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Bill could make hiring independent contractors easier for businesses

By Steve Metzer

The Journal Record

OKLAHOMA CITY – A bill that has advanced through both the Oklahoma House and Senate could help to put independent contractors to work in the state, its author says.

House Bill 1095 would create the Empower Independent Contractors Act of 2019, said state Rep. Mike Osburn, R-Edmond. The measure was designed to cut down on red tape that in the past has made life difficult for some contractors and businesses that might hire them.

The lawmaker said he had heard from businesspeople who wanted to hire contractors but found that the process was too cumbersome and that it added to their tax concerns. Action also was requested by the Foundation for Government Accountability.

The Internal Revenue Service requires small businesses to understand and correctly apply rules for classifying workers as either employees or independent contractors. Worker classification is important because it determines if an employer must withhold income taxes and pay Social Security, Medicare taxes and unemployment tax on wages paid to people. Businesses normally do not have to withhold or pay any taxes on payments to independent contractors. The earnings of people working as independent contractors are subject to self-employed tax.

In the past, Osburn said the state used what’s been referred to as the “ABC test” to identify workers either as contractors or employees of a company. HB 1095, which earlier passed in the House and advanced through the Senate this week, would do away with “parts B and C” of the test, he said.

One part applied a difficult definition to what a “contractor” is – stipulating that it would be someone who does a sort of work not typically done by a hiring company. The other part made life even more challenging for potential contractors by requiring that they register with the state as a business entity, partnership or limited liability company.

If HB 1095 is cleared for final passage and signed into law by Gov. Kevin Stitt, the Oklahoma Employment Security Commission would apply a new “litmus test” in identifying independent contractors.

Various factors to be considered would include things like whether workers put in hours of labor on their own schedule or whether hours are dictated by someone else. Another factor would be whether a worker provides his or her own supplies or tools when working on a job.

Osburn said the Empower Independent Contractors Act was written for the purpose of aiding employers in creating jobs and growing the economy.

 

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