- Associated Press - Friday, July 17, 2015

RALEIGH, N.C. (AP) - Pressed to take action on companies that misclassify workers as independent contractors, North Carolina lawmakers are pushing legislation backed by several business associations to set up an agency to investigate and punish cheating employers.

While the legislation has support from Democrats, Republicans, labor groups and business leaders, some say the deal worked out between lawmakers and the business lobby does not go far enough to penalize willful offenders.

Bills in the House and the Senate would create an Employee Classification Division to investigate reports of employers misclassifying workers. By doing so, companies can shirk paying taxes and employee benefits.

Under the proposed legislation, violators could be fined $1,000 per misidentified employee in addition to paying back taxes, wages and other penalties. Both bills also authorize state agencies to revoke licenses and permits while barring offenders from receiving state contracts for five years.

The bills also set up a temporary system for employers that voluntarily disclose their violations. They do not propose increasing fines or imposing automatic stop-work orders for repeated offenders.

Doug Burton, the president of Whitman Masonry in Raleigh, testified his company is competing with an increasing number of businesses that can undercut his bids by illegally classifying workers as independent contractors.

“I encourage you to put in as much penalties as you can,” Burton said. “They know they can get away with it. They know the penalties are not severe enough that it’s worth the risk.”

One of the bill’s House sponsors, Rep. Gary Pendleton, R-Wake, said he originally favored a $3,000 fine, but during negotiations with business leaders a $1,000 penalty was agreed upon.

“If we make this any more restrictive, we are going to start losing players,” Pendleton said, adding that House leaders were pressing for the bill to come out of committee so they could hold a vote and send their version to the Senate. The committee is expected to vote on amendments next week before sending a bill to the full House.

Gary Salamido, a lobbyist for the North Carolina Chamber, said employee misclassification hurts law-abiding businesses as well as employees. As written, he said the law would educate small business owners who mistakenly misclassify their workers, and help ease them into compliance.

Also at stake are concessions for industries that claim their businesses rely on workers who fit the definition of independent contractors, including newspapers that hire out their deliveries, as well as private courier services and cab drivers who own their own vehicles.

During the House committee meeting, most legislators agreed on avoiding industry carve outs.

“We want to treat everybody the same, no one gets special rights,” Pendleton said.

An investigative series by The News & Observer of Raleigh and The Charlotte Observer last fall sparked legislative action when it reported that employee misclassification costs the state $467 million annually.

All things considered, Burton said he supports the bill.

“Could it be more stringent? Yes. Should it be? Yes,” said Burton. “But could it be more lenient? Yes.”

Copyright © 2018 The Washington Times, LLC.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide