One of the biggest obstacles North Carolina currently faces is that many businesses try to “cheat” the workers’ compensation system by not having insurance. State law requires all companies with three or more employees to have workers’ compensation insurance, and clearly dictates that criminal fines will follow if they’re caught without coverage.

According to the North Carolina Industrial Commission, auditors identified at least 150,000 North Carolinian workers employed by businesses that do not have workers’ compensation insurance. The problem with not having insurance is that it affects everyone, forcing rule-abiding employers and tax payers to foot the bills through programs like Medicare and Medicaid. To help with this ongoing issue, investigators from the commission are checking up on companies and administering fines to uninsured businesses. Since early 2014, they’ve collected more than $2.4 million in fines, compared to $500,000 in 2012 and 2013.

One of the most common reasons companies fail to obtain workers’ compensation coverage is because they misclassify their employees as “independent contractors.” In these cases, the state foregoes millions in uncollected income and payroll taxes. According to the News & Observer, $467 million in state and federal taxes are lost each year in North Carolina from misclassification fraud in the construction industry alone! By not meeting state obligations, on-the-job injuries become the misclassified employees’ responsibility, which can result in them losing their savings, cars, and homes in the process of rectifying the damage. The Industrial Commission is aware of this problem, too, and is working on legislation (Senate Bill 694and House Bill 482) that would crack down on these types of employers. The legislation would create a new misclassification department within the state government to identify companies guilty of malfeasance and punish them with significant penalties and fines. House Bill 482 would also permit state officials to issue a Stop Work Order when misclassification is discovered on a jobsite.

At Prior, Criner & Edwards Attorneys, we often have clients come to us that are facing misclassification firsthand. It’s a very frustrating and challenging issue that we wish no employee had to face, but we hope the legislature will soon act to address this problem in North Carolina. Until then, we encourage you to reach out to our workers’ compensation lawyers about any problems you may be facing or questions you might have about your case. Contact us today to schedule a consultation with our attorneys.