North Carolina Wage and Hour Act: Protections for North Carolina Employee Pay

The North Carolina Wage and Hour Act (NCWHA) governs the state-level wage and hour requirements for North Carolina employers and the corresponding rights of covered employees. The law includes requirements for minimum wages, overtime compensation, wage payments, payments of promised wages and benefits, youth employment, and recordkeeping. The law is codified at N.C. Gen. Stat. Ann. §§ 95–25.1 to 95–25.25. The NCWHA covers all North Carolina employers, although certain requirements are subject to several exemptions, many of which parallel those found in the federal Fair Labor Standards Act (FLSA). The NCWHA allows employees to file lawsuits to recover wages owed due to violations of the minimum wage, overtime, and wage payment provisions.

Minimum Wage

The NCWHA provides that the current minimum wage in North Carolina is $7.25 per hour, because this is the federal minimum wage set out in the Fair Labor Standards Act, 29 U.S.C. 206(a)(1). N.C. Gen. Stat. Ann. § 95–25.3(a).

Tipped Workers and Tip Credits

The NCWHA defines “tips” as any money that exceeds the amount due a business for goods, food, drink, services, or articles sold which is paid in cash or by credit card, or is given or left by a customer for an employee. § 95–25.2(15). Tips do not include mandatory service charges customers are required to pay. 13 N.C. Admin. Code 12.0303(b).

Consistent with the FLSA’s tip credit provisions, the NCWHA provides that tips may be counted as wages only up to the amount permitted in Section 3(m) of the FLSA (i.e. making the minimum wage for tipped employees $2.13, if the employee additionally receives enough tips that he or she receives the full $7.25 minimum hourly wage), and only if:

• The employee customarily receives more than twenty dollars ($20) per month in tips;
• The employer notifies the employee in advance of the employer’s intent to claim the tip credit toward its minimum wage obligations;
• The employee is permitted to retain all tips, except when tips are shared in a valid tip-pooling arrangement; and
• The employer maintains accurate and complete records of all tips the employee received.

N.C. Gen. Stat. Ann. § 95–25.3(f); 13 N.C. Admin. Code 12.0303(e).

Tip Pooling

The NCWHA provides that tip pooling is permissible among employees who customarily and regularly receive tips. However, no employee’s tips may be reduced by more than fifteen percent (15%) under a tip pooling arrangement. N.C. Gen. Stat. Ann. § 95–25.3(f); 13 N.C. Admin. Code 12.0303(h).

Sub-Minimum Wage for Certain Employees

The NCWHA provides that full-time students, learners, apprentices, and messengers, as those terms are defined under the FLSA, may be paid 90% of the minimum wage. N.C. Gen. Stat. Ann. § 95–25.3(b).

Sub-Minimum Wage for Disabled Workers

Under certain circumstances, the law may allow employers to pay disabled employees less than the minimum wage. Employers may apply to the North Carolina Wage and Hour Bureau for a disabled worker certificate to set a sub-minimum wage rate for a particular disabled worker to perform a particular job. For this purpose, a disabled worker means an individual whose earning capacity is impaired by age or physical or mental deficiency or injury, as defined under the FLSA. N.C. Gen. Stat. Ann. § 95–25.3(c); 13 N.C. Admin. Code 12.0202.

Overtime Compensation

Under the NCWHA, every employer must pay each employee who works longer than 40 hours in any workweek at a rate of not less than 1.5 times the employee’s regular rate of pay for those hours in excess of 40 per week. N.C. Gen. Stat. Ann. § 95–25.4.

A workweek is any period of 168 consecutive hours. § 95–25.2(17). The NCWHA defines “hours worked” as including “all time an employee is employed.” § 95–25.2(8). “Employ” means “to suffer or permit to work.” § 95–25.2(17).

Wage Payments and Promised Wages

The NCWHA provides wage payment rights and requirements that go beyond the overtime and minimum wage provisions. Under the NCWHA, “wages” means compensation for an employee’s labor or services whether determined on a time, task, piece, job, day, commission, or other basis of calculation, and the reasonable cost of furnishing employees with board, lodging, or other facilities. For the purposes of the law’s wage payment and notice provisions, §§ 95–25.6 through 95–25.13, “wage” includes sick pay, vacation pay, severance pay, commissions, bonuses, and other amounts promised when the employer has a policy or a practice of making such payments. § 95–25.2(16).

Vacation Pay

While the definition of wages includes vacation pay, when the employer has a policy or practice of providing this benefit, employers in North Carolina are not required to provide vacation pay plans. §§ 95–25.2(16) and 95–25.12.

If the employer does have a vacation policy, the policy must address: (1) how and when vacation is earned; (2) whether and how much vacation time may be carried forward from one year to another; (3) when vacation time must be taken; (4) when and if vacation pay may be paid in lieu of time off; and (5) under what conditions vacation pay is forfeited on termination of employment. Ambiguous policies and practices must be construed against the employer and in favor of employees. 13 N.C. Admin. Code 12.0306(a).

Pay Frequency

Under the NCWHA, an employer may pay employees daily, weekly, bi-weekly, semi-monthly, or monthly. Wages based on bonuses, commissions or other forms may be paid as infrequently as annually if the employee is notified in advance. N.C. Gen. Stat. Ann. § 95–25.6.

Payment of Wages After Separation from Employment

Employees whose employment ends for any reason must be paid all wages due on or before the next regular payday. N.C. Gen. Stat. Ann. § 95–25.7.

Wages based on bonuses, commissions or other forms of calculation must be paid on the first regular payday after the amount becomes calculable. These wages may not be forfeited unless the employee was notified in advance, pursuant to § 95–25.13, of the employer’s policy or practice resulting in the forfeiture. Employees not so notified are not subject to forfeiting the wages. § 95–25.7.

Deductions from Wages

An employer may withhold or deduct any portion of an employee’s wages when:

1. Empowered or required by law;
2. The amount is known and agreed on in advance and the employee provides written authorization. If the deduction is for the employee’s own benefit, the employee must be given a reasonable opportunity to withdraw the authorization. The authorization must: (i) be signed on or before the paydays for the pay periods in which the deduction occurs; (ii) indicate the reason for the deduction; and (iii) state the dollar amount or percentage of wages deducted;
3. The amount is not known and agreed on in advance and the employer has the employee’s written authorization, which must: (i) be signed on or before the paydays for the pay periods in which the deduction occurs and (ii) indicate the reason for the deduction. Before any such deduction, the employee must also: (i) receive advance written notice of the amount to be deducted and (ii) the employee’s right to withdraw the authorization, and (iii) be given a reasonable opportunity to withdraw the authorization in writing.

N.C. Gen. Stat. Ann. § 95–25.8(a).

In addition, if the employee receives written notice of the amount to be deducted at least seven days before the payday on which the deduction is made, deductions can be made for cash shortages, inventory shortages, or loss or damage to the employer’s property. However, the seven-day notice requirement does not apply when a separation occurs. § 95–25.8(c).

Employers may also make deductions to recoup a prepayment of wages resulting from a bona fide error causing an inadvertent overpayment of wages; advances to an employee or third party at the employee’s request; or the principal amount of loans made by an employer to an employee. § 95–25.8(d).

Except for the recoupment of a prepayment of wages under § 95–25.8(d), deductions cannot reduce wages for overtime hours in any amount and cannot reduce non-overtime wages below the minimum wage level for any workweek. § 95–25.8(b).

Recordkeeping Requirements

Like the FLSA, the NCWHA requires employers to maintain specific information about employee hours and pay. N.C. Gen. Stat. Ann. § 95–25.15(b); 13 N.C. Admin. Code 12.0801(a)&(b), 12.0802.

Notice Requirements

The NCWHA requires at at the time of hire, employers must inform employees either orally or in writing of any promised wages and the day and place for payment. Employers must also make available to employees, in writing or in a posted notice, any employment practices and policies regarding promised wages. N.C. Gen. Stat. Ann. § 95–25.13(1)&(2). Under the NCWHA, promised wages include sick pay, vacation pay, severance pay, commissions, bonuses, and other amounts promised when the employer has a policy or a practice of making such payments. N.C. Gen. Stat. Ann. § 95–25.2(16).

The law further prohibits employers from retroactively decreasing wages. Specifically, it requires that employers inform their employees in writing or in a posted notice at least 24 hours before any change in promised wages, other than an increase in wages. N.C. Gen. Stat. Ann. § 95–25.13(3).

Employers must also furnish each employee with an itemized statement of deductions made from that employee’s wages for each pay period such deductions are made. N.C. Gen. Stat. Ann. § 95–25.13(4).

Youth Employment Requirements

The NCWHA contains detailed requirements regarding the employment of persons under the age of 18. In general, these provisions apply to all North Carolina employers regardless of whether they are otherwise exempt from the NCWHA. The child labor provisions include requirements that employers obtain youth employment certificates, place limits on work hours for minors, set minimum working ages, and restrict employment of minors in hazardous professions, among other requirements. N.C. Gen. Stat. Ann. § 95–25.5.

Exemptions from Overtime and Minimum Wage Requirements

The NCWHA contains several exemptions from the overtime, minimum wage, and certain other requirements, meaning that the requirements do not apply to employees who fall into the exempt categories. Many of these exemptions parallel the exemptions set out in the federal Fair Labor Standards Act.

For example, North Carolina’s minimum wage, overtime, youth employment, and recordkeeping requirements do not apply to the following:

• Any person employed in an enterprise engaged in commerce or in the production of goods for commerce as defined under the FLSA. However, some minimum wage, overtime and youth employment requirements may apply;
• Agricultural employees, as defined under the FLSA;
• Domestic workers, including baby sitters and companions, as defined under the FLSA;
• Any person employed as a page in the North Carolina General Assembly or the Governor’s Office;
• Bona fide volunteers in medical, educational, religious, or nonprofit organizations for whom an employer-employee relationship does not exist;
• Persons confined in and working for any penal, correctional or mental institution of the state or local government;
• Generally, any person employed as a model, an actor or performer in motion pictures or theatrical, radio or television productions, as defined under the FLSA, although some youth employment requirements may apply; and
• Generally, persons employed by an outdoor drama in certain positions, although some youth employment requirements may apply.

N.C. Gen. Stat. Ann. § 95–25.14(a).

North Carolina’s minimum wage, overtime, and recordkeeping requirements do not apply to the following:

• Employees of a boys’ or girls’ summer camp or of a seasonal religious or non-profit educational conference center;
• Persons employed in catching, processing or first sale of seafood as defined under the FLSA;
• The spouse, child, parent or dependent of the employer under North Carolina income tax laws;
• Persons employed in a bona fide executive, administrative, professional or outside sales capacity as defined under the FLSA;
• Persons participating in a ridesharing arrangement as defined by N.C. Gen Stat. Ann. § 136–44.21;
• Computer systems analysts, computer programmers, software engineers or other similarly skilled workers as defined under the FLSA;
• Volunteer firefighters in an incorporated, nonprofit volunteer or community fire department;
• Volunteer rescue and emergency medical services personnel in an incorporated, nonprofit volunteer or community fire department or an incorporated, nonprofit rescue squad.

N.C. Gen. Stat. Ann. § 95–25.14(b)&(b1)

North Carolina’s overtime and recordkeeping requirements do not apply to the following:

• Drivers, drivers’ helpers, loaders and mechanics, as defined under the FLSA;
• Taxicab drivers;
• Seamen and employees of railroads and air carriers, as defined under the FLSA;
• Salespersons, mechanics and parts personnel employed by automotive, truck and farm implement dealers as defined under the FLSA;
• Salespersons employed by trailer, boat and aircraft dealers, as defined under the FLSA;
• Live-in child care workers or other live-in employees in homes for dependent children;
• Radio and television announcers, news editors and chief engineers, as defined under the FLSA;
• Any employee of a seasonal amusement or recreational establishment.

N.C. Gen. Stat. Ann. § 95–25.14(c).

Difference Between NCWHA and FLSA Exemptions

In situations where the FLSA provides an exemption from minimum wage and overtime, but the NCWHA does not provide the same exemption, the provisions of the NCWHA apply. N.C. Gen. Stat. Ann. § 95–25.14(a)(1)©; 13 N.C. Admin. Code 12.0501(b).

Private Right of Action

The NCWHA allows employees to file lawsuits to recover wages owed due to violations of the law’s minimum wage, overtime, and wage payment provisions. N.C. Gen. Stat. Ann. § 95–25.22(a)&(b).

Remedies

The NCWHA provides that the employee may recover unpaid wages, interest, and liquidated damages equal to the amount owed. § 95–25.22(a).

However, if the employer proves to the satisfaction of the court that (1) the act or omission constituting the violation was in good faith and (2) that the employer had reasonable grounds for believing that the act or omission was not a violation of the NCWHA, the court may, in its discretion, award no liquidated damages or may award any amount of liquidated damages not exceeding the amount equal to the unpaid wages and interest owed. § 95–25.22(a1).

The court may also award reasonable attorneys’ fees and costs. N.C. Gen. Stat. Ann. § 95–25.22(d).

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