Leaders of the state agency that administers workers’ compensation laws met Friday to discuss new laws that could give the agency more power to deal with companies that skirt the law.
The state Industrial Commission had identified changes that would enable it to impose tougher penalties against scofflaw businesses and educate those that might not fully grasp their obligations. The commission’s fraud unit has been working aggressively this year to identify companies ignoring their duty to carry insurance for workers hurt on the job.
Its work underscored the need for tougher laws; in August, the commission distributed a list of possible solutions to lawyers and insurers.
Some of the possible changes would help curtail misclassification, the practice of treating workers who should be employees as independent contractors. The News & Observer, The Charlotte Observer and McClatchy reported on the widespread problem last month in a five-part series, “Contract to Cheat.”
The scheme puts cheating businesses ahead of law-abiding competitors and puts workers in a vulnerable spot. The newspapers estimate the practice costs $467 million a year in lost tax revenue from the construction industry in North Carolina alone.
The employers also avoid paying workers’ compensation premiums, which can be costly.
“It’s a big problem, and it’s going to require a big solution,” Andrew Heath, chairman of the commission, said Friday to a group of lawyers, insurers and industry leaders that advise the commission.
Among the new laws and regulations that could aid the commission in combating fraud:
• Enact legislation that defines which workers are employees and which can be treated as independent contractors. Similar legislation has been proposed previously but stalled in committees.
• Issue stop-work orders for companies operating without required workers’ compensation insurance.
• Give commission members or deputies the ability to hold people in contempt of court, issue arrest warrants and hold hearings for contempt when company owners refuse to comply with insurance or payment obligations.
• Authorize the commission to impose penalties against employers who knowingly misclassify employees as independent contractors to avoid paying insurance premiums.
• Require company owners who purchase a minimum premium policy, known as a “ghost policy,” to acknowledge that they understand that the policy does not cover any employees in the event of an injury. The measure aims to educate company owners of the risk of these policies.
Heath asked the group of nearly 20 if the commission was on the right track. Most nodded yes, and a few said they need to recruit other agencies to join enforcement efforts.
“It’s the right direction,” said Kevin Bunn, a lawyer who represents injured workers and who represented plaintiffs’ attorneys. “We need to bring others along with us.”