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McCrory signs order targeting employee misclassification

Gov. Pat McCrory has signed an executive order that seeks to crack down on companies that improperly classify their employees as independent contractors.

The order establishes an employee classification section within the North Carolina Industrial Commission to streamline information sharing among state agencies. An as-yet-unnamed director will serve as the primary point of contact for reported instances of employee misclassification. That individual also will refer complaints to the proper agency for investigation.

The N.C. General Assembly has sought to tackle the issue of employee misclassification with proposed legislation that includes a fine of up to $1,000 on violators who misidentify employees, a practice used to avoid costs incurred from taxes and employee benefits. Bills in the N.C. House and N.C. Senate would also authorize state agencies to revoke licenses and permits while barring offenders from receiving state contracts for five years.

“The creation of the employee classification section is a significant first step in eliminating employee misclassification throughout our state,” McCrory said in a written statement. “I look forward to working with the General Assembly to build upon our recent gains.”

The state legislature is scheduled to take up the issue again this spring when it reconvenes for the 2016 short session.

Betsy Bailey, N.C. government relations and building division director for the Carolinas chapter of the Associated General Contractors of America, lauds McCrory’s actions but hopes for more stringent legislation from the General Assembly next year.

“This is a good step in the right direction,” she said, “but fines and sanctions will put a little more teeth into it.”

Gary Salamido, vice president of government affairs for the North Carolina Chamber of Commerce, also approves of McCrory’s action.

“Employee misclassification harms law-abiding employers and employees alike, as some companies attempt to gain unfair and illegal competitive advantages,” Salamido said in an e-mail. “It is important that the laws put in place to prevent this activity are enforced and this executive order helps facilitate that by encouraging better alignment and transparency between government agencies.”

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