North Carolina Personal & Business Insurance
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North Carolina Workers Compensation Crackdown

You may have seen the series of Articles the N&O ran on the problems with North Carolina's Workers Compensation coverage in 2012. This brought some of the issues with workers compensation into the forefront, and changes are being proposed.

There are two main issues that they are working to resolve.

Lack of Enforcement

NC Companies with three or more employees are required to carry workers compensation coverage. The issue is that there has not been a central authority closely monitoring this. Few companies dodging the law were caught until one of their employees was seriously injured. The N&O report indicated that up to 30,000 NC employers were breaking this law.

Since the N&O stirred the government into action, penalties assessed against businesses have increased substantially. The Charlotte Observer reported that the Industrial Commission assessed $79,025 in fees in 2011. In the twelve months following the report, the penalties assessed increased to $6,500,000.

The Industrial Commission has reported that it is now working to use data from the State Division of Employment Security and the NC Rate Bureau to allow them to monitor and catch employers breaking the law. Penalties for failing to carry the coverage are between $50 and $100 a day.

Independent Contractors

Companies that carry Workers Compensation can avoid being charged for employee payroll by calling workers "independent contractors". Business owners have the option to exclude themselves from coverage. If a business claims that everyone who does work for them is an independent contractor, they can have a policy that essentially covers no one. This is called a "Ghost" policy. This is usually done to meet contractual requirements that require proof of workers compensation coverage. If the owner and "independent contractors" all buy these ghost policies, you have a large collection of policies that do close to nothing.

This leaves many without coverage, and too many people being called contractors are actually employees.

Many people think that they can decide if they want someone to be an independent contractor or employee. This is not the case. Even having someone sign a contract stating that they are an independent contractor does not count.

There is a test used by the IRS and the Industrial Commission to determine the actual relationship. If your "independent contractor" is injured and goes to the industrial commission, you could find yourself in hot water. You can see more detail about the test here.

There have been proposals to remove the option for business owners to remove themselves from coverage and plans to take a closer look into who really should be listed as an employee.

Companies that play by the rules and provide protection for their employees are being undercut by those that break the law. For higher risk jobs, this can be a substantial difference. A roofing company could pay up to $35 per $100 of payroll for their workers compensation coverage. It is easy to see why some companies have been tempted.

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