North Carolina Is Now Investigating Employee Misclassification

Date: January 17, 2018

A new law dealing with employee misclassification could impact North Carolina small business owners.

Back in August, Gov. Roy Cooper signed the North Carolina Employee Fair Classification Act into law to make permanent an executive order previously signed by former Gov. Pat McCrory, and the law went into effect on Dec. 31. The measure creates an office within the North Carolina Industrial Commission that will investigate companies and discourage the practice of employee misclassification—when employers wrongly classify employees as independent contractors, whether intentionally or unintentionally.

This new office, Employee Classification Section (ECS), will also assist other state agencies, such as the Department of Labor, Department of Revenue, and district attorneys’ offices, in recovering money owed and in prosecuting employers who fail to pay these penalties. Under the law, employers who are found in violation could face legal expenses, fines, and back payments for taxes and employee pay and benefits that were not provided when the worker was classified an independent contractor.

Employers must also post a workplace notice that informs workers whether they should be classified as employees or independent contractors and provides information about how workers who believe they have been classified incorrectly can report the issue to the ECS.

Check out NFIB’s guide to distinguishing between employees and independent contractors to be sure you’re not operating in violation of state law.

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