Overview
The North Carolina Department of Labor is charged with promoting the “health, safety, and general well-being” of more than 4 million workers in the state. The Wage and Hour Bureau of the North Carolina Department of Labor enforces the Wage and Hour Act of North Carolina.[1] This Act and its amendments protect employees by providing requirements regarding: (1) minimum wage; (2) overtime requirements; (3) wage (including bonus and commission) payments; (4) payments of promised benefits such as vacation pay; (5) child labor; and (6) recordkeeping. The majority of all North Carolina employees are covered by the North Carolina Wage and Hour Act (NCWHA), subject to a few exemptions such as persons employed in agriculture, baby sitters and other domestic companions, bona fide volunteers, models, actors, and persons employed by an outdoor drama production role including lighting, costumes, and set designers.
What is Considered Wages?
Wages include compensation for labor or services rendered by an employee, whether determined on a time, task, piece, job, commission, or other calculation. Wages may also include sick pay, vacation, severance, bonuses, or other such benefits or amounts promised by an employer with a policy or practice of making such payments.
A pay period may be daily, weekly, bi-weekly, monthly, or semi-monthly. While North Carolina law does not prescribe a maximum time following a pay period that payment must be received, employees whose employment is discontinued must be paid all wages due on or before the next regular pay period.
What is Minimum Wage?
The NCWHA requires employers to ensure that all employees, both hourly and salaried, receive the minimum wage for all hours worked in a given workweek. Exceptions exist for full time students, disabled workers, and tipped employees.[2] The current minimum wage in North Carolina is $7.25 per hour.
When Can an Employer Withhold or Deduct Wages?
An employer may withhold wages when empowered or required by law. When the amount is known and agreed on in advance, the employee must provide written authorization, signed on or before the paydays for the pay period in which the deduction occurs, indicating the reason for the deduction, and stating the actual dollar amount or percentage to be deduced. When the amount is NOT agreed to in advance, the employer may still withhold or deduct wages as long as the employee is given advanced written notice of the amount to be deducted and a reasonable opportunity to object.
An employer may deduct wages without notice for a variety of reasons, including cash or inventory shortages, loss or damage to the employer’s property, or when criminal process has been issued against an employee. While an employer in North Carolina may deduct or reduce payment at any time, they cannot reduce wages for overtime hours in any amount and cannot reduce non-overtime wages below the minimum wage for any workweek. Employers are required to give an itemized statement of deductions to their employees every time a paycheck is issued.
When is Overtime Pay Required and How is it Calculated?
Overtime is based on how many hours an employee works each workweek, standing on its own, regardless of the pay period. Any hours worked in excess of forty (40) per week are required to be paid on a time and one-half basis, according to the employee’s regular rate of pay. Both part-time and full-time employees are entitled to overtime pay if either worked more than forty (40) hours in a workweek.
Generally, in computing overtime the employer must use the regular rate of pay, not the minimum wage. However with tipped employees for whom the employer is taking the tip credit, calculation of the regular rate of (hourly) pay is based on the current minimum wage.
To calculate overtime for salaried/commission employees, first convert the employee’s pay to an hourly rate. The hourly rate is determined by dividing the employee’s one week pay by the number of hours worked (this rate must be equal to or greater than minimum wage, or else the employer must increase the rate of pay to meet the requirement). Next, divide the number by two (2) to determine the overtime half-time rate. Last, multiply the overtime rate by the number of overtime hours worked to determine the amount of overtime payment due.
When is Vacation Pay Required?
While the NCWHA includes vacation pay in its definition of wage, North Carolina employers are not required to provide vacation plans for employees. However, if the employer does adopt a vacation policy, the employer shall give vacation time off or payment in lieu of time off as required by company policy or practice. All employees must be notified in writing of the employer’s policy, and such notification must address how and when vacation is earned, whether and how much vacation can be carried forward to the next year, when vacation must be taken, when vacation pay may be paid in lieu of time off, and under what conditions vacation pay is forfeited on termination of employment.[3] All ambiguous policies and/or practices will be construed against the employer and in favor of the employee.
Do I have a claim under the NCWHA?
Employers who fail to pay wages when due are liable for all unpaid wages, interest, and liquidated damages equal to unpaid wages, and possibly reasonable attorneys’ fees and costs. However, employers can avoid or lessen liability for liquidated damages if they show the violation was in good faith or they had a reason to believe their actions were not in violation of the NCWHA. An employee has two (2) years from the date the wages became due to file a lawsuit under the NCWHA. Prior to filing a claim, it is prudent to discuss your individual circumstances with an experienced attorney to ensure compliance with the NCWHA and related statutes.
[1] N.C. Gen. Stat. Ann. §§ 95-25.1 to 95-25.25.
[2] N.C. Gen. Stat. § 95-25.3.
[3] 13 N.C. Admin. Code 12.0306(a).
