Workers’ compensation insurance is required in all 50 states, and North Carolina law requires businesses with three or more employees to buy insurance to cover expenses related to workplace injuries. The North Carolina Industrial Commission is tasked with administering the Workers’ Compensation Act.
Despite the statutory requirements, an April 2012 Raleigh News & Observer investigation revealed that at least 30,000 North Carolina businesses are not providing the required workers’ comp coverage required. Employee misclassification and the misuse of workers’ comp ghost policies have become topics of concern among state regulators, government officials, the business community and the public.
So-called “ghost” policies are generally intended to be used by independent contractors who have no employees and who are willing to exclude themselves from workers’ comp coverage. The contractor would pay a minimum premium to the insurance company, but coverage would only be provided should he or she employ workers during the policy period. If the independent contractor does hire employees, additional premium may be due when payrolls are audited. Often, ghost policies are purchased by sole proprietors when they want to work for a general contractor that requires a certificate of insurance from its subcontractors.
Employee misclassification occurs when an employer declares that his or her employees are independent subcontractors and fails to provide them with the workers’ compensation coverage that is required for employees. Reportedly, it often involves the misuse of ghost policies. Not only can employee misclassification leave employees injured or killed on the job without coverage, it results in underpayment of taxes and gives business that cheat an unfair advantage.
Insurance Commissioner Wayne Goodwin was named chair of the Governor’s Task Force on Employee Misclassification to study the issue. After months of work, the task force has recommended several key strategies for cracking down on noncompliance issues, several of which are already in motion.
Educating all parties involved with workers’ compensation coverage is important in the efforts to eliminate employee misclassification. Paperless Insurance Services provides Workers Compensation coverage in NC and understand how the product works. We are willing to educate our clients so that business owners can make informed decisions about their coverage needs.
We partner with leading insurance carriers to offer multiple resources related to workers’ comp. And, as always, we encourage you to contact the North Carolina Industrial Commission at www.ic.nc.gov, or call their workers’ compensation information specialists at 800-688-8349.
It’s important that we all work together to make sure that everyone plays by the rules and no one compromises when it comes to the safety and protection of our workforce. To get started complete application online at https://www.paperless-insurance.com or call 800-339-0104 option 1 and get insurance quotes over the phone.