Kudos to Mandy Locke, The News and Observer, and McClatchy Newspapers for their blockbuster series entitled “Contract to Cheat.” Ms. Locke, you might recall, authored the excellent articles in 2012 investigating the prevalence of employers in North Carolina who failed to provide workers’ compensation coverage. This new series investigates the misclassification of employees as independent contractors that is rampant in the construction industry as well as in other businesses nationwide.
As Ms. Locke explains, this tactic disadvantages employers who play by the rules, means injured workers frequently do not have workers’ comp, and costs taxpayers billions of dollars a year in payroll taxes. While this new series investigates this problem nationwide it pays particular attention to the problem in North Carolina. This includes:
- An estimated $500 million dollars each year in lost federal and state tax revenue in North Carolina alone;
- How state and federal officials continue to ignore this problem;
- A piece on how employee misclassification affects honest business owners;
- Responses from North Carolina leaders promising change.
The response to Ms. Locke’s series has been encouraging. Recently the US Department of Labor awarded over $10 Million to states to identify these tax cheats. Unfortunately, North Carolina did not apply for these grants. North Carolina leaders as well as federal officials have vowed to address the employee misclassification problem. In addition Andrew Heath, Chair of the North Carolina Industrial Commission, continues to have this issue in his sites and is working with stakeholders in the NC workers’ comp system to develop legislation from a workers’ compensation perspective.
As a workers’ comp lawyer in NC, I am particularly concerned about the effect of employee misclassification on the availability of workers’ comp benefits to injured NC workers. Employers are required to carry workers’ comp coverage for their employees but are not required to do so for their independent contractors. Indeed avoiding that cost is one of the reasons employers misclassify workers to begin with. So when an employer misclassifies an NC employee as an independent contractor and that worker gets hurt the resulting medical and wage loss costs are frequently shifted to the government or the public at large.
Over my 20 years as a NC workers’ compensation lawyer I have handled a number of these sad cases. The injured worker is faced with an uphill climb getting the NC workers’ compensation benefits they deserve. And the employer who should have had workers’ compensation insurance finds his or her own personal assets at risk, as well as possibly their freedom.
But to me the worst aspect of the misclassification problem is the economic disadvantage it poses to employers who play by the rules. Hopefully our state and national leaders will get behind these good employers and level the playing field.