 59 (2016)  Regulates noncompetition covenants.  They must be in writing, signed by the employee, supported by valuable consideration, reasonable both as to time and territory, and not against public policy.
N.C. Gen. State. §§ 75-60, et seq.; Identity Theft Protection ActNorth Carolina employers are required to implement security measures regarding access to and disposal of employee personal identifying information.
N.C. Gen. Stat. § 95-25.1, et seq., North Carolina Wage and Hour ActRegulates employee pay, including minimum wages, overtime, wage payment, payments of promised wages and benefits (such as vacation, holiday, and sick pay), and youth employment. Generally, employers not subject to the federal Fair Labor Standards Act must comply with this Act’s minimum wage and overtime provisions.
N.C. Gen. Stat. § 95-28.1Protects employees from termination for possessing the sickle cell trait.
N.C. Gen. Stat § 95-28.1AProtects employees from discrimination based on genetic information.
N.C. Gen. Stat. § 95-28.3, Leave for Parental Involvement in SchoolsA parent or guardian is allowed to take up to four hours of protected unpaid leave per year to be involved in the child’s school.
N.C. Gen. Stat. §§ 95-80 & 95-81Protects employees and applicants from discrimination on the basis of membership or non-membership in a union.
N.C. Gen. Stat. § 95-230, et seq., North Carolina Controlled Substance Examination Regulation Act (CSERA)Regulates drug testing.  Both applicants and employees are protected.  Settings and conditions of where the test takes place, appropriate chain of custody, and employee’s rights to retest in case of a positive sample.
N.C. Gen. Stat. § 95-240, et seq., Retaliatory Employment Discrimination Act (REDA)Prohibits employment discrimination against any person who makes a workers’ compensation claim or wage and hour complaint, inter alia.  Enforced by the Commissioner of Labor and private action.
N.C. Gen. Stat. § 96-1, et seq., Employment Security Law.Administration of unemployment benefits. Protection of employees from retaliation for testifying at unemployment hearings.
N.C. Gen. Stat. § 110-90.2Requires that a criminal history record check be conducted on all persons who provide childcare in a licensed childcare facility and all persons providing childcare in non-licensed childcare homes that receive state or federal funds.
N.C. Gen. Stat. § 110-136.8 (e)Protects employees whose wages have been garnished.
N.C. Gen. Stat. § 127A-202.1Protects qualified employees upon honorable release from N.C. National Guard.
N.C. Gen. Stat. § 163-41.2No employer may discharge or demote an employee because the employee has been appointed to serve as a precinct official or is serving as a precinct official.
N.C. Gen. Stat. § 163-274 (a)(6)Makes it a crime to terminate or threaten to terminate employment of any legally qualified voter on account of a vote cast, vote that may be cast, or vote not cast.

Thresholds of 3, 4, “more than 10” employees

Threshold (No. of employees) Synopsis
3N.C. Workers’ Compensation Act, N.C. Gen. Stat. § 97-1, et seq.Provides benefits for employees who sustain certain workplace injuries and occupational disease.
3N.C.  Lawful Use of Lawful Products, N.C. Gen. Stat. § 95-28.2Prohibits discrimination against employees who make lawful use of lawful products on their own time (e.g. cigarette use).
4Immigration Reform and Control Act (IRCA)Prohibits discrimination on the basis of citizenship and national origin.
11Occupational Safety and Health Act (OSHA) (injury and illness records)    Reporting is mandated for death; and for illness or an injury that involves (1) medical treatment, (2) loss of consciousness, (3) restriction on work or motion, (4) transfer to a different position, or (5) assault by a family member or ex-spouse, subject to exceptions for specific low hazard industries in the retail, finance, insurance, real estate, and service sectors.

Thresholds beginning with 15 or more employees

Threshold (No. of employees)Applicable Law
15Title Vll (race, color, sex, religion, national origin); ADA (disability); GINA (genetic information); Pregnancy Discrimination Act; N.C. Equal Employment Practices Act or EEPA (NC version of Title VII, ADA, ADEA); N.C. Persons with Disabilities Protection Act
20Age Discrimination in Employment Act (ADEA)(protects employees over the age of 40) COBRA   OSHA requirement for employers of between 20 and 249 employees in designated hazardous industries to electronically submit summaries of injury data
25All government agencies and private employers with more than 25 employees are required to use the federal E-Verify system to ensure that their employees are legally authorized to work in the United States.
50Affordable Care Act   Family and Medical Leave Act (FMLA)
51Mental Health Parity Act of 1996 Mental Health and Addiction Equity Act of 2008
100WARN Act EEO-I Report (annual) for organizations that are not federal contractors
250OSHA reporting requirement for electronic submission of information about workplace injuries and illnesses