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Managing Misclassification: What You Should Know About the Employee Fair Classification Act

By Rachel Hairr

The Employee Fair Classification Act (EFCA), adopted by the North Carolina General Assembly in August, goes into effect on December 31, 2017. Here’s what employers and employees need to know.

The EFCA’s Purpose

The EFCA was enacted to address the practice of misclassifying employees as “independent contractors,” an issue which gained state-wide, and later national, attention in 2014. By classifying workers as independent contractors, employers can avoid paying state and federal payroll taxes, unemployment taxes, and providing worker’s compensation insurance, which would be legally required if the worker were classified as an employee. The practice of misclassification is particularly rampant in such industries as the construction industry.

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