Ken Carlson of Constangy, Brooks, Smith & Prophete, LLP writes:

The “hottest” news in North Carolina employment law these days is arguably the most publicized – and polarizing – statute to have ever come out of Raleigh.  At least in modern times.

It’s officially called “An Act to Provide for Single-Sex Multiple Occupancy Bathroom and Changing Facilities in Schools and Public Agencies and To Create Statewide Consistency in Regulation of Employment and Public Accommodations.”  But that’s the formal name that virtually no one recognizes.  What is recognized is its common name – and for good, bad, or somewhere in between, our entire state is caught in a much larger national conversation known as “HB2.”

Much could be said about HB 2 and how a statute so little debated before passage has generated so much debate once passed.  But the focus of this article is singular, answering a question that many companies have asked:  What does HB 2 mean for private employers, the type of companies that make up the vast majority of the Greater Winston-Salem Chamber of Commerce?  The answer is surprisingly simple – not much.  And to illustrate the point, this article addresses the three primary aspects of HB2 that have actual or potential implications for private companies:  (1) bathroom usage;  (2) employee minimum wage payments or benefits; and  (3) North Carolina discrimination laws.

Bathroom Usage

Contrary to what some may consider popular belief, nothing in House Bill 2 mandates private employers to alter anything in their workplace in order to accommodate or not accommodate transgendered or transitioning individuals, or a person’s self-identity with a particular gender.  This includes no requirement to prohibit or allow such individuals to use a particular bathroom, or to have or not have unisex bathrooms at work, or to monitor the biological sex of employees or visitors when using bathrooms in company facilities.  In short, private companies can essentially do what they want regarding those issues – but it is true that if a company does restrict a bathroom facility to members of a particular biological sex, then HB2 allows the restriction without risk of it being “discriminatory” under North Carolina law.  And this part of the new law, called the “Equal Access to Public Accommodations Act”, is one of the main issues that opponents of HB2 generally cite as being untenable – i.e., as actually enabling what they consider to be discriminatory practices in the workplace.

A primary exception for private employer compliance with HB2 is if the employer also operates facilities that are places of “public accommodation” as defined by G.S. § 168A-3(8).  In short, a place of public accommodation is any facility that is open to the public, not just to the employer’s own employees, and which “supplies goods or services on the premises to the public or which solicits or accepts the patronage or trade of any person.”  (Private clubs or other establishments that are not actually open to the public are excluded.)  For private employers that operate places of public accommodation, compliance with HB2 means that it shall not be discriminatory to designate “multiple or single occupancy bathrooms or changing facilities according to biological sex” – and no local government ordinance, regulation, resolution or policy can dictate otherwise.

Significantly, there is no requirement to allow or not allow transgendered, transitioning or other individuals who self-identify with a particular gender to use a particular bathroom in those places of public accommodation.  And there is no requirement for private employers to essentially “police” that usage.  Rather, private employers can take whatever course they want, although it should be said that many will likely do what many have already done – install or convert at least one existing bathroom into a “unisex” or “multi-sex” facility intended to more easily accommodate this usage dynamic.

That being said, another exception to HB2 involves private employers who are also contractors with the federal government in an amount of at least $10,000 in a 12-month period.  For those companies, federal Executive Order 11246 – which establishes requirements for non-discriminatory practices by federal contractors – actually prohibits them from requiring transgendered, transitioning or other individuals who self-identity with a particular gender to use a particular bathroom.  In other words, federal contractors subject to Executive Order 11246 cannot do what HB2 allows in terms of restricting male or female bathrooms to only those of the same corresponding biological sex.

Note:  The U.S. Equal Employment Opportunity Commission (EEOC), which enforces a number of federal discrimination laws, and the Occupational Safety and Health Administration (OSHA), which tries to ensure safe and healthy work environments for all employees, have also published employer guidances concerning these issues which may affect private employers.  In particular, these guidances address non-discrimination against and/or accommodating transgender, bisexual, gay or lesbian employees, including their use of bathrooms in a private workplace.  These guidances operate under a larger rubric of prohibiting sexual or gender stereotyping, which is then equated to a form of unlawful sex/gender discrimination.  Although guidances are not legally binding, they do have persuasive authority with courts and many companies use them to help monitor compliance with federal anti-discrimination laws such as Title VII of the Civil Rights Act of 1964.

Minimum Wage Payments or Benefits

Part II of HB2 includes amendments to the North Carolina Wage and Hour Act, G.S. § 95-21.1 et seq.  These amendments essentially prohibit any local government from adopting an ordinance, regulation, resolution or policy that “regulates or imposes any requirement upon an employer pertaining to compensation of employees, such as the wage levels of employees, hours of labor, payment of earned wages, benefits, leave, or well-being of minors in the workforce.”

In other words, no city or county in North Carolina can adopt their own minimum wage law, or require any contractor to pay a “prevailing wage” (similar to federal contractor prevailing wage requirements), or mandate that private employers have certain benefits, hours of work, or other key aspects of employment as enumerated above.  Supporters of this aspect of HB2 claim that it prevents the “Balkanization” of wage-related laws in North Carolina by preventing different and perhaps conflicting standards based on location alone.  Opponents of this aspect of HB2 claim that it instead prevents local governments from trying to establish more “livable wages” and other improved employment conditions for their communities.

North Carolina Discrimination Laws

Another provision of HB2 that caught many by surprise, including employment lawyers on both sides of the litigation aisle, is Part III – the “Protection of Rights in Employment and Public Accommodations” section.  This provision amended G.S. § 143-422.2, which states a “public policy” against discriminating against employees based on race, religion, color, national origin, age, sex or handicap by employers with at least 15 employees.  This public policy statement has been used for approximately 30 years as the basis for “wrongful discharge” lawsuits in North Carolina state and federal courts by individuals claiming they were terminated from employment due to their race, sex, age or one of the other public policy categories listed in the statute.

Not only did HB2 amend “sex” to “biological sex” in G.S. § 143-422.2, it also includes an express statement in 143-422.3 that “[t]his Article does not create, and shall not be construed to create or support, a statutory or common law private right of action, and no person may bring any civil action based upon the public policy expressed herein.” Simply stated, HB2 now emphatically prohibits any discrimination or wrongful discharge claim based on an alleged violation of this long-established public policy statement, effectively leaving private litigants with only the U.S. Equal Employment Opportunity Commission and federal courts for employment discrimination charges and lawsuits.

The effective date of HB2 was March 23, 2016, after less than three days of proposal and debate by the state legislature.  It is currently being challenged by at least one federal lawsuit, and certain aspects of the statute may soon be repealed or revised.  For example, its bathroom usage tenets may ultimately be held unlawful based on an April 19, 2016 decision by the Fourth Circuit Court of Appeals, Grimm v. Gloucester County School Board.  In Grimm, the court sided 2-1 with a transgendered male student in a Virginia public high school who objected to being required to use either the bathroom of his biological sex (female), or a unisex bathroom which he considered “stigmatizing”.  Although the facts involved government action in a public institution, with legal analyses quite distinct from those applying to private employers, its legal and practical effect of invalidating the school’s restroom policy could have a significant effect on North Carolina’s HB2.

In addition, the public outcry that has reverberated across the nation since HB2’s passage led Governor McCrory to issue his own Executive Order No. 93 on April 12 – an order that at least lays the foundation for paring away certain provisions in this highly controversial statute when our state legislature next convenes.  And bathroom issues aside, there is a growing movement to repeal at least the amendments to G.S. § 143-422.2 and/or 143-422.3 which now prohibit wrongful discharge claims based on race, biological sex, age, religion and various other protected categories.

To repeat yet again a continuing theme in employment law these days:  stay tuned…..

Ken Carlson
Constangy, Brooks, Smith & Prophete, LLP
(336) 721-6843; [email protected]