North Carolina "Employee Classification" Law Becomes Effective December 31, 2017
Now would be the perfect time to review the status of your workers and make sure they are properly classified before a new law goes into effect on December 31, 2017. The Employee Fair Classification Act establishes a new division within the North Carolina Industrial Commission called the Employee Classification Section whose purpose is to report and investigate complaints of employee misclassification.
Although strict guidelines are in place for classifying workers as either employees or independent contractors, there have been numerous complaints throughout the state that some businesses have misclassified workers and avoided paying taxes, wages and benefits. In fact, this legislation was prompted after media outlets covered stories of businesses that were misclassifying workers and undercutting their competition.
Under the Act, the Employee Classification Section will identify businesses that misclassify employees and collaborate with state agencies to investigate claims to determine whether they are in violation of corresponding agency operating statutes. Business owners that don’t comply with the guidelines could incur costly penalties, be forced to pay back taxes, wages and benefits, and be reported to related state agencies. Businesses that require state licensure could also potentially face the the denial of licenses, permits and applications if they fail to correctly classify workers.
As a business owner, you will receive information detailing the differences between employees and independent contractors. You will also be required to display a poster that informs employees of their rights under the new law and how claims of misclassification may be reported.
Although the substantive law hasn't changed, enforcement and penalties will change. It is in your best interest to conduct an audit of your workers and determine whether they are correctly classified. Doing so will allow you to avoid a potential disruption in your business and the possibility of being faced with the additional expense of penalties and other costs associated with failure to comply to worker classification guidelines.