What
is NETS? It stands for Noncomplaint Employer Targeting System.
This is a new intelligent system used by the North Carolina Industrial
Commission (NCIC) to identify employers that are potentially violating the
statutory requirement to provide workers’ compensation benefits to their
employees. It uses data available from
the Government Data Analytics Center to produce a list of potentially
noncompliant employers. At the end of
July 2014, NETS produced a list of 4,166 potential noncompliant employers and
600 cases were investigated and closed.
How
does this affect you as an employer?
Serious penalties can be accessed retroactively for the time period out
of compliance and if serious enough a cease and desist order can be enforced
that effectively puts an employer out of business.
One
of the most abused violations is in the definition of an independent contractor
vs. an employee. The NCIC defines an employee by “exercise and degree of
control” that en employer asserts over that person or persons. Basically, if the person working for an
employer derives most of their livelihood from that employer and does not have
a separate business license or separate customers to perform work for then that
person is probably NOT an independent contractor. Also, if the business is a corporation then
the total of three employees applies but the corporate officers are counted in
that number even if they elect to reject coverage. The rules are different for and LLC or sole
proprietor type of business.
The
assessed penalties for Fiscal Year 2013-2014 were $5,223,302 which was an
increase of $143% over the previous year.
Don’t
take a chance and get caught trying to define your employee using IRS or other
guidelines as related to independent contractors. Merely giving someone a 1099 Form is not
protection from the law and can result in serious consequences for you and your
business!