Compliance Watch:
Penalties for Breaking North Carolina Labor Laws

April 11th 2024

In 2022, North Carolina ranked number 1 in CNBC’s Top States for Business. This was mainly due to the state’s Infrastructure, Cost of Doing Business, and, most importantly, its workforce. North Carolina takes protecting its workforce seriously. It has set comprehensive labor laws that govern areas such as minimum wage, overtime, discrimination, and workplace safety. And the penalties for breaking North Carolina labor laws can be costly.

In this article, we’ll highlight the key labor laws that every North Carolina employer needs to know and the penalties for breaking them. We will also share valuable tips to help you avoid labor law violations and foster a culture of compliance.

This Article Covers

Most Common Labor Law Violations in North Carolina
Penalties for Breaking North Carolina Labor Laws
How You Can Avoid Violating North Carolina Labor Laws

Most Common Labor Law Violations in North Carolina

In North Carolina, labor laws serve as a critical safeguard for workers, ensuring fair treatment, safe working conditions, and equitable compensation. However, labor law violations continue to occur despite the state’s commitment to protecting its workforce.

Here’s a look at violations that the state sees more commonly than others:

  • Failure to Pay Proper Wages: Not paying employees the minimum wage or overtime hours worked is a common mistake employers make. Based on the Economic Policy Institute analysis, a total of $316,000,000 earned annual wages weren’t paid to workers from 2013-2015. This is no pocket change and shows just how significant wage theft is in the state.
  • Employee Misclassification: Employers may misclassify workers as independent contractors instead of employees to avoid providing benefits and protections mandated by labor laws. According to the 2020 Annual Report from the North Carolina Industrial Commission, 5,129 employee misclassification reports/alerts were processed. These reports led to penalty assessments totaling over $6 million imposed on employers.
  • Sexual Harassment at Work: Sexual harassment remains a distressing issue in workplaces across the country, and North Carolina is no exception. In 2022, 243 sexual harassment charges were recorded by the US Equal Employment Opportunity Commission. This may not seem like a lot, but it’s actually still a lot more compared to other states. And let’s face it; one sexual harassment charge is already one too many!

Penalties for Breaking North Carolina Labor Laws

North Carolina Minimum Wage Laws

The current minimum wage in North Carolina is currently at $7.25 per hour. This puts it in line with the minimum wage set by federal law.

All employers in the state, including government entities, must pay their employees at least this amount. There are, however, some exceptions under the Fair Labor Standards Act, including the following:

  • Bona fide executives
  • Administrative workers learned and creative professionals earning at least $684 per week on a salary basis
  • Computer employees earning at least $684 per week or $27.63 per hour
  • Highly compensated employees earning $107,432 or more per year
  • Outside sales employees, minors, and tipped employees

On the other hand, tipped employees in the state are subject to a different minimum wage of $2.13 per hour. But this is only under the condition that their total earnings reach the federal minimum wage of $7.25. If their tips fall short, the employer is responsible for making up the difference.

Penalty for Violation

Suppose an employer violates the minimum wage, overtime, or wage payment provisions set by North Carolina. In that case, they are responsible for paying the affected employee or employees the unpaid wages, overtime, along with interest as determined by the court. In addition to this, the defendant can also be ordered to pay the costs, fees of the action, and reasonable attorney’s fees. 

FLSA Overtime Laws

North Carolina majorly follows the overtime regulations set by the Fair Labor Standards Act (FLSA), along with some local guidance.

According to FLSA, employees who work over 40 hours weekly are entitled to overtime pay, which is 1.5 times the regular rate. Some job categories, like executives, professionals, and administrative employees, may be exempt from overtime pay based on their job description and salary.

No laws limit work hours for individuals 18 and older, including daily, weekly, or consecutive days. Employers can adjust their employees’ hours regardless of the original schedule. An employer also has the authority to require employees to work overtime, and they can terminate an employee who refuses to do so.

Penalty for Violation

Employers in North Carolina who willfully or repeatedly break FLSA overtime pay requirements face potential in the form of civil monetary fines. This can amount to up to $1,000 for each violation.

North Carolina Equal Employment Practices Act (NCEEPA)

The NCEEPA is a law that aims to prevent employment discrimination in the state. This Act ensures equal employment opportunities for individuals and promotes fairness and inclusivity in the workplace. It’s important to note that this only applies to employers with a regular workforce of 15 or more employees. 

Under this Act, it is prohibited to discriminate against workers or applicants based on various factors, including race, color, religion, age, sex, and handicap. These protected characteristics are consistent with federal anti-discrimination laws, such as Title VII of the Civil Rights Act of 1964.

Employers covered by the NCEEPA must adhere to its provisions and take proactive measures to prevent and address discrimination in the workplace. This includes implementing policies that promote equal treatment, fair hiring processes, and a discrimination-free work environment.

Penalty for Violation

Employers guilty of discriminatory practices may face civil penalties, including fines and back pay awards to the affected employees. Additionally, employers may be required to implement corrective measures, such as providing training on equal employment practices.

Title VII of the Civil Rights Act of 1964 violations, on the other hand, have damage caps for emotional distress, out-of-pocket expenses, and punitive damages. The combined cap ranges from $50,000 to $300,000, based on the employer’s size. However, there are no caps for back pay, front pay, and attorneys’ fees and costs.

Workplace Safety Laws

North Carolina has its own safety plan approved by federal OSHA. The North Carolina Occupational Safety and Health (NCOSH) Division handles safety in most private sector jobs, while federal OSHA deals with anything not covered by the state plan.

Under OSHA General Industry standards, employers are responsible for the following:

  • Giving employees the necessary personal protective equipment (PPE), such as respirators, safety glasses, face shields, and flame-resistant clothing.
  • Providing safety training to prepare employees for workplace hazards, either internally or through third-party sources.
  • Keeping work areas clean, organized, and sanitary, including production floors, storage rooms, and walking surfaces.
  • Ensuring that walking-working surfaces can support the weight of workers, equipment, and machinery.
  • Keeping walking-working surfaces free of hazards like sharp objects, loose floorboards, chemical leaks, spills, snow, and ice.
  • Providing safe entry and exit points to walking-working areas.
  • Regularly inspecting and maintaining walking-working surfaces to ensure safety.
  • Providing easily accessible portable fire extinguishers for employees.

Besides following OSHA standards, the NCOSH division has its own rules for things like hazardous waste, emergency response, communication towers, power generation, steel construction, protective gear, explosives, radiation, and sanitation. The state plan also offers on-site advice and programs to reduce workplace injuries and deaths.

Penalty for Violation

NCGS §95-138 gives the Commissioner authority to propose civil penalties for violations of the safety regulations in the state. These civil penalties are as follows:

  • Serious violations: Up to $7,000, except when they involve injury to an employee under 18 years old, where the penalty can be up to $14,000.
  • Non-serious violations: Up to $7,000.
  • Willful or repeat violations: Up to $70,000.
  • Other specific violations: Up to $7,000.
  • Failure to correct violations: Up to $7,000.

Family and Medical Leave Act (FMLA)

FMLA is a federal law that allows eligible employees to take up to 12 weeks of unpaid leave for important family and medical reasons. This includes situations like having a baby, adopting a child, or caring for a family member with a serious health condition. The law also requires employers to continue providing health benefits during the leave and give employees their previous or similar positions when they return to work.

Penalty for Violation

The Wage and Hour Division is responsible for ensuring employers follow the FMLA rules. This applies to private, state, and local government employees, as well as some federal employees.

If there are violations and the issue can’t be resolved, the US Department of Labor can take the matter to court to make the employer comply. And if the court decides in favor of the person who made the complaint, the employer might have to allow them to take their FMLA leave and also pay them damages, which can include attorney fees and court costs.

North Carolina False Claims Act

The North Carolina False Claims Act lets whistleblowers file “qui tam” lawsuits if they have information about people or organizations intentionally making false or fraudulent claims to the state, taking state property without permission, or evading payment obligations to the state, among other violations. This law also safeguards whistleblowers from facing employment retaliation due to their whistleblowing.

Penalty for Violation

Employers who violate the North Carolina False Claims Act can be ordered to provide the following to the complainant:

  • Reinstatement to the same seniority level the whistleblower would have had if there had been no retaliation.
  • Back pay to amount double the whistleblower’s wages.
  • Interest on the back pay.
  • Compensation for any additional damages caused by the retaliation.
  • In successful cases of whistleblower retaliation, the defendant is responsible for paying the costs of the legal proceedings and the reasonable fees of the whistleblower’s attorneys.

Recordkeeping Laws

There are many laws that set recordkeeping requirements for employers in North Carolina. It can be confusing at times, but here are some key points to remember:

  • EEOC Regulations: Employers must keep personnel or employment records for one year. If an employee is involuntarily terminated, their records should be retained for one year from the termination date.
  • ADEA Requirements: Employers need to keep payroll records for three years. They should also maintain records of employee benefit plans and written seniority or merit systems for the entire duration of the plan or system, plus one year after it ends.
  • FLSA Recordkeeping: Under the Fair Labor Standards Act (FLSA) applicable to the Equal Pay Act (EPA), employers must keep payroll records for at least three years. Additionally, they should retain records for at least two years that explain the reasons for paying different wages to employees of different sexes in the same workplace. These records include wage rates, job evaluations, seniority and merit systems, and collective bargaining agreements.

It’s important to note that these recordkeeping requirements apply to all employers covered by federal anti-discrimination laws, regardless of whether any charges have been filed against them.

Penalty for Violation

In general, if someone willfully violates the standards set by FLSA, they can be criminally prosecuted and fined up to $10,000. If they are convicted a second time, they may face imprisonment.

It’s important to note that the gravity of the penalty for any of these recordkeeping laws will depend on the severity of the violation.

Child Labor Laws

To ensure a safe and healthy workplace for minors, North Carolina employers must follow federal child labor guidelines.

For 14- and 15-year-olds, they can work no more than three hours a day when school is in session and up to eight hours a day when school is not in session. Their work hours must be between 7 a.m. and 7 p.m. (extended to 9 p.m. from June 1 through Labor Day when school is not in session). These children must also take a 30-minute break after every five consecutive work hours.

For 16- and 17-year-olds, there are also rules to follow. During the school term, those enrolled in grades 12 or lower cannot be employed between 11 p.m. and 5 a.m. unless they have written permission from their parents and principal.

There are also certain job limitations for different age groups. Generally, minors are prohibited from working in manufacturing, mining, construction sites, power-driven machinery, or hazardous or detrimental occupations.

Learn more in detail about North Carolina Child Labor Laws.

Penalty for Violation

Under Chapter 95 of the North Carolina General Statutes, if an employer violates the rules of youth employment or any related regulations, they may face penalties. The first violation can result in a civil penalty of up to $500, and each subsequent violation can lead to a penalty of up to $1,000.

How You Can Avoid Violating North Carolina Labor Laws

To avoid the penalties for breaking North Carolina labor laws, it is important to understand and comply with the regulations set forth by the state. Here are some key steps to help you ensure compliance:

Tip #1 Familiarize yourself with key labor laws.

Start by thoroughly studying and understanding the relevant labor laws in North Carolina. These include laws like North Carolina Minimum Wage Laws, FLSA Overtime Laws, and the Occupational Safety and Health Act. The better you understand what these laws require, the easier you’ll be able to navigate the steps to compliance.

Tip #2 Establish clear policies and procedures.

Develop comprehensive policies and procedures that align with North Carolina labor laws. Clearly communicate these policies to all employees through employee handbooks, training sessions, or other appropriate means. Ensure employees understand their rights, obligations, and the consequences of non-compliance.

Tip #3 Maintain accurate employment records.

Keep meticulous records of employment contracts, job descriptions, performance evaluations, and disciplinary actions. You should also maintain information about hours worked, wages paid, and any deductions made. The best way to do this is by using reliable time tracking software. This automation eliminates the need for manual timekeeping, reducing the chances of errors or discrepancies.

Accurate recordkeeping is essential for demonstrating compliance with labor laws and can serve as evidence if disputes arise.

Tip #4 Address complaints and concerns promptly.

Establish a system that allows employees to voice their complaints and concerns regarding labor law violations without fear of retaliation. Implement a clear and efficient process for investigating and resolving these complaints promptly and fairly. Encourage open communication and take appropriate action to rectify any violations promptly.

Tip #5 Conduct internal audits.

Regularly conduct internal audits to assess your business practices and identify any potential violations of labor laws. Review your company’s policies, procedures, and employment practices to ensure they align with legal requirements. This proactive approach allows you to identify and address compliance issues before they become problems.

Tip #6 Seek legal counsel if needed.

If you are uncertain about the interpretation or application of labor laws, or if you face complex legal issues, it is prudent to consult with legal professionals experienced in North Carolina labor laws. They can provide guidance and help ensure your compliance efforts are in line with the law.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided. Learn more about North Carolina Labor Laws through our detailed guide.