Employers sometimes incorrectly treat their employees independent contractors instead of employees. This is called misclassification.
Misclassification fraud harms workers, puts a strain on government resources, and provides an unfair advantage when unscrupulous employers compete with law-abiding businesses. The practice occurs when an employer incorrectly pays a worker as an independent contractor rather than an employee. Misclassification fraud gets employers off the hook for basic protections, including minimum wage, overtime pay, worker’s compensation, health and safety protections, unemployment insurance, family medical leave, protections against discrimination, and Social Security benefits. Employers who fraudulently misclassify their workers have an unfair advantage when bidding for contracts. Hundreds of millions of dollars in state and federal taxes are lost each year in NC from misclassification fraud.