Worker Misclassification Still Problematic in North Carolina

Worker misclassification is by no means a new problem. However, it is one that has been getting more attention lately in North Carolina. Investigative journalism over the last two years has revealed the trouble is rampant in the Tarheel State, with employers labeling workers as independent contractors – rather than employees – in an effort to skirt their responsibilities. In particular, they want to avoid paying for government-required protections, such as workers’ compensation, overtime, and family and medical leave.


Recently, officials at the North Carolina Industrial Commission signed an agreement with the U.S. Department of Labor to coordinate resources in order to dig up and address instances of worker misclassification in this state.

This was the culmination of a growing effort. In March 2015, the U.S. Occupational Safety & Health Administration released a report, “Adding Inequality to Injury: The Cost of Failing to Protect Workers On the Job,” which explored Government Accountability Office data revealing more than 500,000 construction workers in North Carolina, Florida, and Texas were misclassified as independent contractors in 2009 – when their job duties entitled them to the benefits of employment. It was revealed that misclassification affected more than 35 percent of construction workers in North Carolina, and in that industry alone, it lost state and federal governments some $467 million in taxes. Of course, it’s not just in construction. The practice has become extremely pervasive across many industries, and it can be tough to root out.

The agreement between the DOL and the NCIC gives federal officials an opening to share information with state authorities – something the feds had already been doing with authorities in 32 other states. Federal authorities also agreed to lend some of their own personnel to help investigate certain problematic employers that have either been flagged or shown to be repeat offenders.

Upstanding construction companies and business owners interviewed by The News & Observer contend cheating by other businesses makes it tougher for them to compete for the most competitive projects.

As one contractor put it, he made an honest – and pretty decent – living in the commercial masonry trade for years. But when the economy tanked, he started getting outbid by huge margins. At first, he said, he couldn’t figure it out. He had to lay off more than half his labor force within a year. It was soon after that he realized his competitors were cheating. Specifically, some of those submitting bids were subcontracting their labor to companies that labeled their workers as independent contractors, when in fact, they were employees. That allowed them to avoid a significant chunk of taxes and insurance costs (including workers’ compensation). In other cases, subcontractors were treating these workers like ghosts, paying them under the table and never really acknowledging them. However, these practices left taxpayers high and dry, and it made workers more vulnerable. A single worker can cost an honest employer 20 percent more for state and federal taxes, unemployment taxes, and workers’ compensation insurance.

Injured workers in particular bear a huge part of those costs when they are suddenly unable to work and can’t pay their medical bills.

Earlier this year, Governor Pat McCrory announced the appointment of Bradley Hicks to lead the newly formed Employee Classification Section of the state’s Industrial Commission. The branch was established through McCrory’s executive order after the General Assembly couldn’t agree on a bill that would help launch a crackdown on cheating businesses.

If you are injured at work, and your boss is claiming you cannot be paid workers’ compensation benefits because of your independent contractor status, it is possible to successfully challenge this – in court if necessary – by showing the nature of your work relationship in fact made you an employee. Our work injury attorneys can help.

Contact the Carolina workers’ compensation lawyers at the Lee Law Offices by calling 800-887-1965.

Additional Resources:

Worker misclassification, Oct. 23, 2016, By Kevin Druley, National Safety Council, Safety & Health Magazine

More Blog Entries:

 Hudspeth Regional v. Mitchell – Return to Work and Rebuttable Presumption of Loss of Earning Capacity, Nov. 1, 2016, Charlotte Workers’ Compensation Lawyer Blog

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