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With Blessing of GOP Gov, NC Republican Introduces Bill to Fight Misclassification

Pendelton, man of the people-ing it up.

Pendelton, man of the people-ing it up.

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In North Carolina, Wake County Republican Gary Pendleton is introducing a bill that would force heating and plumbing companies to properly classify their employees.  Pendleton’s bill would define misclassification and submit companies that misclassify to fines of $1,000 per affected worker and possible loss of license.  The move comes as North Carolina seeks to rectify its well-document trouble controlling misclassification, which were ushered into the spotlight by McClatchy in their series, “Contract to Treat.”  

Speaking to the News & Observer, Pendleton put it simply: “We’ve got to protect the worker and fair competition in this state.”

Last year, a News & Observer report on misclassification studied the payroll records of private companies on 64 multimillion-dollar, low-income housing projects. Here are some of their findings:

$467 million — Amount of tax revenue lost each year in North Carolina from the construction industry through misclassification.
44 percent — Share of the 826 companies taking part in projects reviewed that appeared to misclassify workers.
35 percent — Share of the 8,713 laborers on these projects who were wrongly treated as independent contractors.
20 percent — Share of an employer’s labor costs saved by using contractors rather than employees.
$18,854 —  The median annual pay for a carpenter; that’s roughly the federal poverty threshold for a family of three.

Most encouraging about the North Carolina bill is that it is being brought forward by Republicans, who typically have not been concerned with this issue, siding with business as a matter of ideology.  But Pendleton says he had the blessing of Republican Gov. Pat McCrory and that his bill will have other Republican co-sponsors.  He intends to ignore the lobby machine.

“I know they will come lobbying,” he said. “But they are wasting their time lobbying me.”

North Carolino is not the only state where the GOP has begun to grasp the gravity of this issue. Texas has for the past two years enjoyed a bipartisan fight against abuse of independent contractors (more here).

A primary concern in North Carolina is the inability of many boards and organizations to actively pursue misclassification cases given their limited power.  Pendleton hopes his bill will help:

Pendleton sees licensing boards as a major tool to keep business in check. His bill, as drafted, would not give them more authority, however.

The state Board of Examiners for plumbing and heating is seeing firsthand the limits of its authority.

It does not have the power to audit a company’s employment or tax records. When it finds a problem, the most it can do is revoke a license.

None of the companies recently cited for breaking the rules of their license will be fined or prosecuted. They have been placed on a supervised probation; any violation of the terms could cause loss of license.

The board has authority under state codes to place companies or licensees on probation. It can also suspend or revoke a license. That’s where the repercussions stop.

The board’s power centers around being a gatekeeper. To get proper permits in the state, a company must have a properly licensed technician in charge. The board’s regulations are simple: Break the rules, risk losing the license.

Read more about North Carolina’s potential misclassification reforms on the the News & Observer website.


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