North Carolina Insurance Commissioner Wayne Goodwin Announces First Meeting of Governor Perdue's Task Force on Employee Misclassification
Date Published: 09-19-2012
North Carolina Insurance Commissioner Wayne Goodwin announced that the first meeting of Governor Bev Perdue's Task Force on Employee Misclassification will be held tomorrow, September 20, 2012 in Raleigh, North Carolina at 10:00 a.m.
"Not only does employee misclassification leave employees who were injured or killed on the job without coverage, it results in the underpayment of taxes and gives business that cheat an unfair advantage," said Commissioner Goodwin, who will chair Task Force. "This Task Force will work to promote the sharing of information between state agencies and to identify ways to reduce the number of businesses that violate the law."
Established in August 2012 by Governor Perdue, the task force will study and address issues surrounding businesses illegally classifying employees as independent contractors to avoid complying with workers compensation laws. According to her Executive Order, the Task Force shall strive to (a) protect the health, safety and benefits of workers; (b) eliminate any competitive advantage currently enjoyed by businesses who violate the law; and (c) educate employers and employees regarding applicable legal requirements relevant to the practice of employee misclassification.
Reprinted below, Governor Perdue's Executive Order 125 establishing the Task Force explained that its purpose is to enhance coordination and communication among various state agencies, and identify effective mechanisms to combat unlawful practices like employee misclassification that harm workers.
"We must make sure that all facets of state government work together cooperatively," Governor Perdue said. "I am expecting this Task Force to cut through any red tape and make any recommendations needed to protect workers,"
The Task Force will include heads of various state agencies or their designees and representatives of other entities possessing expertise on these issues.
Should you have any questions or comments, please contact Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb.
EXECUTIVE ORDER NO. 125
ESTABLISHING THE GOVERNOR'S TASK FORCE
ON EMPLOYEE MISCLASSIFICATION
WHEREAS, North Carolina's economy and its workers are adversely affected when businesses hide their activities from government regulatory, taxing, and licensing requirements;
WHEREAS, certain businesses violate insurance, tax, employment, and occupational safety laws by failing to carry mandatory workers compensation insurance, comply with health, safety and licensing requirements, or pay income taxes and payroll taxes that provide funding for unemployment insurance, disability insurance, and other benefits;
WHEREAS, certain businesses also engage in the practice of illegally classifying their employees as independent contractors (a practice referred to as "employee misclassification") and obtain "ghost policies" (an insurance loophole by which an employer purports to insure an employee in the future who does not currently exist and whose hiring is not contemplated) in order to avoid complying with obligations imposed on employers by North Carolina and federal law;
WHEREAS, employee misclassification: (1) deprives employees of protections afforded to them under the law; (2) confers upon businesses who violate the law an unfair competitive advantage over businesses that comply with the law by unlawfully reducing their operating costs; and (3) prevents the government from collecting significant tax revenues;
WHEREAS, task forces serve as an effective tool for promoting cooperation and the sharing of information between state agencies as well as for identifying effective mechanisms to decrease instances by which persons and entities violate the law;
NOW, THEREFORE, pursuant to the authority vested in me as Governor by the Constitution and laws of the State of North Carolina, IT IS ORDERED:
The Governor's Task Force on Employee Misclassification (the "Task Force") is hereby established.
The following individuals are invited to serve on the Task Force (or appoint designees to serve on their behalf): The Chair of the Industrial Commission, the Secretary of the Department of Revenue, the Secretary of the Department of Public Safety, the Secretary of the Department of Commerce, the Assistant Secretary of the Division of Employment Security. the Speaker of the House of Representatives, the President Pro Tempore of the Senate, the Commissioner of Insurance, the Commissioner of Labor, the Secretary of State, the Attorney General, the General Manager of the North Carolina Rate Bureau, the State Controller, the Director of the Administrative Office of the Courts, and the President of the North Carolina Sheriff's Association. The Commissioner of Insurance shall chair the Task Force.
The Task Force shall strive to: (a) protect the health, safety and benefits of workers; (b) eliminate any competitive advantage currently enjoyed by businesses who violate the law; and (c) educate employers and employees regarding applicable legal requirements relevant to the practice of employee misclassification.
The Task Force shall have the following duties:
(a) Identify those sectors of the economy where employee misclassification occurs most frequently and focus its efforts on eradicating such conduct within those industries;
(b) Utilize a cooperative approach in working with employers and community groups to reduce the prevalence of employee misclassification by providing educational materials explaining (1) the distinction between employees and independent contractors; and (2) raising public awareness of the problems resulting from employee misclassification;
(c) Determine regulatory or other changes in the laws of North Carolina likely to enhance efforts to enforce laws prohibiting employee misclassification;
(d) Establish a dialogue with the business community, the courts, and community groups regarding the mission and activities of the Task Force;
(e) Identify ways to increase the filing of complaints by employees and other members of the public against noncompliant employers, including a simplification of the process by which workers can report suspected violations of the laws;
(f) Reassess the efficiency of existing investigative and enforcement methods, and formulate new methods, for preventing employee misclassification;
(g) Solicit the assistance of law enforcement agencies and district attorneys with the goal of implementing effective procedures for referring appropriate cases for prosecution where appropriate;
(h) Establish relationships with social services agencies serving disadvantaged persons who have been injured by employee misclassification; and
(i) Promulgate methods for the sharing of relevant information between members of the Task Force.
The Task Force shall submit a report every six months to the Governor summarizing the Task Force's activities during the preceding period. The report shall include, without limitation: (a) a description of the Task Force's efforts and accomplishments during the prior six months; (b) a list of proposed legislative or regulatory changes for reducing the prevalence of employee misclassification, including a description of any existing legal or administrative barriers to accomplishing the mission of the Task Force.
The cabinet agencies are directed -- and the heads of each of the Council of State entities, all other state boards and commissions and the North Carolina Rate Bureau, are strongly encouraged -- to make all reasonable efforts to furnish such information and assistance as the Task Force reasonably deems necessary to accomplish its mission.
No per diem allowance shall be paid to members of the Task Force. Members of the Task Force and staff may receive necessary travel and subsistence expenses in accordance with State law and the policies and regulations of the Office of State Budget and Management.
Nothing in this Executive Order shall be interpreted as requiring any action inconsistent with applicable state or federal law.
This Executive Order shall be effective immediately and shall remain in effect until August 21, 2016, pursuant to N.C. Gen. Stat. 147-16.2, unless earlier rescinded.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the Great Seal of the State of North Carolina at the Capitol in the City of Raleigh, this twenty-second day of August in the year of our Lord two thousand and twelve, and of the Independence of the United States of America the two hundred and thirty-seventh.
Beverly Eaves Perdue
Elaine F. Marshall
Secretary of State
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