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NC: Employment Law Aims to Combat Worker Misclassification

By Liz Carey

Raleigh, NC (WorkersCompensation.com) – Changes to North Carolina’s employee classification law won’t change the definition of “employee” or “independent contractor,” but may make it easier for state agencies to come after employers who misclassify their workers. 

On Aug. 11, Governor Roy Cooper signed into law the North Carolina Employee Fair Classification Act. The law creates a new section of the North Carolina Industrial Commission, the Employee Classification Section, that would receive and investigate reports of worker misclassification. The law would also provide an avenue for information sharing among various state agencies like the Department of Labor, the Division of Employment Security, the Department of Revenue and the Industrial Commission.

Additionally, employers would be required to post notifications about employment including statements that workers must be treated as employees unless they are independent contractors, and that workers can report misclassification to the Employee Classification Section.

The law also would allow licensing boards to ask applicants if they had ever been investigated for employee misclassification, and the outcome of that investigation. 

Carol Brooke, a writer for NC Policy Watch, said the act doesn’t go far enough.

“The new law is a good start, but only one small step,” Brooke wrote for NC Policy Watch.  “North Carolina needs more comprehensive protections for workers and businesses to deter and stop employee misclassification and state leaders should redouble their efforts in this area.” 

Brooke said the law doesn’t make employee misclassification illegal, per se, and that it doesn’t go far enough in allowing government agencies to issue “Stop Work Orders” when a company is investigated for employee misclassification, or to prevent employers who have been found guilty of employee misclassification of working on government projects.

Jeremy Falcone, an attorney with Ellis and Winters, LLP, said the act appears to give businesses a free pass on their first instance of misclassification. 

“The Act imposes liability only ‘after [an employer is] assessed any back taxes, wages, benefits, penalties, or other monies… as a result of misclassifying one or more employees within the previous three calendar years.’” he said in a blog post for Ellis and Winters. “Only then is the employer subject to fines, and only ‘for any future instances of employee misclassification.’”

The Employee Fair Classification Act was signed by Gov. Roy Cooper on August 11, but won’t go into effect until December 31.

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