Although widespread vaccination and high levels of immunity have lessened the impact of COVID-19 on the workplace, employers continue to face issues related to the COVID-19 pandemic. The latest Centers for Disease Control and Prevention (CDC) guidance, released on August 11, 2022, tasks individual employees with conducting risk assessments for themselves (and their families) to prevent severe illness and death. With the emergence of less severe (but arguably more contagious) variants, the focus has turned to learning to live with COVID-19.

Priorities for living with COVID-19 focus on “preventing medically significant illness”. To do so, the CDC recommends that employees:

• conduct a personalized risk assessment, including risks of exposure and risk for developing severe illness;
• protect themselves (and others) through vaccines and other methods as needed;
• test and wear a mask after exposure;
• isolate for at least five days if infected; and
• wear a mask in public if infected for at least ten days.

These recommendations apply to all employees, regardless of vaccination status. That said, high-risk employees or employees who experience moderate or severe illness due to COVID-19 should isolate for at least ten days or consult a healthcare professional before returning to work.

The CDC also recommends that someone who has ended isolation should avoid being around anyone who is at high risk for COVID-19 until at least day 11. Quarantining upon exposure is not currently recommended regardless of vaccination status, although employers should check the ever-changing CDC and local guidance should cases surge. Despite these relaxed recommendations, the CDC emphasizes that mitigation and preparedness plans are needed for long-term practices to live with COVID-19 and minimize workplace disruptions. The CDC has indicated that it will release further updated guidance on travel and specific workplace environments soon.

The Equal Employment Opportunity Commission (EEOC) also released new guidelines in July 2022 regarding workplace testing under the Americans with Disabilties Act (ADA). Significantly, the EEOC will no longer assume that COVID-19 testing is job-related and a business necessity. Instead, employers must utilize individualized assessments to determine whether employee testing is justified, which marks a return to pre-pandemic guidance on testing.

Individualized assessments by employers must consider, inter alia, the following workplace and community factors:

• community transmission rates;
• vaccination data;
• variant data;
• testing speed and accuracy;
• types of interactions between employees (for example, whether high-risk employees are involved); and
• the potential impact that an outbreak would have on workplace operations.

General workplace screening for COVID-19 is still permissible, but only if the employees are working in-person, on-site with other employees.

Despite these relaxed guidelines, employers should be diligent to prevent severe illness and death. Policies and procedures that reflect state and federal guidelines will likely mitigate the risks that persist with COVID-19 in the workplace.

In addition to the continuing impact of COVID-19 on the workplace, social justice movements such as “Black Lives Matter” and “Me Too” have recently accelerated diversity, equity and inclusion (DEI) initiatives in organizations nationwide. Increased trainings, including unconscious bias training, diverse recruitment pools and other employee-engagement measures are a few examples of DEI workplace initiatives aimed at addressing some of the fundamental issues raised by “Black Lives Matter” and the “Me Too” movements. 

During the past five years, DEI job listings have increased 71%, according to a special report by the American Psychological Association’s publication Monitor on Psychology. 

After the US Supreme Court overturned Roe v Wade in June 2022, some of the largest North Carolina-based employers have publicly announced that they will cover travel expenses for employees seeking abortions in states where they are outlawed. Many open questions remain surrounding the legality and scope of these policies, such as how to keep employees’ personal health information protected and whether such policies constitute an employer aiding and abetting breach of a state law. The legal contours of employer abortion-related paid travel policies – whether funded through health insurance or other sources – will likely be refined by the courts.

The gig economy, especially through the COVID-19 pandemic, has transformed people's lives – from ridesharing services such as Lyft and Uber to grocery and food deliveries from Instacart, DoorDash or Amazon Prime. The gig economy is also transforming the traditional workforce by offering flexibility and autonomy in the place of more traditional jobs. Within the framework of the gig economy, individuals seek work on their terms. Employers hire based on their immediate needs, instead of for long-term planning. The model can offer numerous benefits to employers, particularly in reducing costs and filling talent gaps.

Although the gig economy may sound like an ideal solution for some of the staffing shortages currently plaguing North Carolina, employers should consider how to classify gig workers. Are these workers “employees” or are they “independent contractors”? If employers classify gig workers as “employees” then there are costs associated with that decision, including taxes and benefits. But if employers classify gig workers incorrectly as “independent contractors” then employers could be faced with costly litigation under the Federal Labor Standards Act (FLSA) and the North Carolina Wage and Hour Act.

Notably, in June 2022, the Department of Labor announced their intention to promulgate new guidelines to help employers determine how to correctly classify their workers. While those have yet to be released, employers should be on the lookout for new guidance. Under the current guidance, classifying gig workers correctly will depend on numerous factors, including:

• the degree of control exerted by the employer;
• the permanency of the relationship;
• use of facilities or equipment;
• the alleged contractor’s opportunities for profit and loss;
• the amount of skill, initiative, judgment and foresight in open market competition with others required for the success of the claimed contractor; and
• the extent to which the service rendered by the alleged contractor is an integral part of the employer’s business.

During the pandemic, the number of employees working remotely skyrocketed. That trend has largely continued throughout 2021 and 2022. As employers continue to face the challenges of a largely remote workforce, they should pay special attention to employee engagement, and how employers can continue to promote their culture, policies and procedures within a largely remote workforce.

As employers begin to shift their workforce back to the office, employers should be cognizant of the challenges some employees will face returning to the office. Employers should be prepared for an increase in requests for accommodations, and how the return to the office will also impact employee engagement and satisfaction.

Union membership in the USA peaked between 1945 and 1955 when 33% of the labor force was organized. Today, the percentage of wage and salary employees who are members of a union is only 10.3%. Out of this pool, slightly more than half of all union members work in the public sector. The percentage of union members employed in the public sector has slightly increased during recent years while the percentage of union members employed in the private sector has slightly decreased.

North Carolina’s workforce reflects relatively low rates of union membership. North Carolina is one of eight states where union members represent less than 4.9% of the available workforce. However, North Carolina is the target of increased union-organizing activity, with recent successful organizing efforts in healthcare and ongoing efforts in retail.

North Carolina does not permit traditional collective bargaining in its public sector. Although state or local employees are free to join private associations, North Carolina law does not allow these associations to negotiate their members’ wages, hours and working conditions.

North Carolina is one of 27 states that has enacted a “Right to Work” (RTW) Law. Under North Carolina’s RTW Law, employees cannot be forced to join a union or pay dues as a condition of employment.

RTW laws do not apply to employers who are covered by the Railway Labor Act (RLA). In general, the RLA only applies to airline or railroad employers. Because of a series of decisions by the US Supreme Court, under the RLA, employers and unions can only require employees to pay their pro rata share of the union’s actual collective bargaining costs incurred in collective bargaining. Employees covered by the RLA cannot be compelled to pay for activities of the union that are unrelated to collective bargaining, such as expenditures for political activities.

Throughout the past several administrations, the National Labor Relations Board (NLRB) has shifted from pro-worker to pro-business – and back again. The reconstituted NLRB under the Trump administration reversed policy decisions by the prior Obama NLRB that endorsed union-organizing and broad protection of workers’ rights. On the issues of joint employer status and micro-units, the Trump NLRB reversed certain Obama-era rules, while setting new standards for analyzing employee handbooks and policies. The Trump NLRB made it easier for an employer to withstand union-organizing, in accordance with the Trump administration’s general policy of reducing restrictions on business.

However, the Biden administration reversed these practices. The Biden administration has undertaken efforts to further workers’ rights and unionization efforts. Recently, the NLRB General Counsel published a memorandum arguing that a 75-year NLRB precedent finding “captive audience” meetings in which employers urge employees to reject unionization efforts is incorrect and urging the NLRB to hold such meetings to violate employees’ rights under Section 7 of the National Labor Relations Act (NLRA) (NLRB CG Memorandum 22-04). The NLRB also recently signed a memorandum of understanding with the Department of Justice’s Antitrust Division to promote coordination of the agencies to protect workers from “conduct designed to evade legal obligation and accountability (such as misclassifying employees or fissuring workplaces); interference with the rights of workers to obtain fair market compensation and collectively bargain (through labor market concentration/labor monopsony or other anticompetitive practices); and the imposition of restrictive agreements or workplace rules, such as noncompete, nonsolicitation and nondisclosure provisions”. It remains to be seen how this cooperation will manifest, but it is clear that the Biden NLRB is more aggressively focused on pro-worker policymaking and unionization efforts.

On the heels of COVID-19, employee turnover rates reached record highs according to the Bureau of Labor Statistics, with many departures likely caused by an increasing demand for new jobs along with shifted priorities triggered in part by remote work flexibility offered to many employees during the pandemic. This high turnover rate, commonly referred to as “The Great Resignation”, represents employees' increasing tendency to quit their current jobs.

The quit rate ‒ ie, the percentage of workers who quit their job – shows that North Carolina is one of the states most affected by the Great Resignation. North Carolina’s quit rate was just over 3.3% in the past year, ranking in the top quarter of states for quit rates during the same period.

Employees are more likely to leave a current job for one with better compensation, benefits, remote or hybrid work options, or work–life balance. One result of this enhanced employee mobility is employers increasing wages across the country.

Once employees have decided to leave and begin applying for other jobs, an employer’s chance of keeping them significantly decreases. Employers therefore should be thoughtful and creative in efforts to retain and recruit top talent. In addition to addressing employee concerns, employers are encouraged to present realistic job descriptions to recruit new hires and to conduct “stay interviews” to discover how employers can adjust to avoid employee turnover. Employers are bolstering their onboarding, mentorship, and advancement opportunities so employees feel rooted in the company and are less likely to look elsewhere for employment.

One of the most important aspects of the relationship between a business and its workers is defining the terms and conditions of that relationship. Workers can be classified either as employees or independent contractors. Under the FLSA and North Carolina Wage and Hour Act, the following factors are analyzed to determine whether a worker is properly characterized as an independent contractor or employee:

• the extent to which the services rendered are an integral part of the principal's business;
• the permanency of the relationship;
• the amount of the alleged contractor's investment in facilities and equipment;
• the nature and degree of control by the principal;
• the alleged contractor's opportunities for profit and loss;
• the amount of initiative, judgment or foresight in open market competition with others required for the success of the claimed independent contractor; and
• the degree of independent business organization and operation.

Joint employment – ie, whether two or more businesses are deemed to be employers of the same employee – is another important component of the relationship. In the past year, the Biden administration withdrew a Trump-era rule that narrowed the test for joint employment, continuing this administration’s pro-worker policies. In the Fourth Circuit, the test for determining a joint employment relationship under the FLSA comprises the following factors.

• Whether, formally or as a matter of practice, the putative joint employers jointly determine, share or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means.
• Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to – directly or indirectly – hire or fire the worker or modify the terms or conditions of the worker's employment.
• The degree of permanency and duration of the relationship between the putative joint employers.
• Whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer.
• Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another.
• Whether, formally or as a matter of practice, the putative joint employers jointly determine, share or allocate responsibility over functions ordinarily carried out by an employer, such as;
1. handling payroll;
2. providing workers' compensation insurance;
3. paying payroll taxes; or
4. providing the facilities, equipment, tools or materials necessary to complete the work.

Salinas v Commercial Interiors, Inc, 848 F.3d 125, 133 (4th Cir 2017). North Carolina courts continued to apply this test in the face of the Trump-era rule narrowing the joint employment test and should continue to do so now that the Biden administration repealed the Trump-era rule. See Elsayed v Fam Fare LLC, No. 1:18-CV-1045, 2020 WL 4586788, at *3 (MDNC August 10, 2020).

Finally, absent an employment contract to the contrary, workers in North Carolina are presumed “at-will”. However, workers may be employed for a specified period of time if set forth in an employment contract, which may limit the employer’s ability to terminate that employee at will.

After the 9/11 terrorist attack on the World Trade Center in New York City on September 11, 2001, the federal structure, laws and regulations for complying with the US federal immigration system started a rapid evolution by creating new agencies, consolidating others and establishing concurrent and exclusive jurisdiction for the regulation of:

• employment-based and family-based nonimmigrant and immigrant visa classifications;
• issuance of a visa at US Consulates; and
• admission of visa holders or applicants under visa waivers presenting an application for admission at the US border.

US immigration law is established by US federal statutes and administered though US federal regulations. These statutes are preemptive and displace all state laws on the subject matter. States are allowed to supplement but not contradict federal law in this field. Often states enact immigration laws that focus on employment verification, personal identification, and entitlement to public benefits that are traditionally regulated at state level.

Occasionally, the federal and state laws clash and the state law invariably is preempted from legislating in areas where federal law is clearly supreme as a matter of statutory and constitutional law.

From Petition to Admission

Immigrant versus nonimmigrant intent and admission documents

All non-US citizens applying for admission at the US border are presumed to have permanent resident intent to stay in the USA upon admission. If the applicant has not been granted permanent residency status in the USA, such person is obligated to prove by written evidence that the purpose of entry is temporary and they will depart the USA on or before the departure date assigned at time of admission. The purpose and period of admission is assigned at time of admission and may be further documented by the issuance and placement of a visa stamp with an expiry date in the passport of the applicant.

Admission based on nonimmigrant intent may be pursuant to a visa waiver or a nonimmigrant visa. In either case, the admission for a term of stay is conditioned upon the applicant’s proof of intent to remain in the country for the period of authorized stay. This term is electronically controlled and monitored after the applicant crosses the US border. Upon admission, the applicant is granted a term of stay before the end of which the applicant must depart the USA to comply with the terms of admission. Failure to depart on time becomes a violation of the terms of admission and will have repercussions for the applicant – whether in the short or long term – upon future applications filed with the US immigration agencies.

The nonimmigrant visa classification of admission sets the scope of authorized activities during the period of presence in the USA. Activities performed outside the scope of the visa classification is a violation that can have serious repercussions for the applicant and any employer participating in the violation.

Nonimmigrant visa classifications, visa issuance and visa appointments

All visas and documentation of a visa waiver are issued from outside the USA through the US Consulate of the country where the applicant is authorized to make application. Further, only a US Consulate may issue a visa; authorization depends upon a personal interview and Federal Bureau of Investigation and Interpol clearances of a background check on the applicant.

Visa appointments are difficult to get because of consulate staffing and budgeting. COVID-19 created long backlogs at many consulates. Consequently, the State Department is considering allowing certain visas to be obtained in the USA, as was authorized 20 years ago. Many applicants seeking a visa interview try to qualify for “emergent” or “exceptional circumstances” for an expedited appointment. The criteria for qualification for an emergent interview can vary depending on the country of origin's COVID-19 conditions, local consular staffing and other similar conditions.

Approval authority for issuance of the visitor visa (B) and the trader/investor visa (E) rests solely at the discretion of a US Consulate and depends on the reciprocal conditions documented by agreement or treaty between the USA and host country. Issuance of a visa by the State Department does not assure admission at the US border by the US Customs and Border Protection agency, which can verify the conditions of issuance or use.

Practical advice on seeking an adviser regarding immigration benefit under US law

North Carolina employers sponsoring visa applicants should consider:

• picking an immigration adviser with a verifiable reputation of success and integrity who is licensed or accredited with years of experience in the US immigration system;
• studying the type of benefit sought and options available for the particular case in selecting a US adviser; and
• performing due diligence on the US immigration history of the beneficiary to avoid being implicated in a false presentation to a US government official, since illegal acts or omissions in an application for an immigration benefit is a federal crime.

Nonimmigrant visa classifications for business

VWP/ESTA:

• classification – visa waiver;
• maximum term of stay per visit – 90 days;
• term of stay per visit – 90 days;
• issuer – US Customs and Border Protection; and
• comment – online application, granted at US border and use of ESTA/VWP more than three times in one year will draw border scrutiny and possible disqualification.

B-2:

• classification – visitor/tourist;
• maximum term – ten years;
• term of stay per visit – six months;
• issuer – US Consulate; and
• comment – requires consular interview.

E-1:

• classification – treaty trader;
• maximum term – five years and renewable in five-year terms;
• term of stay per visit – two years;
• issuer – US Consulate; and
• comment – renewable for as long as criteria met.

E-2:

• classification – treaty investor;
• maximum term – five years and renewable in five-year terms;
• term of stay per visit – two years;
• issuer – US Consulate; and
• comment – renewable for as long as criteria met.

E-3: Specialty Occupation

• same criteria as H-1B Australian nationals

F-1:       

• classification – student;
• maximum term – duration of status;
• term of stay per visit – duration of status;
• issuer – US Consulate; and
• comment – renewable for as long as criteria met and may be coupled with part-time work authority.

H-1B:

• classification – temporary worker;
• maximum term – six years;
• term of stay per visit – two years;
• issuer – US Citizenship and Immigration Services (USCIS); and
• comment – specialty occupation, controlled by lottery.

J-1:

• classification – intern/student;
• maximum term – 12–18 months;
• term of stay per visit – based on subcategory;
• issuer – J-1 sponsoring agency; and
• comment – depends on subcategory and US sponsor.

L-1A:       

• classification – multinational manager/executive;
• maximum term – seven years;
• term of stay – two years unless a new office, in which case one year;
• issuer – USCIS; and
• comment – multinational transfer between related entities.

L-1B:

• classification – multinational “specialized knowledge”;
• maximum term – five years;
• term of stay per visit – two years;
• issuer – USCIS; and
• comment – multinational transfer between related entities.

O-1:

• classification – extraordinary ability;
• maximum term – three years;
• term of stay per visit – varies, one to three years;
• issuer – USCIS; and
• comment – evidence-intensive.

TN (Treaty NAFTA):

• classification – Canadian and Mexican citizens in a professional or licensed occupation as listed on Treaty Annex;
• maximum term – three years;
• comment – Mexican nationals require consular interview but Canadians may apply at the US border.

Employers often set the predicate for union-organizing campaigns when their managers fail to maintain positive and professional relationships with their workforce. This includes situations where managers lack awareness of issues that are important to their employees besides wages, hours and working conditions. Consider the following example of how an employer can unknowingly prompt a union-organizing campaign even when its managers act with good intentions.

Case Study

A large, successful company, with a long history of positive relationships with its employees, operated a major facility in a rural area. A highly successful, progressive, and well-intentioned plant manager was transferred from a more urban facility to the rural facility. In reviewing the holidays recognized in the past, the manager decided to reward employees with a new vacation day, but in doing so, the manager cancelled the opening day of deer season as a recognized holiday.

Shortly thereafter, the employer received notice from the NLRB that a majority of its employees had indicated their support for a union and that an election would be scheduled for the employees to vote on whether they now wished to be represented by a union. Fortunately, from the company’s perspective, the opening day of deer season was quickly restored as a holiday and the company barely won the subsequent election, with a bare majority of the employees voting against union representation.

The moral of this story is simple. To minimize the possibility of employees seeking union representation, employers must ensure that their employees believe that they are treated with respect and dignity and that the company understands what is important to them. This can be accomplished only when an employer vigilantly maintains open lines of communication between its managers and the rank-and-file employees.

The types of questions that may be asked of prospective employees is governed by federal discrimination laws (Title VII, ADA, Age Discrimination in Employment Act (ADEA), etc), along with their North Carolina counterparts. 

First, any inquiry about an individual’s membership in a protected class is prohibited by both federal and North Carolina antidiscrimination laws. Protected classes under federal law include race, color, 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. Under state law, it is also unlawful to refuse to hire an applicant because of their use of legal tobacco products away from the workplace.

North Carolina law permits an employer to require job applicants to take a pre-employment drug test, but requires certain notices be provided to an applicant regarding their rights and that drug tests be performed by laboratories certified by the State of North Carolina. 

Finally, any employer who intends to make inquiries into a job applicant’s credit history must abide by the federal Fair Credit Reporting Act, which contains requirements concerning obtaining written consent and providing a variety of written disclosures to applicants. These disclosures include forms that must be provided to an applicant before and after taking adverse action, such as not hiring an applicant based on information contained in a credit report.

Employers have increasing access to tools that use AI – the use of algorithms to make decisions or solve problems – to automate tedious hiring tasks like identifying candidates and resume screening. AI can be an incredible business tool because, unlike humans, computers don’t tire and can sort through countless data points and instantly offer a solution. But AI tools in employment can be flawed in at least two major ways:

• skewed data; and
• unintentional bias coded into algorithms.

One infamous example occurred in 2014, when tech giant Amazon “taught” a computer system to trawl through submitted resumes and identify job candidates worth pursuing by recognizing certain high-value words. However, because the project was based on past resumes that had been submitted to the company, which was situated in a notoriously male-dominated industry, the algorithm learned to undervalue female candidates. It disfavored applicants from all-women’s colleges and undervalued resumes that included the word “women’s” (eg, “women’s lacrosse team”). Although Amazon officials say the algorithm was never used in the hiring process, the system’s inherent bias exemplifies the risk employers might face when relying on AI to choose candidates.

Additional complications arise when biased algorithms are used in the employee hiring process. Title VII’s antidiscrimination provisions apply to all hiring decisions – even those made with the help of AI. 

The Federal Trade Commission (FTC) has also turned its attention to the use of AI in businesses, naming “bias in algorithms and biometrics” as a key focal point this decade. Authorization for the FTC’s movements in this area stems from 15 US Code § 45, which charges the FTC with preventing “unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce”. Although the rule is broad, an FTC blog suggests that the statute’s prohibition on “unfair or deceptive” business moves would include “the sale of or use of… racially biased algorithms”. Notably, the advisory notice suggests that businesses using AI for hiring could be held liable for algorithmic bias as manifested in their hiring patterns – regardless of whether the business developed the algorithm or simply acquired it from a third party.

Restrictive covenants such as noncompete and nonsolicitation agreements are generally disfavored in North Carolina. Courts will, however, enforce reasonable restrictions that are tailored to a legitimate business interest.

To be enforceable, North Carolina 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 noncompete 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 six factors when determining whether a noncompete or nonsolicitation agreement is reasonable as to time and territory:

• the geographic area of the restriction;
• the area where the employee was assigned to work;
• the area in which the employee actually worked;
• 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 noncompete must be tied to the work performed for the employer. Courts have refused to enforce noncompetes 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, noncompetes 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.

Confidential Information

Nondisclosure or confidentiality agreements are not subject to the same restrictions in North Carolina as other restrictive covenants. Unlike noncompete and nonsolicitation agreements, confidentiality agreements can be unlimited as to time and territory. Employers should be cautious when attempting to use confidentiality agreements in manners similar to noncompete agreements. North Carolina courts have deemed some agreements that were styled as “confidentiality agreements” to be noncompetes in disguise and scrutinized them under the restrictive covenant doctrines described in the preceding section.

Trade Secrets

An employers’ trade secrets qualify as a category of confidential information. North Carolina has adopted the Uniform Trade Secrets Act (see NCGS § 66-152, et seq). Business or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique or process are protectable as trade secrets, as long as that information is commercially valuable as a result of:

• “not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use”; and
• the owner of the information makes “efforts that are reasonable under the circumstances to maintain its secrecy”.

To prevail on a claim for misappropriation of trade secrets, the owner of the trade secret must prove the person accused of misappropriation:

• knew or should have known of the trade secret;
• had a specific opportunity to acquire it for disclosure or use; or
• has acquired, disclosed or used it without the express or implied consent or authority of the owner.

Employee Privacy

There are no state statutes specifically governing employee privacy. North Carolina is a “one-party consent” state, meaning that if one party consents to a communication being recorded, or if there is not a reasonable expectation of privacy in the communication, the communication may be lawfully recorded.

North Carolina law codifies protections for employees against workplace discrimination. The North Carolina Equal Employment Practices Act (NCEEPA) prohibits employers from discrimination against current or prospective employees based on race, religion, color, national origin, sex or handicap (disability). (See NCGS § 143-422.1, et seq.) The NCEEPA applies to employers with 15 or more employees and provides the same protections to employees as federal law under Title VII of the Civil Rights Act of 1964.

The NCEEPA does not create a private right of action. Nonetheless, an employee can bring a common law claim for wrongful discharge based on violation of the public policy expressed in the Act. Importantly, North Carolina’s courts limit the expansion of common law to unlawful discharge claims and the public policy expressed in the NCEEPA. Thus, although Title VII has been interpreted to include discrimination based on sexual orientation (see the US Supreme Court’s landmark Bostock v Clayton County decision) or pregnancy, to date no state court has similarly interpreted the NCEEPA.

North Carolina law also codifies specific protections for individuals with disabilities. The North Carolina Persons with Disabilities Protections Act (NCPDPA) prohibits discrimination based on a “disabling condition”. However, employers may invite an applicant to identify himself or herself as a person with a disability “in order to affirmatively act on his behalf”. Employers must provide reasonable accommodations to employees and applicants with disabilities once they are apprised of the need for an accommodation. (See NCGS § 168A-4.)

The NCPDPA also makes it unlawful for an employer to retaliate against an employee or any individual assisting the employee in asserting his or rights under the NCPDPA or opposing a discriminatory practice under the statute. (See NCGS § 168A-10.) The NCPDPA provides a private right of action to employees or applicants experiencing disability discrimination. (See NCGS § 168A-11.)

Recently, some North Carolina municipalities (Raleigh, Charlotte, Asheville, Greensboro and Chapel Hill, among others) have passed nondiscrimination ordinances that purport to apply to all employers, regardless of the number of employees. While it remains to be seen whether or how these new ordinances will be enforced, this is an important developing trend for employers to monitor.

Personnel Records

There is no North Carolina law strictly governing a private employer’s practices regarding personnel records, but employers should be aware of the state and federal laws concerning record retention for documents commonly found in personnel files.

A record retention policy of three years complies with most federal and North Carolina laws, with the following exceptions.

• Records pertaining to background checks should be retained for five years from the date of the check (15 US Code § 1681p).
• Employee tax records should be retained for four years from the date the tax is paid (26 CFR 31.6001-1(e)(2); 26 US Code § 3101-3128).
• Workers’ compensation records, medical exams required by law, and hazardous material responses should be kept through the duration of employment plus 30 years (29 CFR § 1910.1020).
• Occupational Safety and Health Administration (OSHA) forms should be retained for five years following the end of the calendar year that these records cover (29 CFR § 1904.44).
• Employee benefit plans subject to the Employee Retirement Income Security Act should be retained for six years from when the record was required to be disclosed (28 US Code § 1027).
• Federal procurement contract and related weekly payroll documents should be retained for four years after completion of the contract (48 CFR § 4.705-2).

In North Carolina, almost all safety and health regulations and standards are administered by the Commissioner of Labor, who is elected in a statewide election. The actual inspection and enforcement of the state OSHA is the responsibility of the Commissioner’s OSHA division.

Employers are required to comply with OSHA standards, as well as a catch-all provision known as the General Duty Clause (GDC). Standards include requirements for machine guarding, railings on elevated platforms, electrical requirements, hazard communication rules for hazardous chemicals, rules for the safe excavation for trenches, “lockout and tagout” rules applied to machine maintenance, rules related to working in confined spaces, maintaining a log of all work-related injuries and illnesses, and many other rules and requirements.

The GDC applies to hazards not covered by a standard. Employers are required to maintain conditions of employment that are free from “recognized hazards” that could or are likely to cause serious injury of death. Whether a hazard is ”recognized” can turn on whether the employer’s industry has recognized that the particular hazard exists. A classic example of where the GDC might apply includes issues such as hot workplaces and the need to take reasonable steps to protect employees from heat-related illnesses.

Citations for violations are characterized as non-serious, serious, repeat, or wilful. The maximum penalty for non-serious and serious violations is $7,000. The maximum penalty for repeat or wilful violations is $70,000. In cases involving workplace-related deaths or serious injuries, or in cases of egregious and wilful violations, North Carolina OSHA can also recommend criminal penalties in the form of a fine of $10,000 and up to six months in prison.

Employers are obligated to report to North Carolina OSHA any work-related death within eight hours. Hospitalizations must be reported within 24 hours. Employers can be assured that any serious workplace incident will be reported to North Carolina OSHA by some third party, such as a hospital or local fire departments or police. However, it is always better for the employer to report any OHSA-required hospitalizations or deaths prior to the third party, if possible.

Employee Handbook

Employee handbooks or manuals serve as a way for employers to establish:

• guidelines for conduct;
• workplace expectations and safety; and
• parameters for company culture, philosophy, values and mission.

To ensure that the provisions of an employee handbook are not construed to alter North Carolina’s presumption of at-will employment or give rise a breach of contract claim by an employee against their employer, a handbook or manual for North Carolina employees should contain a conspicuous and explicit disclaimer of contractual rights and a clear statement that the handbook or manual is not intended to alter the at-will default rule. The handbook should also state that the employer retains the right to amend the handbook in the future. However, these disclaims may not protect an employer if a handbook contains specific promises pertaining to healthcare, pensions or other similar benefits.

With the rise of specific local ordinances prohibiting workplace discrimination in North Carolina, this year may be a good time to review your employee handbooks to ensure compliance.

The COBRA Law

North Carolina supplements the federal Consolidated Omnibus Reconciliation Act of 1985 (COBRA) law with its own continuation laws in Article 53 of Chapter 58 of the North Carolina General Statutes. These continuation laws cover all employers in North Carolina regardless of size, and mirrors COBRA’s 18-month coverage period. They do not provide any options for extensions. 

Eligibility requires the departing employee to have been insured continuously under the group policy for the three consecutive months immediately preceding termination and does not extend to anyone who is or becomes eligible for another employer or governmental plan within 31 days of termination of employment. Employers are only required to continue hospital, surgical and major medical benefits, not plans for dental, vision, or prescription drug care. 

Employers must provide notice of these options to departing employees, but the employee is responsible for completing and submitting all required documentation provided by the employer.

The FMLA

North Carolina supplements the federal Family Medical Leave Act (FMLA) with two additional types of family-related leave not covered by the FMLA. First, NCGS § 95-270 prohibits adverse employment actions against employees who take reasonable time off from work to seek legal protection for themselves or a minor child who has been subject to domestic violence or other illegal harassment.

Second, NCGS § 95-28.3 requires employers to allow employees with a school-aged child to take four hours of leave annually to be involved with their child’s school. Employers may require 48 hours' notice and written verification from the school and withhold pay for time taken pursuant to the law.

Addressing Issues of Possible Termination, Including Noncompete Agreements and Vacation Pay/Leave

Employers should both determine and communicate the details of the employment relationship at its inception to better maintain control of the termination process. Key considerations in terminating the employment relationship include the nature of the employment relationship, the rationale for ending the employment relationship, whether the employee is bound by any restrictive covenants, whether the employee has possession or control of company property or information (including confidential information), and the potential for a resulting employment dispute or litigation.

Rationale and procedure for ending the employment relationship

Although the employer may not be required to tell the employee the reason that they are ending the relationship, the employer must ensure that the rationale does not violate federal or state law. The employer may not terminate someone due to their membership in a protected class or in retaliation for the exercise of certain rights, for example. In addition, North Carolina allows employees to maintain a claim for wrongful termination in violation of public policy, which can provide more expansive remedies than those available under federal law.

Possession or control of company property or information

Once the decision to end the employment relationship has been made, but prior to informing the employee of the decision, the employer needs to determine:

• whether the employee is subject to a restrictive covenant;
• what company property or information the employee may have in their possession;
• how to get the property or information from the employee; and
• how to prevent the employee from disseminating company information to third parties.

This could entail changing passwords or access to email or electronic documents shortly prior to the termination meeting, requiring all electronic devices to be brought to the meeting and turned over, or even asking for a forensic examination of certain electronic devices if there is already concern about improper sharing of information.

Potential for employment dispute or 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 a dispute, counsel should be consulted to review the evidence supporting a termination and to ensure that no relevant documents or communications are deleted.

Preventing Age Discrimination

Employers should be cognizant of certain protections for individuals over the age of 40 under federal and North Carolina law. The federal ADEA and the Older Workers Benefit Protection Act (OWBPA) prohibit discrimination based on age. (See 29 US Code § 621, et seq.)

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

Arbitration, Class Action and Mass Terminations

Employers should generally establish whether the termination of an employment relationship, or other employment disputes, will be handled through ADR at the outset of the employment relationship. This could include mandatory mediation prior to filing suit or, most commonly, provisions requiring the arbitration of employment claims. There is clear deference to arbitration in both North Carolina and federal courts. Notably, in North Carolina a mutual agreement by both the employer and the employee to submit claims to arbitration is sufficient consideration to enforce an arbitration agreement.

North Carolina has enacted the Uniform Arbitration Act. (See NCGS § 1-159, et seq.) These provisions give wide latitude to the parties to agree on an arbitrator and determine the best method of arbitration. Notably, an arbitrator may hear dispositive motions, and can only award punitive damages or other exemplary relief if the arbitration agreement itself provides for an award of such damages.

Employers may also want to consider the possibility of eliminating the threat of class action litigation through a well-drafted class action waiver. The US Supreme Court recently upheld the enforceability of class action waivers in relation to an employee arbitration agreement, signalling the continued viability of this option for employers moving forward; see Epic Sys v Lewis, 138 S Ct 1612 (2018). However, this past term, the US Supreme Court clarified that these class exemptions cannot apply to a class of workers involved in interstate commerce who would be exempt from the Federal Arbitration Act under Section 1 (Southwest Airlines Co v Saxon, No 21-309, 596 US ___(2022)).

In other areas, the US Supreme Court strengthened arbitration provisions when it unanimously held that lower courts could not condition a waiver of the right to arbitration on a showing of prejudice (Morgan v Sundance, Inc, No 21-328, 596 US ____(2022)). This opinion resolved a circuit split among federal circuit courts, whereby most circuits were considering prejudice to the other party when considering arguments regarding waiver of right to arbitrate.

With regard to plant closings or mass layoffs, employers should comply with the federal Worker Adjustment and Retraining Notification Act (WARN). Employers must provide 60 days’ written notice when there is either (i) a plant closing, or (ii) a mass layoff at a single site of employment impacting at least 50 employees and 33% of the workforce in a 30-day period. (See 29 US Code § 2101, et seq.) Notably the WARN Act only applies to employers with 100 or more employees.

Employers and employees are free to enter enforceable contracts setting a term of employment and restrictions on the employer’s right to terminate the relationship. Most employees in North Carolina do not have these types of contracts and are instead employed on an at-will basis, meaning the employer or the employee can end their employment relationship at any time, for any reason (other than unlawful discrimination) and without notice.

Despite the at-will element of North Carolina law, employers should always have a good, legitimate and nondiscriminatory reason before they terminate the employment of any employee. Egregious violations, such as overt sexual or racial harassment, assault or battery, threats of violence, the use of illegal drugs at the workplace, and other similar serious acts of misconduct can justify the immediate discharge of the offending employee. Terminations because of job performance should never be implemented unless the employee in question has received written notice of his job deficiencies and a reasonable opportunity to correct them.

Wrongful Discharge

In North Carolina, state courts have recognized a common law claim for wrongful termination in violation of public policy. The North Carolina Supreme Court first recognized this claim in a case involving a truck driver who alleged that he had been fired for refusing to violate regulations limiting the amount of time a driver can work during a specific time frame.

Employers should be mindful that a three-year statute of limitations applies to claims for wrongful discharge. Because a wrongful discharge claim may be brought within three years of an employee’s discharge, plaintiffs can sue an employer for discriminatory discharge under state law even where they failed to file a timely charge of discrimination with the EEOC or other applicable federal agency.

In North Carolina, the EEOC is responsible for enforcing federal antidiscrimination laws. Employers are prohibited from discriminating against an employee or potential hire because of race, color, religion, sex (including pregnancy, transgender status, and sexual orientation), national origin, age (40 or older), disability or genetic information. Most employers with at least 15 employees (20 employees in age discrimination cases) are covered by EEOC laws (the most common federal laws enforced per the EEOC website include Title VII, the ADA, the Genetic Information Nondiscrimination Act and the ADEA). The EEOC investigates charges of discrimination and aims to facilitate early resolution and settlement. Should the charge fail to settle through mediation, the EEOC will either issue a right-to-sue letter or take legal action on behalf of the complainant.

Additionally, the North Carolina Department of Labor’s Retaliatory Employment Discrimination Bureau is responsible for enforcing the 1992 Retaliatory Employment Discrimination Act (REDA). REDA was enacted to protect from retaliation employees who, in good faith, engage in one of the “protected activities” under the law. REDA protects an array of activities and areas, including workplace safety issues, wage and hour issues, mine safety and health, and areas applicable to genetic testing.

Collective Bargaining Agreements

Collective bargaining agreements (CBAs) are made between an employer and a union that has been recognized by the employer or certified by the NLRB as the exclusive bargaining agent for the employer’s employees within a specified bargaining unit. The employer has a duty to negotiate in good faith over wages, hours and working conditions. As explained above, in North Carolina a CBA cannot require an employee to either pay dues or become a union member for those employees who are covered by the NLRA.

Almost all North Carolina private employers are subject to coverage under the federal FLSA, which governs matters including:

• the payment of minimum wages;
• overtime pay requirements and the exemptions from those requirements;
• record-keeping requirements; and
• child labor standards.

The FLSA is enforced by the Department of Labor's Wage and Hour division.

North Carolina employers also are subject to the provisions of the North Carolina Wage and Hour Act, which governs, among other things:

• the time and manner of the payment of compensation to employees, including terminated employees;
• the written notices regarding wage payment policies that employers must provide;
• the deductions an employer may make from wages, and the contents of the written agreements required by employees to permit such deductions.

The North Carolina Wage and Hour Act is enforced by the North Carolina Commissioner of Labor, Wage and Hour Division. The North Carolina Wage and Hour Act provides for the recovery of unpaid wages, liquidated damages, and attorneys’ fees and costs to a plaintiff prevailing in a civil action.

The North Carolina Retaliatory Employment Discrimination Act (NCGS § 95-240, et seq) prohibits employers from discriminating or retaliating against an individual who has filed or threatened to file a claim under the Workers’ Compensation Act, the OSHA, the Wage and Hour Act, and certain other North Carolina statutes. 

The federal False Claims Act similarly provides protection against retaliation for employees who bring qui tam actions in federal court for alleged fraudulent or false claims for payment from the federal government.

A number of federal laws also provide whistle-blower protection for employees who report suspected violations of law, including OSHA, the Sarbanes-Oxley Act of 2002, the Clean Air Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the Securities and Exchange Commission’s whistle-blower program.

Employers should carefully investigate all claims of discrimination including allegations of sexual or other illegal harassment, including claims of racial harassment. If an employee is complaining about a manager or an individual in a position of power, that individual should be walled off from any internal investigation. Employers may consider hiring outside counsel to conduct interviews for particularly egregious or potentially widespread claims of hostile work environment or harassment.

If litigation ensues, there is mandatory mediation in North Carolina state and federal courts for employment disputes. Mediators in North Carolina need to complete the trainings required by the North Carolina Judicial Branch and apply for certification. Each federal district court in North Carolina also keeps a list of approved certified mediators for parties to choose from that are approved for that jurisdiction. If the parties do not agree on a mediator, one will be appointed by the court from the approved list.

Employees in North Carolina may pursue claims for discrimination, violation of the North Carolina Wage and Hour Act, and other employment-related claims on behalf of a class of similarly situated employees if such claim meets the requirements for maintaining a class action in Rule 23 of the North Carolina or federal Rules of Civil Procedure. They may also join in class actions brought by other employees.

The US Supreme Court has held that waivers of class arbitration of employment disputes do not violate federal labor law. Accordingly, an employer can obtain a waiver of an employee’s right to bring or join in a class action lawsuit in a properly constructed arbitration agreement with the employee obtained either at the inception of the employment relationship or in exchange for consideration during the employee’s employment.

Choice of Law and Forum Selection Clauses

North Carolina generally will enforce a choice of law provision contained in a written agreement entered between an employer and employee (eg, written employment contract, noncompete/nondisclosure agreement, severance agreement, etc) “as long as they had a reasonable basis for their choice and the law of the chosen state does not violate a fundamental public policy of the state or otherwise applicable law" (Sawyer v Mkt Am, Inc, 190 NC App 791, 794 (2008)). A forum selection clause that requires that all litigation be conducted in a state that has no connection to the terms of the employee’s employment likely will not be enforced.

Prevailing plaintiffs in discrimination cases are entitled to several elements of damages, including back pay (compensation for lost wages from the time of an employee’s unlawful termination or constructive discharge until the time of judgment), front pay (a prospective award of lost wages running from the time of judgment until a date in the future) and emotional distress damages. Punitive damages are also available in cases where the employer’s conduct is found to be outrageous due to an evil motive or reckless indifference to the rights of others. Prevailing discrimination plaintiffs are also entitled to awards of attorneys’ fees and, where applicable, costs.