The State is cracking down on businesses treating employees as independent contractors. Starting on December 31, 2017, the “North Carolina Employee Fair Classification Act” (“EFCA”) will require all employers to display a poster stating (1) that workers defined as “employees” under the EFCA shall be treated as employees; and (2) that any employee who believes that he or she has been misclassified as an independent contractor may report the suspected misclassification to the Employee Classification Section of the North Carolina Industrial Commission. The statute also requires state occupational licensing boards and commissions to require businesses to report their compliance.
After you affix the new posters to your wall, let us suggest that you take this opportunity to reconsider the proper status of anyone you have been treating as an independent contractor. It is tempting, as in the picture, to take the donut, but think seriously about taking the apple instead. A small business may save money by treating all workers as independent contractors – but you take a calculated risk. Whole industries have been rocked by class action lawsuits claiming contractors should be treated as employees. Some of those have resulted in hefty settlements:
- Nearly $230 million for a group of FedEx delivery drivers;
- Nearly $12 million for drivers at an airport shuttle company;
- $10 million for more than 100 custodians in Massachusetts;
- $8 million for dancers at a strip club in New York; and
- $6.5 million settlement for Lowe’s home improvement contractors.
The more control you exercise over workers, the more likely it is that the State will consider them employees. People who work for multiple clients – like plumbers or lawyers - work on their own terms and generally speaking are true independent contractors. People who work a regular schedule exclusively for you, however, are more likely to be employees.
This new legislation makes it more likely that you will encounter legal problems if you treat employees as independent contractors. Beyond being in compliance with the law, consider also whether it is a good business practice to have your employees classified correctly as employees. Doing “the right thing” up front, by treating employees fairly, can pay off in the long term – creating harmony and reducing stress in the workplace, increasing efficiency by building clear lines of conduct between employer and employee, and creating proper balance. Labor issues have been around since mortals first labored (look at Genesis 30: 25-43) and the law has developed to respond to those issues. Trying to take a shortcut will leave you exposed in many ways, not the least of which is the new law.
Author: Jesse Jones, Attorney
The McIntosh Law Firm, P.C.