North Carolina Worker Misclassification Bill Advances, Some Critical

Last fall, the Raleigh News & Observer published a mammoth, five-part series on the problem of worker misclassification, both nationally and specifically in North Carolina, where the practice is especially pervasive.
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The issue involves companies classifying workers as independent contractors when in fact they are employees. In so doing, these firms can avoid paying workers’ compensation benefits, income taxes or unemployment taxes. Not only does this harm workers, who are left without these protections, it also harms other businesses that are unable to compete with those skimming an estimated 20 percent of their costs off the top. Further, the newspaper reported these actions cost North Carolina $467 million every year in lost tax revenue – and that’s just in the construction industry alone!

What’s more, the report revealed an astonishing 45 percent of the 826 companies participating in HUD-funded projects in this state from 2009 through 2013 misclassified workers.

(In South Carolina, as reported by The State, at least 340 companies misclassified some 2,200 workers in the last two years, resulting in government sanctions. However, those were only the businesses that were caught, which amounted to about 12 percent of the companies audited in a single year. Within the construction industry, it was approximately 38 percent of companies that misclassified workers.)

In response to this eye-opening expose, a number of bills have been introduced into the state legislature that would toughen penalties for businesses that wrongly classify workers, placing the financial burden on virtually everyone else. However, some say those measures still don’t go far enough.

One advocate, North Carolina business owner Doug Burton, recently penned an opinion-editorial for the News-Observer in which he praised lawmakers for taking action, but insisted it needs to have more teeth.

The measures, SB 694 and HB 482 promise to enact employee misclassification reform.

For one thing, Burton said, both bills are relatively weak when it comes to penalties for businesses caught engaging in this practice (which he refers to as “fraud”) are weak. Further, these penalties aren’t even imposed until a business is caught cheating a second time.

Burton suggests we follow the stricter Florida model. One of those elements involves issuing “stop work orders” immediately to companies that aren’t providing workers’ compensation coverage to employees. Work only resumes once the proper insurance has been purchased.

He also recommends a third-party assistance organization to companies caught engaging in this practice, giving occupational licensing boards the authority to revoke, suspend or deny licenses due to misclassification and making cheating businesses ineligible for state or federal government contracts.

Burton noted that although many in the current legislature have vowed to be business friendly, he said that does not mean allowing businesses to cheat their competitors, their workers and taxpayers.

For workers who have been injured and think they may have been wrongly classified, we can help. Just because a company labels a worker as an “independent contractor” doesn’t necessarily mean that’s what they are, and a hearing officer and/or judge can weigh the evidence as presented by an experienced workers’ compensation lawyer.

If you have been injured at work, contact the Lee Law Offices at 800-887-1965.

Additional Resources:
To help NC businesses, end the misclassification fraud, June 3, 2015, By Doug Burton, Opinion-Editorial, The News-Observer

Bill to block cheating employers advances in NC Senate, April 2015, By Mandy Locke, The News & Ovserver

More Blog Entries:
Lifting Accidents and Injuries Common for Nurses and Nursing Assistants, June 30, 2015, Charlotte Workers’ Compensation Lawyer Blog

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