House committee substitute makes the following changes to the 1st edition.

Deletes all of the provisions of the previous edition and replaces it with the following.

Enacts new Article 81 in GS Chapter 143, Employee Fair Classification Act, clarifying the distinction between employees and independent contractors. Sets out definitions for use in the Article for the terms employ, employee, Employee Classification Division, employee misclassification, employer and secretary. Establishes the Employee Classification Division (Division) in the Department of Revenue and sets out eight powers and duties of the Division, including assessing administrative civil penalties for instances of employee misclassification and developing methods and strategies for information sharing between state agencies in order to identify misclassification. Provides for an informal advisory council to advise the director of the Division. Sets out minimum membership of the council including several state officers. Requires the Division to submit an annual report, no later than October 1 of each year, regarding the administration of this Article, to the Office of the Governor and the Joint Legislative Commission on Governmental Operations. Sets out minimum information requirements for the report. 

Specifies the eight factors that are to be considered in the determination of status as an independent contractor, including whether the individual has the freedom to use and independently control his or her own assistants. Prohibits an employer from improperly classifying an individual. Establishes a civil penalty for instances of misclassification, including an assessment of no more than $1,000 per misclassified employee. Provides regulations and factors to be considered in assessing the penalty. Provides a process by which a penalty can be appealed. 

Requires the Division to establish a temporary amnesty program to encourage the voluntary self-reporting by employers engaging in employee misclassification. Requires the Division to establish procedures for participation in the temporary amnesty program and sets out minimum requirements of the procedures.

Requires every state occupational licensing board or commission to require its licensees or permittees to certify that they have read and understood the employee misclassification notice in GS 143-763(a)(7). Failure to certify will result in a denial of a license or permit by the board or commission.  Provides that any records of the Division that are not civil penalty assessments or final orders are not public records but are subject to inspection by state and federal agencies as specified.

Repeals GS 97-5.1, Presumption that taxicab drivers are independent contractors.

Amends GS 95-25.15(c) to require that an employee misclassification notice be added to NC Department of Labor posters and sets out the information that must be contained, including that any employee that believes they have been misclassified can report the suspected misclassification to the Division. Effective January 1, 2016.

Amends GS 87-11 concerning the State Licensing Board for General Contractors providing that it has the authority to refuse or revoke a license or issue a reprimand if a penalty was imposed pursuant to GS 143-765(b), as enacted in this act, that has been upheld on final adjudication, with the violation being willful with no good faith argument that the individual is an independent contractor. Requires the State Licensing Board for General Contractors to include references to the prohibition of employee misclassification in its guidelines governing the suspension and revocation of licenses.

Amends GS 87-23 to condition the State Board of Examiners of Plumbing, Housing, and Fire Sprinkler Contractors' authority to revoke or suspend the license of, or order the reprimand or probation of, any plumbing, heating, or fire sprinkler contractor on whether a penalty was imposed pursuant to GS 143-765(b), as enacted in this act, that has been upheld on final adjudication, with the violation being willful with no good faith argument that the individual is an independent contractor. Also adds a new subsection (d) to GS 87-23 to provide that the Board may conduct audits of pay and project records of licensee firms in furtherance of Article 2 of GS Chapter 87 or the Employee Fair Classification Act, Article 81 of GS Chapter 143.

Amends GS 87-42 to provide that the State Board of Examiners of Electrical Contractors (Electrical Board) may conduct audits of pay and project records of licensee firms in furtherance of Article 4 of GS Chapter 87 or the Employee Fair Classification Act, Article 81 of GS Chapter 143.

Amends GS 87-47(a1) to add, as an activity prohibited by the enforcement authority of the Electrical Board, the willful engagement in employee misclassification in violation of GS 143-765(b), as specified and enacted in this act.

Amends GS 143-59.2(a) to provide that vendors cannot enter into contracts for goods and services with any state government entity if, within five years prior to the date of bid solicitation, the vendor has been assessed a civil penalty pursuant to GS 143-765(b) that has been upheld on final adjudication, with the violation being willful with no good faith argument that the individual is an independent contractor.

Amends GS 153A-134 and GS 160A-194, concerning permitted regulation and licensing for various occupations, businesses, trades, and entertainment by cities and counties, providing that any applicants subject to regulation and licensure by a city or county under these statutes must certify that they have read and understand the employee misclassification notice in GS 143-763(a)(7).

Amends GS 153A-360 and 160A-420 concerning construction and development inspections, providing that owners of sites with work in progress must certify to the city and county that they have read and understand the employee misclassification notice in GS 143-763(a)(7).

Appropriates $293,000 from the General Fund to the Department of Revenue for the 2015-16 fiscal year and $293,000 for the 2016-17 fiscal year, to support five new positions to carryout the duties of the Division. Requires the Department of Revenue to consult with the Industrial Commission, the Office of State Budget and Management, the Division of Employment Security, and the Department of Labor in hiring staff for these positions.

Appropriates $17,500 for the 2015-16 fiscal year from the General Fund to the Employee Classification Division for non-recurring costs associated with the positions authorized by this section.

Includes a severability clause. 

Except as otherwise provided, act is effective August 1, 2015.