On December 18, 2015, North Carolina Gov. Pat McCrory signed an executive order establishing an “Employee Classification Section” within the state’s Industrial Commission. The Order, which took effect immediately, tasked this new Section with overseeing employee misclassification enforcement by receiving reports of employee misclassification and referring those reports to appropriate state agencies for further action. Liaisons from the Department of Revenue, the Industrial Commission, and the Division of Employment Security for the Department of Commerce will be responsible for updating the yet to be appointed Director of the new Employee Classification Section with the status of their respective investigations. The Director must publish an annual report to the Office of the Governor concerning the Section’s activities, including the number of reports of employee misclassification received, the number and amount of back taxes, wages, benefits, penalties, or other monies assessed, the amount of back taxes, wages, benefits, penalties, or other monies collected, and the number of cases referred to each State agency. Notably, the Order also requires the Director to develop methods and best practices for information sharing between State agencies in order to proactively identify possible instances of employee misclassification.
Clearly, state interest in policing worker classification continues to be a hot issue. Employers who have not already closely reviewed their independent contractor relationships should consider performing a privileged audit in order to assess the risk of misclassification claims.