Federal agencies such as the Department of Labor (DOL) and the Internal Revenue Service (IRS) have for some time been expressing their intention to challenge employers who classify individuals performing work as independent contractors. According to the DOL and the IRS, the improper classification of a worker as an independent contractor can result in an employer failing to pay the appropriate taxes, unemployment, workers’ compensation, overtime and benefit amounts. With Governor Mary Fallin’s signing of House Bill 2258, Oklahoma kicks off its own enforcement effort.
Beginning November 1, 2012, contractors who bid on public construction projects must provide proof they have a current employer identification number issued by the IRS, the Oklahoma Tax Commission, the Oklahoma Employment Security Commission and the Social Security Administration. Contractors who intentionally misclassify employees as independent contractors may be penalized an amount up to 10% of their bid.
But wait… there’s more
Another section of House Bill 2258 will affect all employers—not just contractors bidding on public construction projects. To increase the chances of discovering employers who misclassify individuals as independent contractors, the Oklahoma Tax Commission, Oklahoma Workers’ Compensation Court, the Oklahoma Department of Labor, CompSource Oklahoma and the Oklahoma Employment Security Commission will begin sharing information. This information sharing will take the form of coordinated investigation and enforcement actions between agencies. Under the new law, the agencies will establish a database to assist the agencies in sharing information about how specific employers are classifying individuals under particular programs and circumstances.
Undoubtedly, the birth of the database and the information sharing arrangements will spawn increased enforcement against employers who the agencies claim have misclassified individuals as independent contractors.
- Oklahoma House Bill 2258 (Word document)
- Business Registration Packet for Oklahoma (PDF)
- Applying for Federal Employer Identification Number
- Internal Revenue Service
- U.S. Department of Labor
- Social Security Administration
- Oklahoma Department of Labor
- Oklahoma Tax Commission
- Oklahoma Employment Security Commission
- Oklahoma Workers’ Compensation Court
- CompSource Oklahoma