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Lawyers say House Bill 2 limitations go beyond what McCrory, supporters claim

Lawyers say House Bill 2 limitations go beyond what McCrory, supporters claim


The rhetoric unleashed by supporters and critics in the aftermath of the signing of House Bill 2 into law resembles a contest to see which group can out-shout the other with its version of the facts.

As a result, it’s been difficult to find the truth about what the controversial anti-discrimination law actually does since it went into effect Friday.

The bill was approved in a special legislative session March 23 and signed by Gov. Pat McCrory later the same day.

The largest local, statewide and national focus on HB 2 remains the issue of public-restroom choice, overturning a Charlotte ordinance that would have, in part, allowed transgender individuals to use restrooms and locker rooms matching their gender identity.

But all the attention on that aspect has left two other hot-button issues simmering on the side:

  • The law prohibits city and county governments from requiring private contractors to pay a set wage to employees for projects. The bill supersedes any local 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.”
  • The law removes state court as an option for discrimination lawsuits against employers. North Carolina joined Mississippi as the only states with no state court option.

McCrory and Republican legislative leaders have turned their position that the new law is foremost a “common-sense privacy law” into a mantra. Julia Howard, R-Davie, was one of the four sponsors of the bill.

Although the McCrory administration’s recent 18-point “myth vs. facts” news release concentrates on the restroom issue, it suggests that “for the first time in state history, this law establishes a statewide anti-discrimination policy in North Carolina which is tougher than the federal government’s. This also means that the law in North Carolina is not different when you go city to city.”

However, lawyers specializing in employment law contacted by the Winston-Salem Journal say that a uniform standard isn’t always in the best interest of the plaintiffs.

“While the legislators agreed that individuals have the right to sue an employer for discrimination, they took away their most efficient remedy for doing so,” said Harvey Kennedy, with Kennedy, Kennedy, Kennedy & Kennedy LLP of Winston-Salem.

“Therefore, when it comes to state court as a remedy, the anti-discrimination law became meaningless,” Kennedy said.

He said he is convinced that the inclusion of the prohibition on filing discrimination claims in state court and the wage restrictions was “a political power grab.”

“I understand those two elements were a surprise to most legislators, and may have been to the governor,” Kennedy said. During the special session, most legislators did not get a copy of the bill until the beginning of a House judiciary committee meeting.

“There was a will to do something quickly and capture the passion and momentum attached to the restroom ordinance legislation,” Kennedy said.

Richard Rainey, with Womble Carlyle Sandridge & Rice LLP in Charlotte, said he believes legislative leaders overstepped their authority when they added the discrimination language to the bill.

“I don’t agree with the perspective that those steps were necessary, and I am a defense lawyer,” Rainey said.

He said the law takes away communities’ ability to pursue the best contracts possible since they can no longer require private contractors to pay a wage that’s in line with the local economy.

“It was essentially a preemptive strike against municipalities who are more liberal than other parts of the state,” Rainey said.

Laura Noble, with The Noble Law Firm of Chapel Hill, said that with HB 2, “our representatives inexplicably chose to protect employers who discriminate against their employees from our state’s system of justice.”

“For almost 30 years, North Carolinians who have been fired because of their religion, race, color, national origin, age, sex or disability have been able to bring claims in state courts under the common law theory of wrongful discharge in violation of public policy,” Noble said.

North Carolina had 28,167 claims filed with the U.S. Equal Employment Opportunity Commission between fiscal years 2008-09 and 2013-14, representing about 5 percent of national claims during that time period.

Claims based on racial discrimination comprised 39.8 percent, or 11,207, followed by sex at 28.3 percent, or 7,962; national origin at 8.4 percent, or 2,371; and religious at 3.8 percent, or 1,075.

According to The News & Observer of Raleigh, the state agencies responsible for measuring the state’s Equal Employment Practices Act — a remedy cited in the bill — said data for those claims was not available.

By prohibiting the state Equal Employment Practices Act as the basis for civil action, Noble said, “this law has essentially eliminated state law sanctions for employers, who can now fire its employees ... with no state law consequences.”

Forced into federal court

N.C. House and Senate Republican legislative leaders emphasized during debate over the bill that North Carolinians have a “far more robust” federal court option for filing discrimination lawsuits.

Noble disagrees with the “robust” suggestion, saying that filing a complaint in federal court is twice as costly as state court, more time-consuming in terms of logistical requirements, and likely to have a longer period before a decision.

“By eliminating employees’ rights to pursue legitimate discrimination claims in N.C. courts, we unnecessarily force our citizens to the federal government and invite excessive federal intrusion into issues that are better handled at the state level,” Noble said.

Legislators say there is a state remedy in that complaints could be investigated and mediated by the N.C. Human Relations Commission.

However, Noble said that commission has focused “on resolving housing discrimination complaints for private persons and improving community relations.”

“The commission simply does not address employment discrimination complaints against private employers ... because its authority is expressly limited to receiving, investigating and trying to mutually resolve such complaints,” she said.

The commission also does not receive reoccurring financing from the legislature.

Federal remedies for compensatory and punitive damages are capped according to employer size, ranging from a combined $50,000 to $200,000. In state court, Noble said, there is no cap on compensatory damages, and punitive damages can be worth up to three times the compensatory damage award.

Federal claims must be filed first with the EEOC, whose due diligence obligations often serve to weed out the majority of lawsuits before they reach federal court.

Noble and Rainey said the EEOC tends to take more than six months to recommend whether to pursue a federal court filing, in part because its three North Carolina offices typically are understaffed. By comparison, Kennedy said it is not uncommon for a discrimination case filed in state court to be completed within eight to 12 months.

Before HB 2 went into effect, individuals had up to three years to file a discrimination lawsuit. An EEOC complaint must be filed within 180 days of the alleged discrimination act.

“Many employees who have been fired do not realize, within 180 days of the termination, that an unlawful discriminatory motive caused their termination,” Noble said.

More costly for N.C. businesses

Rather than being able to file a complaint in state court in the home county of most plaintiffs, there are a limited number of courts within North Carolina’s three federal districts, including Winston-Salem, Greensboro and seldom-used Durham in the Middle District.

“In federal court, the jury pool is drawn from throughout the district, whereas in state court, the jury pool usually comes from the local county,” Kennedy said.

Noble said that historically, federal judges and juries “are more hostile” to employment discrimination claims than are state judges and juries.

“Complaints filed in federal court are quickly visible via an online search, while state court complaints generally are not,” Noble said. “This discourages wrongfully fired employees from pursuing a federal claim because they are concerned this will impact their ability to obtain new employment.”

Noble said the elimination of state court discrimination lawsuits can be reversed without harming legislators’ intent on the Charlotte ordinance and transgender restroom use.

“Forcing businesses to litigate employment discrimination claims in federal court is not better for North Carolina companies,” she said.

For example, she said there are statutory attorneys’ fees available to plaintiffs under federal anti-discrimination laws that are not available under state law.

“The attorney fee awards in federal court can dwarf the actual compensatory awards,” Noble said. “Forcing more cases into federal court could actually cost North Carolina business more money.”

Sullied business climate?

The lawyers say the law could affect the state’s ability to attract and retain employers, even as McCrory and legislative leaders stress that the state remains just as attractive and viable for business recruitment as it was before the bill was passed.

The law allows local governments to set wage requirements in some cases: the amount they pay their own employees, the amount needed to meet qualifications for economic incentives and the amount necessary to qualify for federal community block grants.

“We know of no examples of companies being recruited to North Carolina that have asked if the state has an ordinance like the one Charlotte was proposing,” according to the 18th point in McCrory’s “myths vs. facts” news release.

However, chief executives of more than 120 corporations — several with major ties and operations in North Carolina — have signed a letter urging McCrory to revise or repeal the law.

On Thursday, Braeburn Pharmaceuticals of Princeton, N.J., said it is “reevaluating our options based on the recent, unjust legislation” whether to build a $20 million manufacturing and research facility with 50 high-paying jobs in Durham County. Braeburn announced its plans March 16.

Several film-production companies have said they will not continue filming after the current part of their projects are wrapped up, and will not consider North Carolina for new productions until the law is repealed.

The bill’s synopsis says that “laws and obligations consistent statewide for all businesses, organizations and employers doing business in the state will improve intrastate commerce” and attract new businesses.

“One county should not be able to tell another county how to set wages,” said Rep. Paul Stam, R-Wake, a co-sponsor of the bill.

Sen. Buck Newton, R-Wilson, the Republican nominee for state attorney general, said the wages provision “protects businesses so they don’t have to have a lawyer in each county to figure out what local regulations and ordinances they are subject to.”

Noble raised a free-market scenario to supporters of the bill, saying that Republicans tend not to penalize companies or individuals with taxes for being successful.

“Why should urban communities be limited in their contract requirements with wages just because they are performing better than other parts of the state?” she asked.

There was an attempt by an opponent of the bill to turn the three provisions into separate bills. That suggestion was snuffed out by bill supporters who cited the overall effort to rein in what they considered oversteps by local authorities.

Kennedy said he believes that separate bills tackling the elimination of the state court option on discrimination lawsuits and on the set wage requirement would not have passed the legislature.

“They would have faced more severe scrutiny at the committee level from the public and some committee members,” Kennedy said. “There would have more media reports.

“Without the momentum of the restroom ordinance, their chances of passing in a regular season were not good.”

The Associated Press (336) 727-7376 @rcraverWSJ

The Associated Press contributed to this report.

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