Under the Dome

State Senate OKs bill to clamp down on cheating on tax and labor laws

The Senate on Thursday approved its version of a House bill that would address labor schemes that allow employers to skirt labor and tax laws by treating workers who should be employees as independent contractors.

The vote could set up a compromise attempt between senators and representatives, since the House version of the bill, passed 90-15 in August, is significantly different.

Sen. Josh Stein, a Democrat from Raleigh, said he supported the bill but was concerned that no money had been committed to ensure the state Department of Revenue has the resources to enforce the new law. Sen. Buck Newton, a Republican from Wilson, and Sen. Harry Brown, a Republican from Jacksonville, said the department indicated it could take on the new responsibility without having to hire new staff.

The bill was the result of “Contract to Cheat,” a five-part series in The News & Observer and The Charlotte Observer last year exposing the extent of employee misclassification, which is especially prevalent in the construction industry.

The Senate bill eliminates an exception for newspaper carriers under the law, which for the past 13 years has allowed them to be treated as independent contractors for purposes of workers’ compensation insurance. Sen. Floyd McKissick, a Democrat from Durham, unsuccessfully tried to amend the bill Thursday to restore that exemption.

Sen. Bob Rucho, a Mecklenburg County Republican, opposed any exceptions. He claimed that newspapers were guilty of abusing the system that they exposed.

The practice was most common in the construction industry, where the newspapers estimated it cost $467 million a year in lost state and federal tax revenue in North Carolina.