Recently, the North Carolina Industrial Commission and the U.S. Department of Labor signed a “Memorandum of Understanding” that aims to curb employee misclassification by making it easier for both entities to investigate it. Employee misclassification is a well-documented problem here in North Carolina, and involves employers who classify their workers as independent contractors, rather than employees. The goal, usually, is to avoid paying their fair share of payroll taxes – and workers’ compensation benefits in the event of a worker injury.
In some cases, companies maintain federal contracts while brazenly flouting labor laws. In North Carolina, misclassification and other abuses cost the state $467 million a year, The News & Observer reported, just in lost tax revenue from the construction industry. In many cases, taxpayers and injured workers are picking up the tab that should be paid by workers’ compensation benefits.
Now, this latest agreement will break down the long-standing barriers between the NC Industrial Commission and federal labor officials. Last year, Gov. Pat McCrory assigned the commission with the task of coordinating efforts among state agencies to find and crackdown on employers who were breaking the law and wrongly misclassifying workers and denying them benefits to which they were entitled.
It’s important for our Asheville workers’ compensation attorneys to note that just because a company identifies a worker as an independent contractor does not automatically mean that’s what they are. There are a series of measures that courts can use to ascertain whether that label is in fact correct. It’s an important designation because independent contractors are not entitled to workers’ compensation benefits, while employees are. In weighing whether benefits are warranted, the courts will want to know things like:
- How much control did the company have over the worker’s day-to-day activities?
- Was the worker free to set his or her own hours and define how the work would be done?
- How was the worker paid?
- Was this the worker’s sole source of income?
- Did the worker use his or her own tools or were those provided by the company?
These are just a few of the issues that may be relevant when making this determination.
Although taxpayers on the whole are affected, vulnerable workers and employers who follow the law are hit directly. Law-abiding companies can’t compete with those that fail to pay their workers fair wages, which shaves sometimes 20 percent off their operating costs. As for the workers, they are often placed in dangerous jobs without workers’ compensation protection and employers who may fire them if they get injured.
The Industrial Commission’s assignment from McCrory involved coordinating the efforts of state agencies to target these problems, which involves sharing information among agencies that handle state taxes, workers’ compensation and unemployment taxes. Now, the new federal agreement means that same information can be shared with federal authorities as well, which increases the stakes for scofflaw employers.
Workers who are wrongly treated as independent contractors do have the option of filing a complaint with the newly-formed Employee Classification Section of the NC Industrial Commission. That option wasn’t available before.
These moves mark important reform in assuring the protection of workers and workers’ rights.
If you have been injured at work, contact the Lee Law Offices at 800-887-1965.
State, federal officials say they’ll go after labor scheme, tax cheats, Aug. 31, 2016, By Mandy Locke, The News & Observer
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Nichols v. Fairway Bldg. Prods. – Forklift Work Injury Renders Man Totally, Permanent Disabled, Sept. 8, 2016, North Carolina Workers’ Compensation Lawyer Blog