Worker Misclassification Reform Being Debated

WRAL.com is reporting that the North Carolina House of Representatives is expected to pass a bill today that would seek to tighten penalties on employers who misclassify workers as independent contractors when they should be considered employees.  The State Senate passed a similar bill back in April.

The News and Observer ran a series of front-page articles earlier this year addressing the problem of employers misclassifying employees as independent contractors.  The problem arises because employers need not pay some taxes on independent contractors, shorting the state and the federal social security system millions each year.  This not only cheats the government, it cheats employees, who do not receive credit for their earnings in the social security system.  Additionally, misclassified employees do not accrue benefits towards social security retirement.  But most problematically, independent contractors are not typically covered by worker’s compensation insurance, meaning that if they are hurt on the job, they have little recourse to be recover.  And misclassification hurts legitimate employers who are forced to compete with competitors who undercut them by failing to pay taxes and worker’s compensation premiums.

An op-ed in the N&O this summer critiqued the present House and Senate bills as too weak to deter businesses from misclassifying workers.  But there is no doubt that the bills are improvements over the current system.