Nebraska New Reporting Requirements Now Include Independent Contractors

Effective January 1, 2010, the definition of “employee” under the Nebraska New Hire Reporting Act, for the first time, expressly included “independent contractors.” Nebraska law requires all employers to report any newly hired or rehired employees, including, their name, address, social security number, and the date of hire or rehire, within 20 days of the date of hire or rehire. Nebraska employers should now perform new hire reporting when hiring independent contractors. This is required regardless of how little money is involved because there is no de minimis standard like the $600 threshold for 1099-MISC. Also, independent contractors who are paid after January 1, 2010 need to be reported, regardless of how long the employer has done business with the contractor in the past.

For reasons unknown the Nebraska amendment adding “independent contractor” to the definition of “employee” did not include a definition of the term “independent contractor.” Other states have expressly adopted such a definition, and the Nebraska State Directory of New Hires website describes an independent contractor using the definition used by other states as “an individual who provides goods or services to an employer under terms specified in a contract or within a verbal agreement for compensation that is reported as income other than wages and who is an individual, the sole shareholder of a corporation, or the sole member of a limited liability company.”

However, Nebraska did not adopt that language in its statute, and there are no current regulations addressing this oversight. Therefore, the language of the law requires broad reporting, and employers must report hiring or rehiring any contractor providing goods or services for compensation, with nothing in law expressly limiting that to individuals, sole proprietors, or single member corporations or LLCs.

Submitting a copy of an employee’s W-4 form, with a notation of the date of hire or rehire, is typically be sufficient for the requirements of this Act. However, employers may now want to use the new federal Form W-9 which has been revised to now require such independent contractor service providers to list their first and last names, and FEIN or SSN.

Importantly, employers need to submit their reports using the social security number of self-employed individuals, even if they operate with a company having a FEIN. Therefore, while employers should ask independent contractors to complete the new Form W-9, if the individual’s social security number is still not known after reviewing the W-9, the employer should ask the independent contractor for it. If refused, the employer is probably best to decline to hire the contractor.

Employers are advised to seek advice from their attorney on how to proceed given the myriad unanswered questions arising from this amendment.

Kevin R. McManaman