Posted by Liz Greene
In our state enforcement headlines for this week, Oklahoma state Senator Andrew Rice (D-Oklahoma City) has filed Senate Bill 1384, intended to stop employers from improperly misclassifying workers as independent contractors. The practice of worker misclassification is often an attempt on behalf of businesses to avoid payroll taxes and other costs such as benefits and/or worker's compensation insurance.
If the bill passes, Oklahoma will join a host of other states already cracking down on the practice of improperly classifying workers as independent contractors. The motivation for reform is two-fold: first, to recapture lost tax revenue (the "tax gap"), and second, to level the playing field for businesses and extend employee protections to all entitled workers.
Senate Bill 1384 does not change the definition of worker classification, but is merely about information sharing and coordination between state agencies. If passed, it would allow the Oklahoma Tax Commission, Oklahoma Workers’ Compensation Court and Oklahoma Employment Security Commission to share information and coordinate investigative and enforcement efforts in order to find employers who intentionally misclassify individuals as independent contractors rather than employees.
Senator Rice, who is easy to reach on Twitter, says, “This is an employer and worker fairness issue. The overwhelming majority of Oklahoma businesses properly classify workers, but the few who do not play by the rules are cheating their employees and fellow tax payers. This bill would discourage further employee misclassification, protect employee benefits, and would increase state revenue by recovering those payroll taxes that currently aren’t being paid, and should be.”
Rice further explains that when employees are misclassified they may not be covered under certain antidiscrimination, leave and labor standards laws, or have access to employer-provided health insurance coverage and pension plans. Misclassification can also affect how federal and state programs, such as payment of taxes and payments into state workers’ compensation and unemployment insurance programs, are administered.
The measure would also allow a database of information to be created, which would be accessible by agency representatives responsible for enforcement.
As we cover here on our 1099 Risk Blog, businesses who engage with independent contractors will need to evaluate their worker classification practices this year. Between pending independent contractor reform legislation in Congress, the proliferation of class action lawsuits, the IRS's 6000 employment tax audits, and state efforts, the risks and consequences of getting it wrong are compounding. While the steepest regulatory penalties are reserved for businesses who are intentionally misclassifying workers as independent contractors, the tax consequences of reclassification are often just the tip of the iceberg, and even unintentional misclassification may lead to immense risk exposure.
If the bill passes, Oklahoma will join a host of other states already cracking down on the practice of improperly classifying workers as independent contractors. The motivation for reform is two-fold: first, to recapture lost tax revenue (the "tax gap"), and second, to level the playing field for businesses and extend employee protections to all entitled workers.
Senate Bill 1384 does not change the definition of worker classification, but is merely about information sharing and coordination between state agencies. If passed, it would allow the Oklahoma Tax Commission, Oklahoma Workers’ Compensation Court and Oklahoma Employment Security Commission to share information and coordinate investigative and enforcement efforts in order to find employers who intentionally misclassify individuals as independent contractors rather than employees.
Senator Rice, who is easy to reach on Twitter, says, “This is an employer and worker fairness issue. The overwhelming majority of Oklahoma businesses properly classify workers, but the few who do not play by the rules are cheating their employees and fellow tax payers. This bill would discourage further employee misclassification, protect employee benefits, and would increase state revenue by recovering those payroll taxes that currently aren’t being paid, and should be.”
Rice further explains that when employees are misclassified they may not be covered under certain antidiscrimination, leave and labor standards laws, or have access to employer-provided health insurance coverage and pension plans. Misclassification can also affect how federal and state programs, such as payment of taxes and payments into state workers’ compensation and unemployment insurance programs, are administered.
The measure would also allow a database of information to be created, which would be accessible by agency representatives responsible for enforcement.
As we cover here on our 1099 Risk Blog, businesses who engage with independent contractors will need to evaluate their worker classification practices this year. Between pending independent contractor reform legislation in Congress, the proliferation of class action lawsuits, the IRS's 6000 employment tax audits, and state efforts, the risks and consequences of getting it wrong are compounding. While the steepest regulatory penalties are reserved for businesses who are intentionally misclassifying workers as independent contractors, the tax consequences of reclassification are often just the tip of the iceberg, and even unintentional misclassification may lead to immense risk exposure.
Tags: oklahoma, rice, independent contractor, misclassification, state, enforcement, data sharing, worker, classification
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