Commentary

Businessman explains need for law to crack down on workplace fraud

Wake County businessman Doug Burton had had enough of the unfair competition that North Carolina continues to sanction with its failure to pass meaningful laws to crack down on the wrongful treatment on employees as “independent contractors.”

In an excellent op-ed in this morning’s edition of Raleigh’s News & Observer, he lays out the increasing dire problem:

“Treating employees as independent contractors when in fact they are regular employees is a fraudulent business practice that has become an epidemic. Some call this “misclassification,” but it is in fact fraud that lets these cheating businesses – many from out of state – off the hook for basic protections, including minimum wage, overtime pay, workers’ compensation, health and safety protections, unemployment insurance, federal and state tax withholding, social security withholdings and matching and more.

This fraud is a growing problem that harms workers, puts a strain on government resources and provides an unfair advantage when these unscrupulous employers compete with law-abiding businesses. I see it every day. Other legitimate business owners see it, too, when they are regularly underpriced for jobs and there is no other explanation for such bids other than cheating. When cheating businesses classify employees as independent contractors to reduce labor costs, legitimate business and workers alike lose out.”

He goes on to explain why current proposals in the General Assembly are a start but fail to go anywhere close to far enough:

“SB 694 and HB 482 both include loopholes and definitions that allow the cheaters to continue to beat the system. Penalties are weak in both bills and are assessed only when a business is caught a second time cheating. Effective legislation should at least increase the range to Florida’s levels – up to $5,000 in penalties for each misclassified employee – and should link the amount of any penalty to the willfulness and severity of violations. No one wants to punish honest mistakes, but we should want to stop businesses that know better from continuing to cheat.

Legislation must include “stop work orders,” a proven tool used in Florida for years to great effect. As in Florida, authority should be given to the N.C. Industrial Commission to issue “stop work orders” when businesses do not properly provide workers compensation coverage. Once coverage is obtained through most local insurance companies, work can start up again. This is a system that has worked in Florida because businesses there understand the incredible risk they run if they want to save money by not having workers’ compensation coverage for their workers.”

Let’s hope lawmakers, who so often profess to want to help good North Carolina businesses, are listening.  Click here to read the entire op-ed.

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