North Carolina’s Wage and Hour Act Does Not Apply to Non-Residents Working Primarily Out of State

Panos v. Timco Engine Center, Inc., __ N.C. App. __, 677 S.E.2d 868 (2009) – The North Carolina Court of Appeals recently reaffirmed that the state’s Wage and Hour Act does not apply to a non-resident employee working primarily outside of the state, even though the individual communicated daily with co-workers within the state.

In January 2005, Ross Panos entered into a two-year employment agreement with Timco Engine Center (whose parent company has an office in Greensboro) to serve as the company’s general manager. The agreement provided that Panos would be paid his base salary for one year if Timco terminated his employment “without cause.” It also provided that the terms of the agreement would be governed by North Carolina law. While Panos lived in California and managed a facility for Timco in Michigan, Panos participated in conference calls with Timco’s president, who is based in Greensboro, and other Greensboro employees almost daily. He also traveled to North Carolina for work about eight or nine times a year for a day or two each time. 

In December 2005, Panos began searching for a new job by sending e-mails (some to Timco’s competitors) through his corporate e-mail account. Timco’s president terminated Panos’ employment for “cause” claiming his actions constituted a breach of loyalty. Panos sued alleging that Timco had breached the employment agreement and violated North Carolina’s Wage and Hour Act by failing to pay severance pay as set forth in the agreement. The trial court granted summary judgment in favor of Timco on Panos’ Wage and Hour Act claim. On appeal, the Court of Appeals found the Wage and Hour Act did not apply to Panos because, despite his daily phone calls to North Carolina, his activities as a non-resident were insufficient to bring him within the statute’s protections. That the employment agreement called for North Carolina law to apply to its terms, the court found, did not “change the limits or requirements of the North Carolina statutes thus applied.”

Note: This article was published in the October 2009 issue of the North Carolina eAuthority.