There’s been a great deal of justifiable attention given over the last several months to the issue of “misclassification” — the wrongful treatment of employees by employers as “independent contractors.” As Raleigh’s News & Observer demonstrated in a damning series last year entitled “Contract to Cheat”:
“It’s a tactic that costs taxpayers billions of dollars each year. Yet when it comes to public projects, government regulators have done nearly nothing about it, even when the proof is easy to get.
The workers don’t have protections. The companies don’t withhold taxes. The regulators don’t seem to care.”
This year, North Carolina legislators introduced legislation to attack the problem, but as Raleigh attorney Leonard Jernigan explained in a Progressive Voices essay for N.C. Policy Watch recently, the legislation has been watered down to the point at which it will have little real impact.
“The bills, for instance, do not provide for ‘stop work’ orders that would force companies to halt work on projects until they obtain insurance for their workers.
What’s more, cheating employers are not punished at all until they are caught the second time. And even then, the penalty is a paltry $1,000 fine per employee regardless of how big the business is, how long the cheating has gone on and how much harm may have been caused or the competitive advantage gained over honest employers.
Last and perhaps even more importantly, there is no criminal penalty attached to misclassification fraud. These companies are not confused about the status of their employees. The cheating is blatant and intentional. It’s simply outrageous that an out-of-state company can come in and cheat honest businesses and North Carolina taxpayers out of millions of dollars and no one is even threatened with jail.”
Today at 1:00 p.m., the House Judiciary II Committee will take up the misclassification legislation and, if things go well, consider some toughening amendments to put some actual teeth in it. Let’s hope that, at a minimum, committee members add the “stop work” provision and some real penalties — which at this point — are laughably inadequate.