An Introduction to Termination of Employment in NC
North Carolina is an "at-will" employment jurisdiction. In most circumstances, this means that an employer in North Carolina can terminate their employment with an employee at any time and for any lawful reason so long as that lawful reason is not otherwise in violation of the employee’s contractual or statutory rights. This is true unless there is a specific exception that might apply, such as the exceptions set out below or contract or other jurisprudence developing the "public policy" exception to the "at-will" doctrine.
1. Contractual Exceptions
In addition to the public-policy exceptions to "at-will" employment, the North Carolina courts will enforce an employee’s contractual right to continued employment. Thus, for example, where an employee has a one-year contract of employment, purported termination prior to the expiration of the contract is actionable notwithstanding the general rule of "at-will" employment.
2. The Public-Policy Exception to "At-Will" Employment
The North Carolina courts have recognized a narrow exception to the "at-will" employment doctrine based on public policy . More specifically, North Carolina recognizes that even in the absence of an express contract provision guaranteeing employment for a certain term, it will recognize an implied contract of employment that will be enforced. Under North Carolina law a contract of employment cannot be terminated without just cause when such a termination would contravene public policy as expressed in the Constitution, statutes, or administrative regulations. Thus, the State Supreme Court has approved the cause of action based on the public policy reasons underlying the statutory or constitutional provisions that are alleged to be violated by the termination of the employment relationship. North Carolina courts have recognized such public-policy based actions when termination would be a violation of North Carolina’s Equal Employment Practices statute (N.C. Gen. Stat. § 143-422.2), would violate the Worker’s Compensation Act (N.C. Gen. Stat. § 97-6), or other similar provisions.
Legally Permissible Reasons for an Employee’s Termination
In North Carolina, employers are generally required to have "just cause" for termination. However, many employers continue to operate as at-will employers and follow the at-will rule unless the employer is otherwise bound by contract. An at-will employment state is a state that allows either party to terminate an employee at any time for any reason, or no reason at all. An at-will employee may also decide to leave an employer for any reason or no reason at all.
However, in North Carolina, if there is a discharge of at-will employees that is:
· in retaliation for the employee’s exercise of a legal right;
· an abuse of the employer’s right to discharge; or
· contrary to public policy, the discharge will be a tort and grounds for a wrongful discharge lawsuit.
Because there may be an exception to the at-will rule, unless the employee is terminated for one of the reasons stated above, the employer does not have to provide a reason for the termination. Generally, the employer must demonstrate that the termination was not for an unlawful reason, the discharge was based upon job-related factors, and terminated employee is unable to prove a reasonable alternative justification for the discharge.
Employers may have legitimate reasons for terminating employees, including: unsatisfactory job performance, violation of company policies and procedures, misconduct, dishonesty, poor work quality, attendance problems, layoffs, or other economic reasons.
Employers may conduct exit interviews to document their reasons for the termination. If the employer opts to not conduct an exit interview, the employer should consider giving a copy of the separation notice to the terminating employee to verify that the employer has issued the notice to the employee.
Improper and Unlawful Termination
North Carolina jurisprudence recognizes three categories of prohibited termination: (1) termination that violates a specific constitutional provision, statute or regulation, (2) termination based upon an express or implied contractual provision, or (3) termination in retaliation for the employee’s exercise of legally protected rights. These types of terminations, broadly, are known as "illegal" or "unlawful" terminations.
Example: A female employee is fired because her employer believes that women should be obedient to their husbands, and that she must therefore quit her job and rejoin the workforce only after her husband dies so that she may devote herself to him. This will be considered a violation of public policy in NC, resulting in a legally actionable wrongful discharge.
Example: If the female employee mentioned above is fired because she complains to Tampa Corp. about sexual harassment in Tampa Corp.’s workplace, that would probably amount to an unlawful retaliatory discharge.
Example: If the female employee is fired because she has an employment contract entitling her to a year’s salary if terminated without cause, her discharge will likely amount to a breach of contract if the discharge was without cause.
Example: A 15-year employee who has just completed all tasks assigned to her in a business unit is suddenly relieved of her responsibilities and reassigned to another part of the company that does not have any responsibilities for which she is qualified. Litigation ensues, and in the discovery phase it is revealed that up to this point the individual has been consistently rated as exceeding objectives and that those objectives had been and were being revised to make it more difficult and time consuming to receive a positive evaluation because of the impression that was given by this employee that the business unit would not be going under due to cuts in services and that this reducing services in the business unit was not necessary. Which impression proved to be correct will be determined later.
In addition to traditional employment discrimination cases, covered employers should also be aware of anti-retaliation protections under state and federal employment laws:
Public Policy Based Retaliation – the following NC statutes protect employees/individuals from retaliation based upon various protected classifications:
OSHA Workplace Safety – if an employee complains of safety hazards, retaliatory discharge is illegal under OSHA.
Workers’ Compensation retaliation – NC employees cannot be retaliated against for filing a workers’ compensation claim.
Anti-discrimination statutes – the most common cited statute is Title VII; however, Title VII does not cover retaliation in the family medical leave (FMLA) or Pregnancy Discrimination Act (PDA).
Retaliatory discharge – the most commonly cited wrongful discharge public policy rule is that employees cannot be discharged based upon being a member of a protected category or because the employee has engaged in protected activity and opposed the adverse effect of employment consanguineous with sex, race, age, national origin etc.
Protected concerted activity such as NLRB Section 7 Rights – Section 7 of the National Labor Relations Act (NLRA) protects non-union employees from coercive action by employers to prohibit the establishment or preservation of labor organizations.
Employer Requirements in Termination Procedures
The recommended procedure you should follow during termination is to give the employee your verbal notice of termination, then the written notice via a termination letter. You can give the termination letter at the time you verbally notify the employee of the termination or you can mail the letter the next day (or within a few days) after you verbally notify the employee, and some employers will mail a letter even for immediate terminations – that is your choice. The termination letter should have the same legally required information as the notice of separation from employment form that North Carolina employers are required to fill out and send to the employment security commission.
The notice of separation from employment form must include:
- date of termination;
- date work was last performed;
- reason for separation. If the reason is "other," then you must indicate at least the basic problem that caused the separation;
- income verification mailing address. The form must include an address for "Income Verification" because employees must be paid their salary until the separation is complete and income verification is how employees will receive their terminated employees salary checks. As indicated above, you may need check with your internal policies to make sure you follow these procedures.
Rights of the Individual After Termination
Some employees, unfortunately, are terminated even if they are not at-will. A company may not wish to provide notice to a senior executive that their position is being eliminated for business reasons or because of financial necessity. This termination, depending on the circumstances, may lead to claims of being an implied contract employee and so should be handled with care. Even if a company convinces an executive that no notice is required, if a company has disclosed an employee’s information and is telling him or her they are terminated as part of a re-organization or otherwise, there may be significant liability under various employment laws. For example, the Equal Employment Opportunity Commission (EEOC) has a policy that requires a covered employer to provide written notice to its employees when it discontinues a group health plan, and there are specific notice requirements under the Consolidated Omnibus Budget Reconciliation Act (COBRA) should that happen. See 29 U.S.C.A. § 1166(c) (requiring covered employer to notify employees of group health plan discontinuation within thirty days of discontinuation).
Terminated employees in North Carolina may have rights to severance pay under any severance plan maintained by their employers. Under the Fair Labor Standards Act (FLSA), employers that provide severance pay must treat the payments as wages. In turn, North Carolina law provides an employee a right to payment of wages on a conditional prior end date or , if no other date is agreed upon, on the next day the office is open for business. N.C. Gen. Stat. § 95-25.7. Keep in mind the application of a state statute will not limit an employee’s ability to assert contractual rights or otherwise bring a claim under a severance agreement or policy. Such claims must be alleged within three years of accrual in North Carolina. N.C. Gen. Stat. § 1-52. This generally means the employee may file charges with the N.C. Department of Labor or file a civil suit up to three years from when the employer failed to pay the employee all wages due.
If an employee is fired for refusing an illegal directive from management, he or she may have a claim for wrongful termination. A manager or supervisor’s directive that is illegal—such as the directive to discriminate on the basis of race or age—could give rise to liability for the manager or supervisor as well.
North Carolina law and public policy provide protection to employees who report unlawful acts that constitute violations of the law. Known as the "whistleblower" statute, N.C. Gen. Stat. § 95-241 provides remedies for an employee whose employer retaliates against them for filing a complaint or report with an investigatory agency. An employee who successfully alleges a claim of retaliation under this statute may be entitled to reinstatement, lost wages, and any associated damages.
Recent Changes to NC Termination Laws
During the last 4 years there has been a significant uptick in judicial opinions involving the Employment at Will doctrine. In these cases the courts in their opinions are including more and more discussion of the public policy exceptions to the Employment at Will doctrine.
As a result of this uptick in judicial opinions all NC employers have to be more and more aware of the various actions perceived to be against public policy when taking adverse actions against employees.
Additionally, many of these opinions have resulted in unpublished opinions by the NC Court of Appeals. Clearly, when you read the published opinions you can see that the cases are not as straight forward as that they first appear. This leaves the door open for other employers to have similar situations in which one of their employees could claim to have been wrongfully terminated.
So, the one touch stone public policy matter for all NC employers to pay extreme attention to is the NC industrial Waste Disposal Acts. Any industrial waste disposal claim provides the employee such power. It does not matter how insignificant or paltry the amount of waste was the employee sought to dispose of at issue. Merely investigating an employee’s waste disposal habits opens the door to liability. When you add other factors such as how the employee self-reported his disposal habits or the institutions previous history of self-reporting of waste disposal issues the risk becomes even greater.
Practical Information and Advice for Employers and Employees
Both employers and employees should keep in mind practical tips to avoid common pitfalls of termination.
Tips for Employers.
It is important to have a clean house. Facts are what matter, and they cannot change with the passage of time or emotions. The best way to prepare for an employment lawsuit is to assess the facts at the time of termination. If an employee has not received regular raises, performance evaluations, or discipline, you may want to consider another way of addressing performance concerns rather than through termination.
Make sure to generate and preserve documents before terminating employees. Document your business reasons for termination, along with any steps you took to resolve the issues before termination. Finally, make sure you keep these documents as long as records are maintained in your routine course of business. Even with at-will employment, you do not want to land yourself in litigation and have to scramble to address the business reasons for termination without any documentation.
Consider providing a severance agreement to the terminated employee. Make the severance amount conditioned upon a release of claims. In addition, offering outplacement resources to the terminated employee can be viewed favorably by the EEOC in the event of a discrimination complaint .
Tips for Employees.
If you are terminated, you have the right to know your performance problems and what, if anything, you could have done differently to prevent your termination. Ask respectfully for your personnel file, or a copy of your file, or the termination letter that may have been placed in your file, as needed. Knowing why you were terminated is helpful for future job applications and interviews.
If you are receiving a severance package, take a day to read through the document before signing it. Make sure the amount of severance makes sense given the amount of time you have worked for the company and whether or not you have a separate employment agreement that states you would continue to receive compensation after your termination. Once you sign a severance agreement, it can be very difficult to unwind your decision. Read the fine print carefully, as some documents are written with assumptions about what was said or done and you may want to revise the documents to fit how you view your situation.
If you believe you have been terminated for an unlawful reason, seek legal counsel before moving forward with any statement regarding your termination. Be careful to not make a statement that is adverse to your legal case.