North Carolina’s leaders – and those campaigning to take charge in the coming year – promised Wednesday to wake a sleeping government in order to stop businesses that misclassify employees as contractors and avoid paying taxes and buying workers’ compensation insurance.
Gov. Bev Perdue ordered a team of agency leaders to meet and figure out how to work together to crack down on cheating businesses. Both men campaigning to be governor – Republican Pat McCrory and Democrat Walter Dalton – said fixing these problems is at the top of their priority list.
The commitments follow a three-part series in The News & Observer highlighting how honest business owners are losing their foothold as they compete against businesses that break the law to avoid taxes and insurance.
The practices are prevalent in the construction industry and have seeped into other fields. Some employers are treating their laborers as independent contractors instead of direct employees to avoid paying Social Security, unemployment tax, overtime and workers’ compensation.
Some business owners are buying “ghost policies,” inadequate workers’ compensation policies that sometimes leave wounded workers fighting for needed medical care.
Businesses that break the rules have prospered as North Carolina’s agencies worked in information silos, tending to their own sets of rules and failing to share critical information with fellow agencies.
“I am expecting this task force to cut through any red tape and make any recommendations needed to protect workers,” Perdue said in a statement.
The task force will report to the governor’s office every six months. The next governor could stop the task force formed by Perdue, who is not seeking re-election. But the nominees of both major parties seem likely to continue the effort.
Promising action
McCrory, who served as mayor of Charlotte from 1995 to 2009, said the N&O’s report reinforces his belief that state government is broken.
McCrory said it’s impossible to know who is in charge in state government and that the current setup of agencies leads to little accountability. If elected, McCrory said, he’ll examine whether some agency heads who now are elected ought to be appointed and report to the governor, a change that would require a constitutional amendment.
And he insisted that all state government information technology workers need a central boss who coordinates databases and upgrades to ensure those systems are equipped to share data.
“Toes will be stepped on,” he said. “Our state government is set up with a process of governing that’s stuck in the 1900s.”
Dalton, currently the lieutenant governor and a former state senator, also said the practices raise critical questions about the way the government is organized. He called the N&O findings about government agencies operating in silos “disappointing.”
If elected, Dalton said he would consider charging a single agency to crack down on businesses instead of sharing these responsibilities among many.
“Sometimes it’s too many cooks in the kitchen and nobody’s watching the stove,” Dalton said.
A legislative study
Legislators echoed calls for change.
Phil Berger, Senate president and an Eden Republican, said he’d be looking to the state controller to make recommendations on how agencies can better share their data and detect fraud. A report is due in October.
This summer, legislators formed a study commission after The N&O reported that at least 30,000 businesses were failing to buy required workers’ compensation insurance. That group will soon start meeting, and Berger said it could look at the larger issues as well.
“There seems to be a failure of the regulatory agencies to curb the inappropriate activity,” Berger said. “This can’t go on.”
Thom Tillis, speaker of the House and a Republican from Cornelius, near Charlotte, said in a statement that these issues are critical especially as the state tries to climb out of a recession. He urged the federal government to create meaningful immigration reform to address some of the business practices used to compete unfairly.
Many of the workers highlighted in the series are here illegally and cannot collect some benefits, but businesses are nonetheless required to pay on their behalf.
Support from the chamber
The N.C. Chamber says it’s time that businesses operating legitimately get some sort of protection against those that don’t.
“We have to make sure these folks (operating legally) aren’t penalized,” said Gary Salamido, vice president for governmental affairs. “More integration between agencies is very, very important.”
For those wrestling with an uneven playing field, change couldn’t come quickly enough.
Eric Mace, owner of Mountain Stone Masonry of New Hill, said issues of fairness have plagued the construction industry far too long, and he’ll be looking to vote in November for a candidate determined to fix them.
“People actually feel a little hope that this is finally coming to light,” Mace said. “The next governor has to fix this.”
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