North Carolina — Wage & Hour

North Carolina requires employers to pay the higher of $6.15 per hour or the federal minimum wage under the Fair Labor Standards Act, whichever is greater. Because the federal minimum wage is $7.25 per hour, the effective minimum wage in North Carolina is $7.25 per hour. The state rate automatically tracks any future changes to the federal FLSA minimum.

Source: N.C. Gen. Stat. § 95-25.3(a)

North Carolina requires overtime pay at 1.5 times the regular rate for hours worked over 40 in a workweek. The state follows the federal Fair Labor Standards Act standard and does not impose daily overtime thresholds. An employee who works 12 hours in one day but stays under 40 hours for the week is not entitled to overtime under state law.

Source: N.C. Gen. Stat. § 95-25.14; NC DOL — Overtime Pay, Salary and Comp Time

North Carolina requires employers to pay all wages due to separated employees on or before the next regular payday following termination, regardless of whether the employee resigned, was terminated for cause, or was laid off. The statute draws no distinction based on the reason for separation.

Basic timing rule. Under N.C. Gen. Stat. § 95-25.7, "[e]mployees whose employment is discontinued for any reason shall be paid all wages due on or before the next regular payday either through the regular pay channels or by trackable mail if requested by the employee in writing." This standard applies uniformly to voluntary and involuntary separations. Unlike states that require immediate payment or accelerated payment upon termination, North Carolina allows employers to follow their established payroll schedule. An employer with biweekly paydays need not cut a special check on the termination date; the final wages are due on the next biweekly payday that would have applied had the employee remained employed.

Bonuses, commissions, and other variable compensation. Wages based on bonuses, commissions, or other forms of calculation are governed by a related but slightly different rule. These amounts "shall be paid on the first regular payday after the amount becomes calculable when a separation occurs." The employer is not required to pay a commission or bonus that cannot yet be calculated on the termination date, but once the amount is calculable, it must be included in the next regular paycheck.

Forfeiture policies and the notification requirement. Variable wages "may not be forfeited unless the employee has been notified in accordance with G.S. 95-25.13 of the employer's policy or practice which results in forfeiture." G.S. 95-25.13 requires that employers make available to employees, in writing or through a posted notice maintained in a place accessible to employees, employment practices and policies with regard to promised wages. The statute adds: "Employees not so notified are not subject to such loss or forfeiture." If an employer maintains a policy that bonuses are forfeited upon separation (for example, a requirement that the employee be actively employed on the bonus payment date), that policy must have been communicated in writing in advance; retroactive forfeiture policies are unenforceable.

Scope of "wages." For purposes of the final-paycheck rule in § 95-25.7, N.C. Gen. Stat. § 95-25.2(16) defines "wage" broadly. The definition "includes sick pay, vacation pay, severance pay, commissions, bonuses, and other amounts promised when the employer has a policy or a practice of making such payments." Accrued vacation pay is therefore treated as a wage if the employer's policy or practice promises it. An employer may establish a written policy that limits or denies payout of accrued vacation upon termination, but in the absence of such a written policy communicated in accordance with § 95-25.13, accrued vacation is presumed to be a promised wage that must be paid in the final paycheck.

Payment method. The final paycheck must be delivered "through the regular pay channels or by trackable mail if requested by the employee in writing." An employer may continue using the same payment method (direct deposit, paper check) used during employment, but if the employee requests trackable mail in writing, the employer must comply.

Source: N.C. Gen. Stat. § 95-25.7; N.C. Gen. Stat. § 95-25.2; N.C. Gen. Stat. § 95-25.13

North Carolina's Wage and Hour Act exempts numerous categories of employees from the state's minimum wage, overtime, and youth employment requirements under N.C. Gen. Stat. § 95-25.14. The most significant exemption is the FLSA enterprise exemption under § 95-25.14(a)(1), which creates a structural relationship between federal and state coverage: employees already covered by the federal Fair Labor Standards Act are generally exempt from parallel North Carolina requirements, allowing the FLSA to serve as the operative standard for those workers.

The FLSA enterprise exemption — § 95-25.14(a)(1). Under § 95-25.14(a)(1), the provisions of N.C. Gen. Stat. § 95-25.3 (Minimum Wage), § 95-25.4 (Overtime), and § 95-25.5 (Youth Employment) do not apply to "[a]ny person employed in an enterprise engaged in commerce or in the production of goods for commerce as defined in the Fair Labor Standards Act." This exemption incorporates the FLSA's enterprise-coverage test by reference; employees who work for an enterprise that meets the FLSA's commerce thresholds (typically $500,000 in annual gross volume of sales or business) fall outside North Carolina's minimum-wage and overtime mandates for that reason alone.

The statute contains three important qualifications to this broad exemption:

• Youth employment carve-out (§ 95-25.14(a)(1)a). The exemption from North Carolina's youth employment requirements applies "[e]xcept as otherwise specifically provided in G.S. 95-25.5." Certain state youth-employment protections remain in force even for employees of FLSA-covered enterprises.

• Minimum-wage floor for non-exempt employees (§ 95-25.14(a)(1)b). An employee who is not otherwise exempt under other provisions of § 95-25.14, and for whom the applicable federal minimum wage is less than North Carolina's minimum wage ($6.15 per hour under § 95-25.3(a)), is not exempt from the North Carolina minimum-wage requirement. Because the current federal minimum wage ($7.25/hour) exceeds the North Carolina statutory rate, this provision has limited practical effect today but would activate if the FLSA minimum wage were to fall below $6.15 or if a specific sub-minimum-wage provision under the FLSA applied.

• Exemption from FLSA with no state analog (§ 95-25.14(a)(1)c). An employer or employee exempt from the FLSA's minimum wage, overtime, or child labor requirements for whom there is no comparable exemption under the North Carolina Act is not exempt under this subsection, except where the FLSA exemption provides an alternative overtime-calculation method (an alternative to 29 U.S.C. § 207(a)). In that case, the employer or employee subject to the FLSA's alternative method is exempt from N.C. Gen. Stat. § 95-25.4(a). Employees not employed at an FLSA-covered enterprise described in subdivision (1) are also subject to those FLSA alternative overtime methods in the circumstances the FLSA describes.

Other categorical exemptions under subsection (a). Beyond the FLSA enterprise exemption, § 95-25.14(a) exempts additional categories from minimum wage, overtime, and youth employment requirements (and associated record-keeping under § 95-25.15(b)):

• Agriculture (§ 95-25.14(a)(2)). Any person employed in agriculture, as defined under the FLSA.
• Domestics (§ 95-25.14(a)(3)). Any person employed as a domestic, including baby sitters and companions, as defined under the FLSA.
• Legislative and executive pages (§ 95-25.14(a)(4)). Any person employed as a page in the North Carolina General Assembly or in the Governor's Office.
• Bona fide volunteers (§ 95-25.14(a)(5)). Bona fide volunteers in medical, educational, religious, or nonprofit organizations where an employer-employee relationship does not exist.
• Incarcerated workers (§ 95-25.14(a)(6)). Persons confined in and working for any penal, correctional, or mental institution of the state or local government.
• Models and performers (§ 95-25.14(a)(7)). Any person employed as a model, or as an actor or performer in motion pictures or theatrical, radio, or television productions.
• Minor league baseball players (§ 95-25.14(a)(8)). Any employee who has entered into a contract to play baseball at the minor league level and who is compensated pursuant to a collective bargaining agreement that expressly provides for wages, hours, and working conditions.

Subsection (b) exemptions — minimum wage and overtime only. N.C. Gen. Stat. § 95-25.14(b) exempts additional employee categories from minimum wage and overtime (but not youth employment), including summer-camp employees, seafood processors, family members of the employer, FLSA white-collar exemptions (executive, administrative, professional, outside sales), computer professionals, and ridesharing participants.

Subsection (c) exemptions — overtime only. Section 95-25.14(c) exempts categories from overtime and related record-keeping requirements only, including motor-carrier employees (drivers, helpers, loaders, mechanics), seamen, railroad and air-carrier employees, automotive/truck/farm-implement dealer salespersons and mechanics, trailer/boat/aircraft dealer salespersons, live-in child care workers, radio/TV announcers and chief engineers, and employees of seasonal amusement or recreational establishments.

Government employer exemption — subsection (d). The provisions of the Wage and Hour Act do not apply to the State of North Carolina, any city, town, county, or municipality, or any state or local agency or instrumentality of government, except that the following provisions do apply to government employers: (1) the minimum wage provisions of § 95-25.3; (2) the definition provisions of § 95-25.2 necessary to interpret the applicable provisions; (3) the exemptions of subsections (a) and (b); and (4) the complainant protection provisions of § 95-25.20.

Seasonal government recreation programs — subsection (e). Employment in a seasonal recreation program by the State of North Carolina, any city, town, county, or municipality, or any state or local agency or instrumentality of government, is exempt from all provisions of the Wage and Hour Act, including the minimum wage requirement of § 95-25.3.

Source: N.C. Gen. Stat. § 95-25.14

North Carolina permits employers to pay a direct cash wage as low as $2.13 per hour to tipped employees, provided the employee's tips bring total compensation to at least $7.25 per hour. To take this tip credit, employers must satisfy specific notice, retention, and record-keeping requirements under state and federal law.

Tipped employee definition. Under N.C. Gen. Stat. § 95-25.2(14), a "tipped employee" is any employee who customarily receives more than $20 per month in tips. This threshold is lower than the federal FLSA standard of $30 per month under 29 U.S.C. § 203(t), meaning North Carolina extends tipped-employee treatment to workers whose monthly tip income falls between $20 and $30.

Cash wage floor and tip credit amount. N.C. Gen. Stat. § 95-25.3(f) allows employers to count tips earned by a tipped employee as wages "only up to the amount permitted in section 3(m) of the Fair Labor Standards Act, 29 U.S.C. § 203(m)." The FLSA sets the minimum direct cash wage at $2.13 per hour—the rate established on August 20, 1996, under 29 U.S.C. § 203(m)(2)(A)(i). The maximum tip credit an employer may take is therefore $5.12 per hour (the difference between the $7.25 minimum wage and the $2.13 cash wage). If an employee's tips in any workweek do not bring the employee's effective hourly rate to at least $7.25, the employer must pay the difference in direct wages.

Requirements to take the tip credit. To lawfully apply the tip credit under N.C. Gen. Stat. § 95-25.3(f), an employer must satisfy four conditions:

1. Advance notice to the employee. The employer must notify the tipped employee in advance that tips will be counted toward the minimum wage. Under 29 C.F.R. § 531.59(b), this notice must inform the employee of: (a) the amount of the direct cash wage; (b) the additional amount claimed as a tip credit (which cannot exceed the tips actually received); (c) that all tips received must be retained by the employee, except for valid tip pooling; and (d) that the tip credit will not apply unless the employee has been informed of these provisions.

1. Employee retention of all tips. The tipped employee must be "permitted to retain all tips." Under 29 U.S.C. § 203(m)(2)(B), an employer may not keep tips received by its employees for any purpose, including allowing managers or supervisors to keep any portion of employees' tips, regardless of whether the employer takes a tip credit. This prohibition is absolute under federal law as amended by the Consolidated Appropriations Act of 2018.

1. Accurate and complete tip records. The employer must "maintain accurate and complete records of tips received by each employee as such tips are certified by the employee monthly or for each pay period." Under N.C. Gen. Stat. § 95-25.3(f), even if an employee refuses to certify tips accurately, the employer may still count tips as wages if the employer can "demonstrate by monitoring tips that the employee regularly receives tips in the amount for which the credit is taken."

1. Make-up pay obligation. If tips plus the direct cash wage do not equal at least $7.25 per hour for any workweek, the employer must pay additional wages to bring the employee to the full minimum wage. This is the employer's legal obligation under both N.C. Gen. Stat. § 95-25.3(a) and 29 U.S.C. § 206(a)(1).

Tip pooling. North Carolina law expressly permits tip pooling "among employees who customarily and regularly receive tips," but "no employee's tips may be reduced by more than fifteen percent (15%) under a tip pooling arrangement." N.C. Gen. Stat. § 95-25.3(f). This 15% cap is a North Carolina overlay on the federal tip-pooling rules; the FLSA permits tip pooling among employees who customarily and regularly receive tips under 29 U.S.C. § 203(m)(2)(A) but does not impose a percentage cap. An employer who reduces an employee's tips by more than 15% through a tip pool violates state law and forfeits the tip credit.

Interaction with the FLSA enterprise exemption. Many North Carolina employers are exempt from the state's minimum-wage and overtime requirements under N.C. Gen. Stat. § 95-25.14(a)(1) because their employees are covered by the federal FLSA. For those employers, the FLSA's tip-credit rules at 29 U.S.C. § 203(m) and 29 C.F.R. Part 531 govern directly. Employers who are not covered by the FLSA—typically very small enterprises that do not meet the $500,000 annual gross volume threshold—remain subject to North Carolina's tip-credit rule in § 95-25.3(f), which incorporates the federal tip-credit standard by reference. In practice, both groups of employers apply the same $2.13 cash wage and the same four-part compliance framework, because North Carolina has adopted the FLSA standard.

Source: N.C. Gen. Stat. § 95-25.3; N.C. Gen. Stat. § 95-25.2; NC DOL — Minimum Wage in N.C.; 29 U.S.C. § 203(m)

North Carolina requires employers to pay all wages and tips accruing to employees on a regular payday. Employers may choose from five permitted pay-period frequencies and may select any legal form of payment, including cash, check, money order, or direct deposit, so long as full payment is made on the designated payday.

Frequency requirement. Under N.C. Gen. Stat. § 95-25.6, "[e]very employer shall pay every employee all wages and tips accruing to the employee on the regular payday." The statute does not mandate a maximum interval between paydays for regular wages (as opposed to final pay upon separation, which is governed by § 95-25.7). Instead, it enumerates the permissible pay-period structures from which employers may choose.

Permitted pay periods. N.C. Gen. Stat. § 95-25.6 authorizes five pay-period frequencies: daily, weekly, bi-weekly, semi-monthly, or monthly. An employer may adopt any of these intervals; the statute does not prohibit monthly pay periods even though many states impose biweekly or semi-monthly maximums. Once the employer establishes a regular payday within one of these frequencies, wages and tips must be paid in full on that payday for all work performed during the preceding pay period.

Bonuses, commissions, and other forms of calculation. The statute creates a separate timing rule for variable compensation. "[W]ages based upon bonuses, commissions, or other forms of calculation may be paid as infrequently as annually if prescribed in advance." This provision allows employers to defer payment of performance-based or formula-driven compensation beyond the regular pay period, but only if the employee has been notified of the annual payment schedule before earning the compensation. If the employer does not prescribe the extended interval in advance, bonuses and commissions are treated as regular wages subject to the standard pay-period rule.

Forms of payment. North Carolina regulation 13 NCAC 12.0309 clarifies that "[G.S.] 95-25.6 and G.S. 95-25.7 do not require a specific form of payment. Therefore, the employer may select any legal form of payment, so long as payment is made in full on the designated payday, subject to authorized deductions and legal withholdings." The regulation lists acceptable forms of payment: "cash, money order, negotiable checks, and direct deposit into an institution whose deposits are insured by the United States government or an institution selected by the employee."

Direct deposit. An employer may make direct deposit a mandatory condition of employment under North Carolina law without violating the Wage and Hour Act, but if direct deposit is the only option offered, employees must be permitted to choose their own financial institution. The North Carolina Department of Labor has taken the enforcement position that if mandatory direct deposit imposes bank fees that reduce an employee's effective hourly rate below the $7.25 minimum wage, the employer violates the minimum-wage requirement. If direct deposit is optional and the employee elects to participate, fees may reduce the employee's pay below the minimum wage without creating a violation.

Payroll cards. The North Carolina Department of Labor's enforcement position permits payment by payroll debit card if two conditions are met: (1) the employee can withdraw all monies due on payday at no cost, and (2) one-time use of the card by the employee on payday is at no cost to the employee. If the employer mandates the card and the employee cannot access wages without incurring fees, the employer violates the full-payment-on-payday requirement.

Enforcement. Under N.C. Gen. Stat. § 95-25.22(a), an employer who violates the wage-payment provisions of §§ 95-25.6 through 95-25.12 is liable to the affected employee for the unpaid amounts plus interest at the legal rate set forth in N.C. Gen. Stat. § 24-1, from the date each amount first came due. The statute also authorizes liquidated damages equal to the unpaid amount unless the employer demonstrates good faith and reasonable grounds for believing the act or omission was lawful.

Source: N.C. Gen. Stat. § 95-25.6; 13 NCAC 12.0309; NC DOL — Debit-Payroll Card Payment and Direct Deposit

North Carolina requires employers to provide written notification to employees about their wages at the time of hiring and before any reduction in promised wages. These notification requirements, codified in N.C. Gen. Stat. § 95-25.13, were substantially strengthened effective July 8, 2021, when Senate Bill 208 changed the hiring-notice requirement from oral-or-written to written-only and extended the advance-notice period for wage reductions from 24 hours to one full pay period.

Notification at hiring — § 95-25.13(1). Every employer must "notify its employees, in writing at the time of hiring, of the promised wages and the day and place for payment." The statute requires three specific disclosures in the written hiring notice:

• Promised wages. The amount the employee will be paid. The statute does not prescribe a particular level of detail, but the notice must be sufficient to inform the employee of the wage rate or salary they will receive.

• Day for payment. The regular payday (for example, "every other Friday" or "the 15th and last day of each month"). This must correspond to one of the five permitted pay-period frequencies under N.C. Gen. Stat. § 95-25.6: daily, weekly, bi-weekly, semi-monthly, or monthly.

• Place for payment. If wages are paid in person, the physical location where the employee will receive payment. If wages are paid by a method other than in-person delivery (direct deposit, mail, payroll card), the employer must disclose the method of payment instead of a physical place.

Prior to the July 8, 2021 effective date of Senate Bill 208, § 95-25.13(1) permitted employers to provide this notice "orally or in writing." The 2021 amendment eliminated oral notice as an option. The statute now requires written notice at the time of hiring. An employer may satisfy this requirement through an offer letter, an employment agreement, or a standalone written notice provided to the employee on or before the first day of work. Oral notice, even if detailed and accurate, no longer complies.

Notice of wage changes — § 95-25.13(3). Every employer must "notify employees, in writing, at least one pay period prior to any changes in promised wages." This provision applies to wage reductions and other changes that decrease or alter the employee's promised compensation. The one-pay-period advance-notice rule has two key components:

• "At least one pay period prior." The notice must be delivered far enough in advance that at least one full pay period elapses between the date of notice and the effective date of the wage change. For example, if an employer pays employees bi-weekly and the next regular payday is Friday, June 13, and the employer wants to reduce an employee's hourly rate effective Monday, June 30, the employer must provide written notice no later than Friday, June 13 (one pay period before the June 30 change). The one-pay-period minimum replaced the prior requirement of "at least 24 hours" notice, which had been in effect from 2005 through July 7, 2021.

• Written form. The notice must be in writing. Under the pre-2021 version of § 95-25.13(3), the statute permitted notice "in writing or through a posted notice maintained in a place accessible to its employees." The 2021 amendment removed the posted-notice option for wage-change notifications. Employers must now provide individualized written notice to each affected employee; a workplace poster or general announcement no longer suffices for purposes of § 95-25.13(3).

Retroactive wage increases excepted. N.C. Gen. Stat. § 95-25.13(3) expressly provides: "Wages may be retroactively increased without the prior notice required by this subsection." An employer who raises an employee's wages, whether prospectively or with retroactive effect, is not required to provide advance written notice. The one-pay-period notice obligation applies only to reductions or other changes that are adverse to the employee.

Ongoing policy disclosure — § 95-25.13(2). In addition to the hiring-notice and wage-change-notice requirements, every employer must "make available to its employees, in writing or through a posted notice maintained in a place accessible to its employees, employment practices and policies with regard to promised wages." This separate obligation requires employers to maintain written or posted documentation of wage-related policies—such as overtime-calculation methods, tip-pooling arrangements, bonus-forfeiture provisions, and vacation-accrual or payout rules—accessible to employees throughout their employment. Unlike subsections (1) and (3), subsection (2) still permits a posted notice as an alternative to individualized written distribution.

Itemized deduction statements — § 95-25.13(4). The statute also requires employers to "furnish each employee with an itemized statement of deductions made from that employee's wages under G.S. 95-25.8 for each pay period such deductions are made." This wage-statement requirement operates in parallel to the hiring and wage-change notice provisions and ensures transparency about any deductions authorized under North Carolina's wage-deduction statute.

Relationship to forfeiture provisions. The notification requirements in § 95-25.13 serve as a predicate for the enforceability of employer policies that result in forfeiture of wages. Under N.C. Gen. Stat. § 95-25.7, variable wages (bonuses, commissions) "may not be forfeited unless the employee has been notified in accordance with G.S. 95-25.13 of the employer's policy or practice which results in forfeiture." Similarly, vacation-pay forfeiture policies must be communicated "in accordance with G.S. 95-25.13." If an employer fails to provide the required written notice under § 95-25.13, forfeiture provisions in the employer's policy are unenforceable, and the employee retains the right to payment.

Effective date and legislative history. The current written-notice requirements took effect on July 8, 2021, when Governor Roy Cooper signed Senate Bill 208 into law. Session Law 2021-82 amended § 95-25.13(1) to require written (rather than oral-or-written) notice at hiring, and amended § 95-25.13(3) to require one pay period (rather than 24 hours) of advance notice before wage reductions. These amendments apply to all hiring and wage changes occurring on or after July 8, 2021.

Source: N.C. Gen. Stat. § 95-25.13; N.C. Gen. Stat. § 95-25.6; N.C. Gen. Stat. § 95-25.7; N.C. Session Law 2021-82 (Senate Bill 208)