Employment Law for NC Craft Brewers
Presented by
Steve Rowe &
Sebastian Wolfrum
Overview of Fair Labor Standards Act Coverage:
Minimum Wage, Overtime, and Hours Worked
These materials have been prepared by Poyner Spruill LLP for informational purposes
only and are not legal advice. This information is not intended to create, and receipt of it
does not constitute, a lawyer-client relationship.
Overview of Exemptions
• Exempt:
– Commissioned sales employees of retail or service establishments
(overtime only)
• NON-exempt:
– Head brewer or warehouse manager if they are directly working in
production of beer or its handling
Overview of Exemptions
• Employees of certain seasonal and recreational
establishments
• Executive, administrative, professional, and outside sales
employees
Risks of Noncompliance
• Record keeping
– Section 11(a) of the FLSA authorizes representatives of the
Department of Labor to investigate and gather data concerning
wages, hours, and other employment practices; enter and inspect
an employer’s premises and records; and question employees to
determine whether any person has violated any provision of the
FLSA.
– Failure to keep proper records is an FLSA violation
DOL Investigation on Recordkeeping
– The investigator will request certain records
– Will inspect payroll and time records; can make copies
– Employee interviews will be used to determine if records match the
reality of hours worked and wages paid
Reporting Requirements
• Failure to observe the recordkeeping requirements is a
violation of the FLSA for which criminal or civil sanctions
may be imposed
– An employer who fails to maintain the required records cannot
avoid liability in a wage and hour case through argument that there
is insufficient evidence of the claimed hours worked
– Where an employer's records are inaccurate or non-existent,
courts may award damages based on employees’ recollections
The Practical Result of Noncompliance with
Recordkeeping Requirements
• The plaintiff (i.e. your employee) must demonstrate he or
she performed work and was not properly compensated
and must provide evidence of the amount of work
performed
• The burden then shifts to the employer (i.e. you) to present
evidence to counter the plaintiff’s version or to alter the
inference the court might draw from the plaintiff’s evidence
• If the employer fails to produce this evidence (i.e. you kept
no records or poor records) the court may award damages
to the employee even though the result is only
approximate
Common Employer Mistakes
• Confusing salaried with exempt
• Confusing job titles with exempt
• Failing to police working time - remote work, breaks, off
the clock
– Failure to record and pay for break periods
• "Waivers" of minimum wage and overtime rights
• Lack of accurate time and payroll records
Common Employer Mistakes
• Contracts for “exempt” status
• Use of comp time
• Failing to pay overtime that is not “approved”
– Failure to keep records of non-authorized overtime
• Training time, travel time, and other off the clock work
when not properly paid
• Counting on employees to keep their own records
Common Employer Mistakes
• Not keeping a timesheet or timecard for non-exempt
workers
• Failing to record time of clock-in and clock-out.
• Believing there is a coverage threshold based on
employee headcount
• Independent contractor v. employee classification
mistakes
Deductions From Salary
• As a general rule, an exempt employee is entitled to
his/her full salary, without deductions or reductions.
• If improper deductions are made, you can lose the
exemption and have to pay overtime to the employee.
• Deductions may be made for absences of one or more full
days for personal, sick, or FMLA reasons, or for
disciplinary suspensions.
• If you make deductions from pay, comply with state law
regarding the timing and form of notice to the employee
about those deductions.
Uniforms
• If you require uniforms, you cannot reduce a non-exempt
employee’s pay below the minimum wage to reimburse
you for the uniforms.
• However, if you have a situation where you believe an
employee is wearing the uniforms outside of work and
causing damage necessitating continual replacement of
uniforms, you can require repayment through wage
assignment or direct reimbursement.
Proper Hiring Practices: Background Checks and Interviewing
Rightful Hires To Avoid Wrongful Discharge
• You can reduce or eliminate problems with
employees through careful hiring practices.
• Use interviews, reference checks, and
applications to find employees with the
characteristics your company needs for success.
Rule to Live By
• All employment decisions based on an
applicant’s personal characteristics (such
as criminal record and credit score) must
always be “job-related and consistent
with business necessity.”
– Not based on stereotypes
– Not based on assumptions
– Objectively defensible
Problematic Requirements
• Criminal Background—NO convictions
• Credit—MUST have clean credit history
• Examination requirements—MUST pass a certain test or
exam
• Education—MUST have a college degree
• Professional—MUST have professional certification
Can these requirements be justified?
Do we impose these requirements because they are
necessary or because they come from preferences
rooted in tradition or bias?
EEOC Enforcement Guidance On
Use of Criminal Records
• Employers should NOT rely on arrest records as a basis for screening
applicants.
• Employer use of criminal conviction records to screen applicants may
have “disparate impact” based on race and national origin. Disparate
treatment may also occur.
• Employer should “validate” use of criminal background checks. This
requires hiring a specialist to evaluate whether criminal background is
predictive of success at specific jobs.
• Probably cheaper to limit criminal record checks and/or
disqualifications to those positions that are easily defensible
• Avoid “automatic disqualification for a criminal conviction.”
Use of Credit History Under Scrutiny
• According to the EEOC
– Inquiry into an applicant's current or past assets, liabilities, or credit
rating, including bankruptcy or garnishment, refusal or cancellation of
bonding, car ownership, rental or ownership of a house, length of
residence at an address, charge accounts, furniture ownership, or
bank accounts generally should be avoided because they tend to
impact more adversely on minorities and females. Exceptions exist if
the employer can show that such information is essential to the
particular job in question.
• It will be difficult to establish business necessity, as there
is little evidence that credit is a factor in predicting job
performance.
Use of Credit History Under Scrutiny
• At least ten states have adopted statutes banning or limiting
use of credit checks in hiring
• Several other states have bills pending
• Most of the states with statutes have some exceptions
allowing credit checks for managers with access to funds or
other positions involving handling money
• Federal and state FCRA laws are implicated when credit
checks are procured
• A requirement of creditworthiness cannot be justified for most
jobs
BOTTOM LINE: Avoid performing credit checks on applicants
Interviewing Do’s and Don’ts
• You can reduce or eliminate problems with
employees through careful hiring practices
• Use interviews, reference checks and applications
to find employees with the characteristics your
company needs for success
• Thorough interviews reveal
– Past discipline problems
– Exaggerated skill claims
– Difficult personalities
Interviewing
• Interviews, and all other employee selection
procedures, are governed by state and federal
anti-discrimination laws such as Title VII of the
Civil Rights Act of 1964
• Avoid questions that tend to reveal protected
class characteristics such as race, national
origin, age, and sex, or that indicate a
preference for applicants without such
characteristics
Protected Characteristics
• Race
• Age
• Disability
– Actual
– Perceived
– By Association
• Ethnicity
– Color
– National Origin
• Gender
• Religion
• Sexual Orientation
(in some places)
Interviewing
• Use interviews to get to know the applicant
• Ask hard questions about
– Skills necessary to do the job
– Strengths and weaknesses
– Past “gaps” in employment history
– Relationships with prior employers
Things You Can and Cannot Ask
• Do not ask an applicant’s age or date of birth or
any questions showing a preference for any age
group
• You may ask an applicant if he or she is over 18
Things You Can and Cannot Ask
• Do not ask about an applicant’s place of birth or
family history
• You may ask if an applicant is authorized to work
in the United States or about an applicant’s ability
to read or write English or a foreign language if
the job requires such
Things You Can Ask
• You may ask about an applicant’s freedom to
travel if it is required by the job
• You may ask about an applicant’s ability to meet
work schedule requirements
• You may ask if the applicant is available for
weekend and holiday work provided it is a job
requirement
Things You Cannot Ask
• Do not ask about an applicant’s religion or what
religious holidays he or she observes
• Do not ask if an applicant’s religion would
prohibit weekend or holiday work
Things You Can and Cannot Ask
• Do not ask about organizations or activities that
may reveal the applicant’s marital status,
national origin, creed, religion, or other protected
class characteristics unless the information is
demonstrably job related
• You may ask about professional organizations to
which an applicant belongs
Things You Cannot Ask
• Do not ask if an applicant has ever been arrested
• Do not ask about height, weight, physical or
mental condition, or medical history
• Do not ask about any physical characteristics
such as scars, burns, or missing limbs
Things You Cannot Ask
• Do not ask about the applicant's health
• Do not ask if the applicant has ever been
hospitalized or received counseling or seen a
psychiatrist
• Do not ask if the applicant has a drug or alcohol
problem
Things You Cannot Ask
• Do not ask if the applicant
has ever been injured on
the job or about an
applicant’s workers’
compensation history
• Do not ask if the applicant
will need leave for treatment
Things You Can and Cannot Ask
• Do not ask if the applicant has a disability or medical
condition that will prevent the person from performing
the job
• You may ask if the person knows of any reason that he
or she cannot perform the essential functions of the job
• You may describe or demonstrate a job function and
ask all applicants if they can perform the functions with
or without reasonable accommodation
Overview of Confidentiality and Trade Secret Considerations
Departing Employees and Competitors
• Use of “exit” procedures and terminating access to
company information systems
• Use of non-compete covenants and other restrictive
covenants
• Protecting trade secrets and other confidential information
• Pursuing claims associated with departing employees
Claims Associated With Departing Employees
• Breach of non-compete covenants and other restrictive covenants
• Misappropriation of trade secrets
• Tortious interference with contract
• Unfair trade practices
• Computer Fraud and Abuse Act
• Conversion
• Breach of post-termination fiduciary duties
Being the “New” Employer When Hiring a Departing
Employee From a Competitor
• Finding and responding to non-compete covenants and other
restrictive covenants
• Avoiding use or transfer of ex-employer’s trade secrets Avoiding
and other confidential information
• and defending claims associated with departing employees
Types of Non-Compete Covenants
• Non-compete covenant
• Non-solicitation of customers
covenant
• Restriction on employment with
customers
• Restriction on employment with
specific competitors
Non-Compete Covenants
Are “Restrictions On Livelihood”
N.C. Gen. Stat. § 75-4
“ No contract or agreement hereafter made, limiting the
rights of any person to do business anywhere in the State
of North Carolina shall be enforceable unless such
agreement is in writing duly signed by the party who
agrees not to enter into any such business within such
territory.”
Legal Requirements for
Enforceable Non-Compete Covenant
• In writing and signed by Employee
New Hanover Rent-A-Car vs. Martinez, 136 N.C. App. 642 (2000)
• Made part of contract of employment
Brooks Distributing Co. vs. Pugh, 91 N.C. App. 715 (1988)
• Based on valuable consideration
Young vs. Mastrom, 99 N.C. App. 120, 392 S.E.2d 446 (1990)
Hejl v. Hood, Hargett & Associates, 196 N.C. App. 299 (2009)
MSC Industrial Direct Co. v. Steele, 2009 N.C. App. LEXIS 1307 (2009)
Legal Requirements for
Enforceable Non-Compete Covenant
• Reasonable as to time and “territory”
Hartman vs. Odell & Associates, 117 N.C. App. 307 (1994)
Wachovia Ins. Servs. v. McGuirt, 2006 NCBC 23 (2006)
• Designed to protect legitimate business interest
VisionAIR, Inc. vs. James, 167 N.C. App. 504 (2004)
Okuma America Corp. vs. Bowers, 181 N.C. App. 85 (2007)
• Not against public policy
CNC/Access, Inc. v. Scruggs, 2006 NCBC 20 (2006)
Cox v. Dine-A-Mate, Inc., 129 N.C. App. 773 (1998)
Finding and Responding to Non-Compete
Covenants and Other Restrictive Covenants
• Find out if employee signed agreement containing non-compete covenant or
other restrictive covenant with ex-employer
• If employee says he/she is not obligated to ex-employer under non-compete
covenant, require representation and warranty of such
• If employee signed such agreement, get copy of it
• If new employment conflicts with non-compete covenant, see if employee can
negotiate with ex-employer for release from non-compete covenant or
modification that permits new employment
• If possible, require representation and warranty from employee that he/she will
not breach non-compete covenant
• If possible, require employee to indemnify new employer for legal expenses or
damages against new employer if ex-employer sues
Protecting Trade Secrets and
Other Confidential Information
Legal Requirements for Protection as “Trade Secret”
• Information is not publicly available or otherwise known to competitors
or other outsiders
• Information would be difficult for competitors or other outsiders to
obtain or develop independently
• Information derives actual or potential commercial value from not
being known to competitors or other outsiders and
• Employer has taken reasonable steps to maintain information as
secret and confidential
N.C. Gen. Stat.§66-152, et seq.
Protecting Trade Secrets and
Other Confidential Information
Other Considerations for Protection as “Trade Secret”
• Amount of time and money spent by Employer in developing
information
• Extent to which information is guarded from non-essential disclosure
to employees and others involved in Employer’s business
• Steps taken by Employer to prevent employees or other insiders from
revealing information to competitors or other outsiders
Avoiding Use or Transfer of Ex-Employer’s
Trade Secrets and Other Confidential Information
• Instruct employee that he/she cannot retain or use any materials from
former employment that are ex-employer’s property or contain ex-
employer’s trade secrets or confidential information and require
representation and warranty from employee that he/she will not do so
• Instruct employee that he/she cannot use or disclose any of ex-
employer’s trade secrets or confidential information and require
representation and warranty from employee that he/she will not do so
• Instruct other employees not to induce or cause departing employee to
use or disclose ex-employer’s trade secrets or confidential information
Claims for Breach of Non-Compete Covenants
and Other Restrictive Covenants
Ex-Employer’s Legal Options When Non-Compete Covenant Is Breached
• Demand departing employee to “cease and desist”
• Notify new employer of departing employee’s contractual obligations and demand
compliance, but be careful and be sure non-compete covenant is enforceable
• Negotiation versus litigation
• Lawsuit against departing employee and/or new employer
• Beware “backlash” with customers and employees
• Use business measures to keep customers and employees
White vs. Cross Sales & Engineering, 177 N.C. App. 765 (2006)
American Marble Corp. v. Crawford, 84 N.C. App. 86 (1987)
Questions?
Steve Rowe
252.972.7108
Sebastian Wolfrum
919-699-6733
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