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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!

Posted 2:47 PM  View Comments

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