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By Bradley Hunt, Attorney at Law

How To Avoid Labor Lawsuits

As a business owner, you must be prepared to deal with problems or challenges that may impact the growth and future success of your company. Whether you’re operating a small business with 1-5 employees or an organization with 20 employees, here are three steps that you should take to protect yourself and your business from employment lawsuits.

Step One: Understand State and Federal Employment Laws

Having a basic understanding of both federal and North Carolina labor laws is a good start to avoiding a labor lawsuit. North Carolina is an “at-will” employment state, meaning an employer can hire and fire an employee at their discretion. While North Carolina may be an “at-will” state, this does not mean that an employee is powerless when it comes to filing a suit against a company. Setting clear expectations and following state and federal employment laws is a good start. Having an employment contract or agreement could save you the trouble of dealing with a lawsuit.

Step Two: Follow Wage Guidelines

Employers often get into trouble trying to avoid paying overtime or misclassifying employees as part-time or 1099 (to avoid paying benefits) when they are treated as full-time direct hires. All employers should be following the rules as it relates to overtime pay, contract, part-time or full-time employees.

Some of these classification rules can be tricky, especially related to contract vs. direct hire employees. If you are not certain, you may wish to consult with an employment attorney. For an overview of employee rights regarding overtime pay, visit the North Carolina Department of Labor’s website.

Step Three: Outline Termination Practices

While NC employers can fire employees at will, it is a good idea to have some documentation reflecting the reason the person was terminated. As an employer, no matter what industry or field, keeping a detailed outline of termination instructions for the manager or owner to follow can be valuable. These guidelines should be prepared well in advance of needing to use them to terminate an employee.

Questions your termination guideline should answer:

  • What actions will result in immediate termination? Who within the company has the right to immediately terminate an employee?
  • What actions will result in a warning in the employee’s file?
  • How and when will offenses be documented?
  • Who is responsible for documenting warnings and terminations? Where will that information be maintained?
  • Are there probationary periods for insubordination, misconduct, or other actions?
  • What steps are needed from a security perspective when you terminate an employee? This might include revoking access to computer networks or buildings, or even having a security team member watch while the employee collects their personal items before escorting them from the building. If the person might be considered a risk to other employees, you may wish to take additional precautions.

Should you need to terminate (layoff) large numbers of employees due to a major reduction in force or business closure, federal rules may apply under the Worker Adjustment and Retraining Notification Act (WARN). These rules generally apply to businesses with 50 or more employees.

Labor laws can be complex. If you are uncertain about how to handle a specific employee-related issue, please schedule an appointment with one of our employment law attorneys.