Oklahoma may follow IRS effort to identify misclassified workers

Q&A with Nathan Whatley

published in The Oklahoman | April 16, 2010

McAfee & Taft labor and employment attorney Nathan Whatley was featured in The Oklahoman discussing the IRS’s announcement that it will randomly audit thousands of businesses throughout the country. This audit, which will take place over the next three years, will place particular emphasis on whether employers have misclassified employees as independent contractors in order to evade federal tax obligations. Whatley shared his comments on whether Oklahoma is also increasing its focus on employee/contractor classifications.

On January 13, Oklahoma Sen. Andrew Rice introduced Senate Bill (SB) 1384, “aimed at identifying Oklahoma employers that have misclassified individuals as independent contractors rather than employees and underpaid state taxes and workers’ comp and unemployment benefits premiums,” said Whatley.

The bill directs the Oklahoma Tax Commission, the Oklahoma Workers’ Compensation Court, and the Oklahoma Employment Security Commission to create a database of employers, employees, and independent contractors that can be accessed by any one of the agencies. Whatley said that they are also directed to “share information and coordinate investigation and enforcement efforts for the purpose of detecting those employers who intentionally misclassify individuals as independent contractors other than employees.” SB 1384 contemplates the agencies sharing information and coordinating enforcement efforts to identify and confront employers that have misclassified individuals as independent contractors. On February 10, the bill was referred to the Senate Business and Labor Committee.

According to Whatley, it’s too early to tell the scope of the IRS’ upcoming audits or where SB 1384 is headed. “It’s safe to assume that in the current economic and political climate, companies classifying workers as independent contractors are more likely than ever to be reviewed by federal and/or state agencies. Now is the time to look at your use of independent contractors to make sure you’re in compliance with applicable tax, benefits and employment laws.”