Ignore the hype: Here's what employers need to know about North Carolina's HB 2

Argh! I was hoping not to have to talk about HB 2 again (North Carolina's notorious "bathroom bill"), but there has been so much misinformation about what it did to wrongful discharge claims that I've just gotta.

UPDATE (6:20 p.m. Friday, 4/8/16): I had a good conversation this evening with Greg Lacour of Charlotte Magazine about his article. We agreed that his article did not misrepresent all of the facts about HB 2 that I've discussed below. Most of my "seven facts" are in rebuttal to statements I've heard about HB 2 from other sources. The primary inaccuracy in Mr. Lacour's article was his statement that all causes of action for wrongful discharge have been abolished by HB 2. (See Fact No. 6.) He and I have a few additional substantive disagreements, but they're probably more accurately characterized as differences of opinion. I also thought Mr. Lacour should have talked to a defense attorney in addition to a plaintiff's attorney. Mr. Lacour agreed, and is going to publish a new blog post addressing some of these points. When it's up, I'll give you a link.

In light of my conversation with Mr. Lacour, I'm deleting the word "inaccurate" from the last sentence of this blog post.

I also received an email this afternoon from the Charlotte City Attorney with his legal analysis regarding the constitutionality of HB 2's employment provisions. (See Fact No. 1.) I have not had a chance to read it yet, but he gave me his permission to publish his email and the memorandum, so I'll post them both soon.

UPDATE (6:35 a.m. Monday, 4/11/16): Greg Lacour was nice enough to send me a link to his updated article on HB 2. I don't agree with everything he's said in this one, and I'm especially disappointed that he didn't address the point-by-point analysis of his original article that he asked me to make with him over the phone on Friday. I'll respond with specifics soon.

UPDATE (9:49 p.m. Wednesday, 4/13/16): Dear Readers: Thanks very much for the constructive comments from Ian Palmquist, Eric Doggett and lawblawd related to my "Fact No. 1" below. I have been spending the evening re-reading the Williams decision and comparing it with the Charlotte ordinance amendments enacted in February (and then nullified by the General Assembly in March). I'll be posting more about this soon.

UPDATE (7:16 a.m. Friday, 4/22/16): My final piece, on whether the Charlotte ordinance was legal in the first place, is up now, including the correspondence I received from Charlotte City Attorney Robert Hagemann. 

(Those of you looking for my personal opinion about the "bathroom" part of the bill will have to live in suspense.)

Here's what HB 2 does and doesn't do to the common-law cause of action for wrongful discharge:

Fact No. 1: HB 2 does preempt (override) local anti-discrimination ordinances, such as the one that the City of Charlotte enacted in February. But did you know that in 2003, the North Carolina Supreme Court had already decided that local human rights ordinances (such as the one that the City of Charlotte enacted in February) are unconstitutional? It did! So the "preemption" part of HB 2 actually represents no change in existing law.

NC retro postcard.flickrCC.orionpozo

Fact No. 2: HB 2 does abolish the common-law "wrongful discharge" cause of action based on "EEO" discrimination. When I say "EEO," I mean discrimination based on race, sex (now "biological sex"), national origin, color, religion, age, and "handicap." (Ugh.) This means that if an employee wants to assert a discrimination claim against an employer, she has to either go through the EEOC charge-filing/resolution process first and then sue under federal law, or sue based on an "indirect" state-law claim, like intentional or negligent infliction of emotional distress, negligent hiring or retention, false imprisonment, assault and battery, or something else that fits the situation. A plaintiff can always combine federal discrimination and state-law tort claims in the same lawsuit, too.

Fact No. 3: HB 2 does not stick it to the plaintiff on the statute of limitations. Federal law has a fairly short time limit for filing a discrimination charge (in North Carolina, 180 days). The statute of limitations on a wrongful discharge claim is three years (1,095 days) from the date of termination. A state claim is way better, right? Usually, but not always. Even though an individual has 180 days to file the initial discrimination charge with the Equal Employment Opportunity Commission, the time for filing a lawsuit is 90 days after the EEOC is done with the charge. (More precisely, 90 days after the individual receives a Notice of Right to Sue.) If the EEOC has a backlog, the 90-days-post-dismissal could be more generous than the three-years-from-date-of-termination that applies to wrongful discharge claims. 

Don't panic!

Fact No. 4: HB 2 will not necessarily result in a smaller recovery for a plaintiff who wins. Yes, compensatory (emotional distress) and punitive damages under the federal anti-discrimination laws are capped. But punitive damages are capped under North Carolina law, too.

If the plaintiff wins on a federal discrimination claim, she can get back pay, back benefits, future pay, future benefits, plus up to $300,000 in compensatory and punitive damages. Under North Carolina law, a wrongful discharge plaintiff can get lost wages and emotional distress damages (not capped), plus punitive damages in appropriate cases, which are capped at three times the actual damages or $270,000, whichever is greater.

Let's say you are a minimum wage worker who is fired after complaining about sexual harassment. You go right out and get another minimum wage job, and you never try to get medical or psychiatric treatment. But your employer was very bad -- it tolerated a notorious sexual harasser for years only because he made a lot of money for the company, despite complaints from 199 victims (you were victim number 200).

Are you better off suing under North Carolina law, or under federal law?

Under North Carolina law, you'd get your actual damages (let's say $6,000). Your employer was rotten to the core, so you get punitive damages. Your actual damages were only $6,000, so you get either $6,000 x 3 = $18,000, but that's less than the $270,000 maximum, so you get $270,000 in punitives. Your "gross" recovery is $276,000 in state court -- but you have to pay your lawyer, because you don't get attorneys' fees on a wrongful discharge claim. That'll be one third, please, ma'am. Your "net" is $184,000.

In this scenario, you are better off suing under the federal anti-discrimination laws. You'd get your actual damages of $6,000, plus $300,000 in punitive damages (this amount varies depending on the size of the employer). Whoa! You're already $30,000 ahead. Plus, under federal law, you get attorneys' fees, which means that your lawyer won't have to take a cut -- that whole beautiful $306,000 is for you!

Charlotte Skyline.flickrCC.JamesWillamor
Did Charlotte realize its ordinance was unconstitutional?

Fact No. 5: HB 2 does not "abolish" any EEO protections for LGBT individuals in North Carolina because they have never had that protection anyway. Let's do a "before and after":

BEFORE HB 2: LGBT individuals were not protected against discrimination under North Carolina state law.

AFTER HB 2: LGBT individuals are not protected against discrimination under North Carolina state law.

BEFORE AND AFTER: The General Assembly can enact a statute that protects LGBT individuals whenever it wants.

BEFORE AND AFTER: According to the EEOC, the federal Title VII prohibits employment discrimination against LGBT individuals, including LGBT individuals in North Carolina.

I was quoted extensively about HB 2's employment provisions in a blog post for the Wall Street Journal Risk and Compliance Journal. Thanks very much to WSJ editor Ben DiPietro.

Fact No. 6: HB 2 does not abolish any other claims for wrongful discharge. In North Carolina, employees can sue for wrongful discharge on a lot of grounds unrelated to "EEO" status. Workers' compensation retaliation, OSHA retaliation, Wage-Hour Act retaliation, termination for refusing to commit perjury, termination for testifying truthfully, termination for refusing to take an action that the employee believes violates the law, you name it. All of these claims are still valid in a post-HB 2 world. It's only the wrongful discharge claims based on "EEO" status that are abolished.

Toilet Junkyard.flickrCC.IanRansley
If you're an NC employer, you can still let employees use the bathroom that corresponds to their gender identity.

Fact No. 7: HB 2 does not require an employer to provide restrooms to employees based on their biological sex. The bill's bathroom provisions do not apply to private-sector workplaces, or to the public sector in relation to public-sector employees. Thus, a North Carolina employer may choose to comply with the current guidance from the EEOC and the Occupational Safety and Health Administration, which is that individuals should be able to use the bathroom that corresponds to their gender identity. A North Carolina employer who does this will be in compliance with HB 2.

Thanks again to Jon Yarbrough, who forwarded that Charlotte Magazine article to me.

Image Credits: From flickr, Creative Commons license. Vintage North Carolina postcard by orionpozo; screaming woman by Venturist; Charlotte skyline at night by James Willamor; toilet junkyard by Ian Ransley.

Robin Shea has 30 years' experience in employment litigation, including Title VII and the Age Discrimination in Employment Act, the Americans with Disabilities Act (including the Amendments Act). 
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