An editorial in the Raleigh News and Observer by Doug Burton, owner of Whitman Masonry, Inc. in Raleigh, elegantly calls for movement on the employee misclassification problem in North Carolina.  Employee misclassification occurs when a business owner designates an employee as an independent contractor in order to avoid paying payroll taxes and workers’ compensation in NC.

As Mr.Burton writes:

The harm being done to my business and others is serious. Businesses have gone under as a result of this problem. The once foreign idea of cheating is now becoming an option that businesses are considering, and this will continue unless the General Assembly enacts real reform.

Taxpayers are also harmed. Misclassified workers aren’t covered by worker’s compensation, so on-the-job injuries become the taxpayers’ responsibility if the worker doesn’t have health insurance. An in-depth investigation by News & Observer showed $467 million in state and federal taxes are lost each year in N.C. from misclassification fraud in the construction industry alone.

Senate Bill 694 and House Bill 482, both would address employee misclassification and are alive and well in the North Carolina legislature.  Both bills would a create new misclassification department to find and punish misclassification.  House Bill 482 also would allow state officials to issue a stop work order when misclassification is identified on a jobsite.

As a workers’ comp lawyer in NC I see the sometimes catastrophic effects of employee misclassification first hand. Frequently I talk to someone who was injured on the job but is being denied NC workers’ compensation benefits because their employer misclassified them as an independent contractor. Hopefully the legislature will act to address this problem in NC.

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