Black-letter propositions
- 01
Under North Carolina General Statutes section 75-4, no contract limiting the right of any person to do business anywhere in the State is enforceable unless it is in writing and signed by the party who agrees not to enter into the business within the territory.
- 02
An agreement in writing that satisfies the statute must still be reasonable in the scope of what it restrains, and the writing requirement is a minimum, not a guarantee of enforceability.
- 03
Every employer must pay every employee all wages and tips accruing to the employee on the regular payday, and pay periods may be daily, weekly, biweekly, semimonthly, or monthly.
- 04
Wages based on bonuses, commissions, or other forms of calculation may be paid as infrequently as annually if that is prescribed in advance.
- 05
An employee whose employment is discontinued for any reason must be paid all wages due on or before the next regular payday, and wages based on bonuses or commissions must be paid on the first regular payday after the amount becomes calculable.
- 06
Bonus, commission, and similar wages may not be forfeited on separation unless the employee was notified, as the statute requires, of the employer's policy or practice that results in forfeiture, and employees not notified are not subject to the forfeiture.
- 07
An employer may withhold or divert wages only when required or empowered to do so by law, or when the employee has given written authorization signed on or before the payday that states the reason and the amount or percentage of the deduction.
- 08
When the amount of a deduction is not known and agreed upon in advance, the employer must have a signed written authorization stating the reason and, before deducting, must give advance written notice of the amount, notice of the right to withdraw the authorization, and a reasonable opportunity to withdraw it.
- 09
An employer must notify employees in writing at hiring of the promised wages and the day and place of payment, notify them in writing at least one pay period before a change in promised wages, and furnish an itemized statement of deductions each pay period in which they are made.
- 10
An employer who violates the minimum wage, overtime, or wage payment provisions is liable for the unpaid amounts plus interest from the date each amount came due.
- 11
The court must also award liquidated damages equal to the amount due, unless the employer shows to the court's satisfaction that the act or omission was in good faith and that it had reasonable grounds to believe it was not a violation, in which case the court may award no liquidated damages or any amount up to the amount due.
- 12
An action to recover unpaid wages may be maintained in court by one or more employees, and also by the Commissioner of Labor at the request of the affected employees.
Use this attack sequence under time
Frame the issue
Ask whether an agreement restraining competition is in writing and signed by the person who promised not to compete.
Resolve the next checkpoint
Ask separately whether the restraint is reasonable, because the writing requirement is only one requirement.
Resolve the next checkpoint
Identify the regular payday and the date the wages accrued or, for commissions and bonuses, the date the amount became calculable.
Resolve the next checkpoint
For a final paycheck apply the next-regular-payday rule to all wages due.
Resolve the next checkpoint
For a deduction, look for a signed written authorization stating the reason and the amount, and for the advance notice when the amount is not known.
Resolve the next checkpoint
Check whether the employee was notified of any forfeiture policy before a bonus or commission was withheld.
Finish the conclusion
Compute the remedy: unpaid wages, interest, and liquidated damages, and test the good-faith defense.
Common wrong turns
- A noncompetition promise that is unsigned or oral cannot be enforced under section 75-4, however reasonable it is.
- Departing employees must be paid all wages due by the next regular payday, not on the day of separation.
- A commission or bonus can be forfeited only if the employee was notified of the forfeiture policy.
- An oral promise by the employee that the employer may deduct is not the signed written authorization the statute requires.
- Liquidated damages are mandatory equal to the amount due unless the employer proves good faith and reasonable grounds.
Worked example
An employee who sold insurance in North Carolina signed an offer letter that promised a monthly salary and said she would not compete for two years, but she never signed the letter. She was fired, and her employer did not pay her final salary or a commission she had earned until three weeks after the next regular payday, and it deducted the price of a company phone from her final check without her signature.
The noncompetition promise is unenforceable because section 75-4 requires a writing signed by the party who agrees not to compete and she never signed. The employer violated the final-pay rule by paying the salary and commission after the next regular payday, and a commission is payable on the first payday after it becomes calculable unless she was notified of a forfeiture policy. The deduction for the phone was unlawful without a signed authorization stating the reason and amount. The employer owes the unpaid wages, interest, and liquidated damages equal to the amount due unless it proves good faith and reasonable grounds.
Practice this topic
Restraints on doing business
North Carolina General Statutes section 75-4 makes an agreement that limits a person's right to do business anywhere in the State unenforceable unless it is in writing and signed by the party who agrees not to enter into the business within the territory, and it adds that nothing in it legalizes an agreement that is illegal under other law.
Wage payment, final pay, and deductions
North Carolina General Statutes section 95-25.6 requires every employer to pay all wages and tips accruing to the employee on the regular payday and permits bonus and commission wages to be paid as infrequently as annually if that was prescribed in advance.
North Carolina General Statutes section 95-25.7 requires wages to be paid to a separated employee on or before the next regular payday, requires commission and bonus wages to be paid on the first regular payday after the amount becomes calculable, and bars forfeiture of such wages unless the employee was notified of the forfeiture policy or practice.
North Carolina General Statutes section 95-25.8 permits withholding only when required by law or when the employee gave a signed written authorization stating the reason and the amount or percentage, and it requires advance written notice of the amount and of the right to withdraw when the amount is not known in advance.
North Carolina General Statutes section 95-25.13 requires the employer to notify employees in writing at hiring of the promised wages and the day and place of payment, to give written notice at least one pay period before a change in promised wages, and to furnish itemized statements of deductions.
Remedies
North Carolina General Statutes section 95-25.22 makes an employer that violates the wage payment provisions liable for the unpaid amounts with interest, directs the court to award liquidated damages equal to the amount due unless the employer shows good faith and reasonable grounds for believing it was not a violation, and lets employees or the Commissioner bring the action.
Frequently asked questions
What is the controlling rule for employment agreements: written restraints on trade, wage payment, deductions, and final pay under north carolina law?+
State the writing and signature requirement for restraints, decide whether the promise is enforceable, apply the wage payment, final pay, and deduction rules, and compute the remedy including the liquidated damages and the good-faith defense.
Must a North Carolina noncompete be written?+
Yes, it must be in writing and signed by the party who agrees not to compete, under North Carolina General Statutes section 75-4.
When must a fired employee be paid?+
All wages due must be paid on or before the next regular payday, under North Carolina General Statutes section 95-25.7.
Can an employer withhold a bonus after an employee quits?+
Only if the employee was notified of a forfeiture policy or practice, under section 95-25.7.
What does an employer need to deduct money from wages?+
A signed written authorization stating the reason and the amount, unless the law requires it, under section 95-25.8.
What damages follow unpaid wages?+
The unpaid wages, interest, and liquidated damages equal to the amount due unless the employer proves good faith, under section 95-25.22.