Congress is investigating the issue of employers classifying employees as “independent contractors” in order to skirt workers’ compensation and wage laws. It will be interesting to see the effect, if any, on Independent Contractors in NC Workers’ Compensation.
Employers must pay and withhold state and federal payroll taxes from their employees paychecks. In North Carolina, employers must also provide NC workers’ compensation benefits to their employees in most circumstances. Some employers will claim that an employee is an independent contractor, or a 1099 employee, in an effort to avoid these responsibilities. Unfortunately employers who skirt the law may have a competitive advantage over employers who follow the law. Irresponsible employers also shift the responsibility for their workplace injuries to the public at large.
In deciding whether a worker is an independent contractor or an employee the court, or the NC Industrial Commission, will consider a number of factors, including:
- The extent to which the services rendered are an integral part of the principal’s business.
- The permanency of the relationship.
- The amount of the alleged contractor’s investment in facilities and equipment.
- The nature and degree of control by the principal.
- The alleged contractor’s opportunities for profit and loss.
- The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
- The degree of independent business organization and operation.
No one factor controls the determination and how the parties define the relationship does not much matter.
Every year I handle cases involving employers who are uninsured for NC workers’ compensation risks, many of whom thought they could avoid their responsibility to provide workers’ comp in NC by claiming the injured worker was an independent contractor. These employers are surprised to discover that their own assets are at risk.
Hopefully Congress will recognize the national importance of this issue and take appropriate action.