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Moore County Home Builders Association

P. O. Box 912,
10022 NC HWY 211 E.
Aberdeen, NC  28315

Moore County Home Builders Association
Moore County Home Builders Association

(910) 944-2992

Moore County Home Builders Association Moore County Home Builders Association Moore County Home Builders Association Moore County Home Builders Association

SB 407 — Legislature clarifies definitions of employees and IC’s

NEW LAW TARGETS EMPLOYEE MISCLASSIFICATION;
MORE VIGOROUS ENFORCEMENT 
ANTICIPATED

On August 11, Governor Cooper signed SB 407 (Employee Misclassification/IC Changes) into
law. The new law largely codifies an executive order issued on December 18, 2015, by former
Governor McCrory, which established the Employee Classification Section within the North
Carolina Industrial Commission.

The “Employee Fair Classification Act” is designed to respond to the practice of those
employers who hire an individual to work under the business’s control as an employee but
classifies the individual as an independent contractor. This is done to avoid employer
requirements for income tax withholding, federal payroll taxes, state unemployment insurance
taxes, state workers’ compensation insurance coverage, minimum wage and overtime pay, and
responsibility for the protection and conduct of employees.

The new law specifically empowers the Employee Classification Section within the Industrial
Commission to receive and investigate reports of employee misclassification and to coordinate
with the four major state agencies which have jurisdiction to independently investigate
employee misclassification as it affects their specific area of responsibility (i.e., Department of
Labor—Wage & Hour Act; Division of Employment Security—Unemployment Taxes; Industrial
Commission—Workers’ Comp Act; and Department of Revenue—Withholding & Payroll Taxes).
It is anticipated that this new law will cause increased, and more vigorous, enforcement by the
agencies noted.

NCHBA, along with other major employer associations, supported this bill because employee
misclassification not only harms workers but it also creates an uneven playing field where
employers who follow the law are at a distinct competitive disadvantage with those who
engage in this illegal activity. NCHBA led efforts to ensure that the current definition of
“employer” and “employee” were not changed nor were independent causes of action
authorized as some groups advocated.

Generally speaking, the primary difference between an “employee” and a legitimate
“independent contractor” is the level of control exerted by the employer over the work
performed (e.g., GS 96-1(b)(19) defines an “independent contractor” as “an individual who
contracts to do work for a person and is not subject to that person’s control or direction with
respect to the manner in which the details of the work are to be performed or what the
individual must do as the work progresses.”).

Occupational licensing boards are directed to require licensees to certify that they have read a
public notice defining employee misclassification. Further, these boards are directed to
discipline licensees who fail to disclose misclassification investigations.

For more information, contact NCHBA General Counsel Mike Carpenter at (800) 662-7129 or
mcarpenter@nchba.org.

 
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  • Updates and News

    Upcoming Events: The Builder Awards Entry is Now Open | 2019 January Membership Meeting

    We extended the deadline for the Home & Garden Sponsorships till November 15th.

    You can find the sponsorship packet information here.

    Moore County Home Builders Association

    Moore County Home Builders Association

    Moore County Home Builders Association
    P.O. Box 912
    10022 NC Highway 211 East
    Aberdeen, NC 28315
    Phone: 910-944-2992