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October 10, 2017
Consistent with recent federal trends in making enforcement of independent contractor misclassification a priority, North Carolina is following suit. On August 11, 2017, Governor Cooper signed into law the North Carolina Employee Fair Classification Act. Effective December 31, 2017, the Act establishes a new Section of the Industrial Commission, the Employee Classification Section. Though the Employee Classification Section was first created by Executive Order of former Governor Pat McCrory in December 2015 and has been operating since that time, the new Act codifies what the Industrial Commission has described as the preexisting initiatives of the Commission. The Employee Classification Section identifies its mission on its website as: “To identify businesses that engage in activities of Employee Misclassification throughout the State of North Carolina and collaborate with State agencies to conduct independent investigations in order to determine if there has been violation of the respective agency operating statutes.”
The Employee Fair Classification Act does not change existing definitions of employees or independent contractors under North Carolina law, but rather allows “the Employee Classification Section to strengthen the statewide collaborations with agencies in accessing information [to] combat worker misclassification,” according to Section Director Bradley Hicks in a recent press release. Under the Act, the Employee Classification Section will receive complaints and investigations of misclassification from the North Carolina Departments of Revenue, Labor and Commerce and will share such complaints with the other agencies.
It further provides that occupational licensing boards or commissions shall require applications for licensure, certification or permit to certify and disclose any investigations for employee misclassification and the results of such investigation over a time period that the respective board chooses. Failure to comply with the certification and disclosure requirements will result in a denial of the sought after license, permit or certification.
Importantly, the Act also requires that employers display a poster that includes the following information: (1) that workers who are defined as employees under North Carolina law are to be treated as employees unless they are independent contractors; (2) that employees who believe they have been misclassified as an independent contractor may report the alleged misclassification to the Employee Classification Section; and (3) the physical address, telephone number, mailing address and email address of the Employee Classification Section.
The Industrial Commission reports that the Employee Classification Section began accepting complaints concerning worker misclassification from other partner agencies in January 2016 and has already entered into information sharing agreements with the United States Department of Labor, Wage and Hour Division and the North Carolina Department of Commerce, Division of Employment Security. The Employee Classification Section reports that it is also collaborating with the North Carolina Department of Labor, the North Carolina Department of Justice and the North Carolina State Board of Examiners of Plumbing, Heating and Fire Sprinkler Contractors.
The Employee Classification Section saw misclassification complaints for the first and second quarters of 2017 increase over 644% from the first two quarters of 2016. The forthcoming poster requirements in the new Act are likely to lead to further increased complaints of misclassification. Employers should review and assess their current classifications of workers to ensure strict compliance with the law prior to the December 31 effective date of the new Act.
These materials have been prepared for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.