Misclassification: North Carolina Proposes New Penalties for Employers

Employee rights have developed over centuries to protect workers financially, physically, and from other abuses that may result from employers or companies taking advantage of power. While the legal rights of workers have developed, employers continue to find loopholes to make a profit and put workers at a disadvantage. One way that workers may lose rights is when they are misclassified by an employer.

Construction workers, factory workers, and other skilled laborers may find themselves signing an “Independent Contractor” arrangement, even when they are actually a bona fide employee. Unfortunately, many workers do not realize that they are signing away their rights until it is too late. Though contracts can be binding, “Employee” versus “Independent Contractor” status is determined by law and the courts, not an agreement established by an employer. Our Charlotte workers’ compensation attorneys are experienced in the complexities of workers’ compensation law and are dedicated to helping protect employee rights.


One primary difference between an “Independent Contractor” and an “Employee” is that an employee is entitled to workers’ compensation benefits. Employers will intentionally misclassify employees for several reasons. First of all, they do not have to pay workers’ compensation insurance. Companies and single employers also avoid various taxes and can avoid a number of other legal obligations that they would otherwise have to an employee.

Courts base classification on the degree of control the employer has involving the manner and method of work. Misclassification of employees is not difficult because it usually isn’t challenged until an employee is in need of workers’ compensation or other benefits. Many employees don’t realize that they do not have the correct status until they are facing a dispute with an employer who avoided taxes and failed to pay insurance.

Some legislators are suggesting that companies should face criminal prosecution and that civil penalties should be increased for such misclassifications. Other ways to discourage misclassification would be to create a statutory definition of employment. For example, in Germany, any employee who makes more than 82% of their wages from one party is technically an employee and cannot have “Independent Contractor” or freelancer status. This broadens the security gap for employees who are solely dependent on one employer for income. Some workers’ rights advocates are also proposing that legislators revoke the licenses of perpetrators or consider workers’ compensation for all employees.

A new bill will require employers to notify employees of their work classification in writing. At least workers who are classified as “Independent Contractors” will be aware of their status in advance and can contest any terms that they disagree with. The bill also increases punishments for those who practice fraud and wage theft.

Workers’ compensation is a program intended to protect workers and their families in the event of an injury, illness or work-related accidental death. Unlike personal injury claims, employees do not have to prove negligence; however claims are limited to medical expenses and lost wages. Employees who are denied benefits may be able to file third-party negligence claims. The North Carolina bill would protect workers and ensure that companies and employers are compelled to compliance.

If you have been denied workers’ compensation or need an advocate to help you file a claim, contact the Lee Law Offices today by calling 800-887-1965.

More Blog Entries
Independent Contractor Workers’ Comp and Third-Party Claims, North Carolina Workers’ Compensation Lawyers Blog, May 20, 2013

New Legislation Aims to Bolster OSHA Role in Worker Safety, North Carolina Workers’ Compensation Lawyers Blog, May 25, 2013

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