Employee Misclassification – Back In News

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Employee Misclassification Means Contractor or Sub

The employee misclassification news was back in. Classification Codes such as 8810 (Clerical/Administrative) are the number one question we receive calls and emails about every month.  Employers want to make sure they are not being overcharged for improper classification. Most of the news articles do not concern classification codes when referring to employee misclassification.  

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Employee misclassification occurs when an employer wrongly classifies what would be a true employee as a contractor or sub-contractor.   The IRS publishes many guides on how an employee should be classified (employee vs. contractor vs. statutory employee, etc.).  The IRS guides may not fit every situation as there may be state-specific guidelines.  The IRS guides are more of  a “rule of thumb.”

There are ways to make sure that an insurance carrier premium auditor realizes that you do have contractors that are not covered under an employer’s insurance policy for Workers Compensation.  That info will be covered tomorrow.

Employee misclassification (contractors vs. employees) can carry with it very severe penalties.  Not only are employers that have non-covered employees not paying their fair share of their Workers Comp, they are also not paying the proper taxes.  Many states have locked down on this situation.   Additional enforcement will occur as state and federal agencies share more databases.

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North Carolina, our HQ state, had a very severe problem of employers not covering their employees with WC.  The state had over 30,000 employers that did not have the proper WC coverage.

West Virginia increased their enforcement of non-covered employers by posting signs at the businesses informing the public of the business not having coverage.   I actually had seen one of the signs on a business trip to WV a few years ago.

The bottom line is to make sure your company does not have uncovered contractors or employees and to not let the buzzwords “Employee Misclassification”  keep your company from questioning or disputing the classification codes of your employees.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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