When Laws Conflict: North Carolina Workers’ Compensation Act v. A New FLSA Rule

Among the final acts of the Trump administration was the promulgation, on September 25, 2020, of a new proposed rule regarding classification of workers and independent contractors. The Wage and Hour Division of the United States Department of Labor entitled the rule Independent Contractor Status Under the Fair Labor Standards Act. While many states including North Carolina lodged objections on the grounds that workers receive better protection when they are classified as employees, it is likely that the rules will become final. Regardless of whether the federal standards change, it is important that North Carolina workers’ compensation professionals understand that federal and state labor laws differ significantly, and that state law – not federal – controls “employment” in the workers’ compensation context.

Why does this matter?

When an adjuster receives a new claim, one of the first tasks is to verify that the injured worker is truly an employee, rather than an independent contractor. This step is important in deciding whether to accept or deny the case, since North Carolina workers’ compensation law generally does not apply to independent contractors.

The new proposal under the Fair Labor Standards Act (“FLSA”) would allow more workers to be treated as contractors, affecting their right to minimum wage, overtime, anti-discrimination protections, and paid leave. In some states, the FLSA standards and the workers’ compensation standards are tied together such that FLSA rules also would impact whether workers are entitled to workers’ compensation. However, North Carolina’s standards are separate and distinct from federal law, meaning that the new FLSA proposal should not affect workers’ compensation. It is important for adjusters to continue using state law when assessing employment relationships.  

What is an “employee” under the NC Workers’ Compensation Act?

Regardless of how an employee is classified under federal standards, the North Carolina Workers’ Compensation Act and interpreting case law establishes that, for this inquiry, “control” is the driving question – how much control does the employer have over the worker? In very general terms, while the boss has the right to control an employee, an independent contractor has the right to exercise judgment and choose the methods. The following factors are considered, but no one prong is determinative:

  • Is the person engaged in an independent business, calling, or occupation?
  • Is the person to have the independent use of his or her special skill, knowledge, or training in the execution of the work?
  • Is the person doing a specified piece of work at a fixed price or for a lump sum or upon a
  • quantitative basis?
  • Is the person subject to discharge because he or she adopts one method of doing the work rather than another?
  • Is the person in the regular employ of the other contracting party?
  • Is the person free to use such assistants as he or she may think proper?
  • Does the person have full control over such assistants?
  • Does the person select his or her own time?

The workers’ compensation attorneys at Anders Newton understand that the question of “employment relationship” can be confusing, especially for adjusters who handle cases in many states. It is important to get this right; regardless of any federal rule, if you believe the North Carolina Industrial Commission may lack jurisdiction over a case because a worker is not a true employee, you may have grounds for a denial. Reach out to us any time at 919-516-8400 with questions about this area of law and how it may affect a claim you are handling.

Posted in