Raleigh, N.C. — The House on Wednesday gave preliminary approval to a measure that would crack down on employers that classify workers as independent contractors to avoid paying certain taxes.
This type of employment fraud is estimated to cost the state hundreds of millions of dollars every year in lost taxes. It also leaves the workers without recourse to workers' compensation if they're injured on the job and without unemployment benefits if they're laid off.
House Bill 482, which is expected to get final approval in the House on Thursday, would set up a division in the Department of Revenue to monitor the issue by comparing payroll reports with employers' reports and submissions to the Department of Labor, the Industrial Commission and other regulatory bodies.
The proposal would impose a $1,000 civil penalty on employers that violate the classification law. The business would be banned from doing business with the state for five years, and occupational licensing boards would be instructed to rescind the licenses or permits of those found to be repeat offenders.
Rep. Mike Hager, R-Rutherford, offered an amendment to the bill to tweak the factors the state could use to determine whether someone is an employee or a contractor. But Rep. Rick Glazier, D-Cumberland, said changing a factor of being able to set his or her own schedule by adding "subject to customer requirements" would create a huge loophole for employers.
The amendment passed 111-2 before the entire bill received a 93-20 vote.