Doug Burton, the North Carolina Masonry Contractors’ Association (NCMCA)‘s eastern regional vice president, wrote the following article for the March issue of North Carolina Masonry News, the association’s newsletter.
Misclassification payroll fraud is a growth industry in NC and beyond that particularly affects the masonry industry here on all levels. Misclassifying employees is when a company declares their workers as independent contractors in lieu of a W-2 employee and thus fraudulently saves thousands of dollars per employee annually, putting the employee at risk and gaining an unfair advantage over those companies that abide by the laws.
Those that misclassify avoid paying worker’s compensation insurance for that employee, do not collect nor match the social security and Medicare premiums, pay no federal or state unemployment tax, don’t pay overtime and don’t withhold federal and state income taxes. At a minimum, this amounts to a 21% labor advantage over compliant companies. The annual loss in NC to this fraud totals an estimated $470 million.
The federal government and some states have recognized and begun to address the significance of this issue, the unfair advantage it provides to the cheaters versus the legitimate companies and the lost revenue. Here in NC, the legislature took up the issue in 2015, passing a bill in the House that established a new structure inside the Department of Revenue to address misclassification fraud. The Senate attached an amendment to the bill that the House would not accept so the bill was set aside. It is scheduled to be readdressed in the upcoming 2016 short session in April and if passed will put in place an emphasis by state government to address and hopefully rid this practice from our state.
Due to legislative inaction, Gov McCrory issued in December an executive order addressing the fraud, appointing a person in the Industrial Commission whose sole duty is to focus on misclassification. Bradley Hicks is now on board and beginning to coordinate those efforts. You can read more on his department’s role at the following website – http://www.ic.nc.gov/fraud.html
If you are in favor of ridding this fraud from our state, simply contact your local House Representative or State Senator and tell them to support House Bill 482 – they need to hear from affected business owners that this is a huge issue in the state and that it needs to be addressed and eliminated. The bill establishes penalties against the cheating employer as well as back taxes owed whereas the Industrial Commission cannot assess penalties.
How do we recruit a young person getting out of school and entertaining going into our trade when they quickly encounter misclassification and recognize that it will severely limit upward mobility in regards to income and benefits? This fraud has no place in the work force and in particular in the masonry industry and we need to do our part to protect and grow our most valued resource – the ones out there installing masonry every day. Get off the fence and let’s go make a difference.
Doug Burton is NCMCA Eastern Regional vice-president and is with Whitman Masonry in Raleigh. He is a past NCMCA president and serves as chairman of the NCMCA Certification Program Board of Governors. Reach him at email@example.com.