That code would work if you had an implicit conversion from a string to an Employee. Basically a string literal is of type string - i.e. its value is a string reference (and an interned one at that). You can only assign a value of one type to a variable of another type if there's a conversion between the two types - either user-defined or built in. In this case, there's no conversion from string to Employee, hence the error.
Contrary to some other answers, the types don't have to be the same - for example, this is fine:
object x = "string literal";
That's fine because there's an implicit reference conversion from string to object. Likewise you can write:
XNamespace ns = "some namespace";
because there's an implicit conversion from string to XNamespace.
To answer your second question: to see if a type in .NET is a value type or a reference type... struct and enum types are value types; everything else (class, delegate, interface, array) is a reference type. That's excluding pointer types, which are a bit different :)