NC leaders promise to crack down on cheating businesses

mlocke@newsobserver.comOctober 29, 2012 

— A task force of state leaders renewed promises Monday to break down barriers that keep them from spotting and cracking down on business owners who skimp on taxes and workers’ compensation insurance.

Gov. Bev Perdue launched the task force in August after a News & Observer series highlighted a business community divided by those abiding by the laws and those skirting them. Honest employers struggled to compete as competitors cut corners by treating employees as independent contractors to save on taxes and insurance. All the while, state agencies operated in silos, failing to share information and crack down on businesses that break the rules.

On Monday, officials from the state Labor Department, Revenue Department and Unemployment Tax Division sat side by side, a stark contrast from the isolation and independence that has marked the agencies charged with making sure businesses abide by the law. Already, some have found ways to collaborate without creating new legislation or hiring extra staff.

The scope of the problem is still largely unknown, but employers, particularly those in the construction industry, say the problem is widespread. Last year, investigators with the Division of Employment Security audited 2,637 businesses required to pay unemployment taxes – 1 percent of the total – and found that 40 percent had wrongly classified workers who should have been treated as employees. Investigators found another 3,000 cases through tips and problems when workers came to apply for unemployment benefits.

“The abuse is aggressive and flagrant,” Alitha Palich, a spokeswoman for a group of employers in the plumbing, heating and fire sprinkler industries, said urging state leaders to aggressively pursue businesses that aren’t following the law.

Collaboration between agencies has already begun. Just two months after the launch of the task force, the Division of Employment Security has shared its database of businesses that pay unemployment taxes with the Industrial Commission, which oversees and settles disputed workers compensation claims. Meanwhile, the Industrial Commission and the Revenue Department have prepared an information packet to be distributed to businesses about their tax and insurance obligations.

Leaders agreed Monday that they will have to try a variety of strategies, both in educating businesses and in enforcing the law and punishing those who break it. All agreed that sharing data will be critical, and they will likely lean on officials at the State Controller’s office to help them comb databases to quickly identify businesses that may be skirting the law.

More collaboration is needed, state leaders say, and state officials have been charged with calling counterparts from other states to learn how they have tackled problems of worker misclassification.

The task force will meet twice more and craft recommendations to present to the legislature in February.

Locke: 919-829-8927

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