Thought Leaders: Are your workers independent contractors or employees?
In the context of Nevada law for the purposes of payment, collection of wages and other benefits
If you are an employer in Nevada, you know your employees are required to be paid a minimum wage for work performed, be provided certain insurance benefits depending on full or part-time status, be compensated properly for overtime, are allowed breaks, and other benefits.
You may also know that if you engage independent contractors, these workers are not necessarily entitled to all the benefits afforded to those with an employee status. It is important for you, as an employer, to know the distinction between an independent contractor and an employee to protect your business from liability.
To establish an independent contractor relationship for the purposes of payment and collection of pay and other benefits, there is a relatively new law that has been enacted in Nevada to help employers and workers alike determine their role in the workplace. The determination that a worker is an independent contractor is dependent on several factors that have been enumerated within the law.
In June of 2015, Senate Bill 224 was signed into law. The bill created a “conclusive presumption” that a person is considered an independent contractor if that person meets certain criteria set forth under the law. A “conclusive presumption” requires a court to presume an issue or fact is true notwithstanding evidence to the contrary. Therefore, if a court makes a conclusive finding that a worker is an independent contractor, the worker will not be able to provide evidence to the court opposing that finding.
Under S.B. 224, codified at NRS 608, a person is conclusively presumed to be an independent contractor for the purposes of Nevada Revised Statutes (NRS) Chapter 608—Provisions Governing Payment and Collection of Wages and Other Benefits — if the following requirements are met:
1. The person must not be a foreign national and must be legally present in the United States;
2. The person is required, under their contract with the principal, to hold necessary state or local business licenses and maintain any necessary occupational licenses, insurance or bonding; and
3. The person meets three or more of the following requirements:
a. The person has control over the means and manner of the performance of the work they do and the result of that work;
b. The person has control over the time in which the work is performed (an exception is made here with respect to agreements with a principal regarding completion schedule, range of work hours, and/or for those performing as entertainers);
c. The person is not exclusively required to work for the principal unless the law or a regulation requires exclusivity, and/or the agreement provides for exclusive services for a limited period;
d. The person can hire employees to assist with the work;
e. The person contributes a substantial investment of capital in the business of the person, for instance the purchase of tools and equipment, and/or the person asks for permission from the principal to access the work space from the principal and/or leases the work space from the principal.
For the purposes of this article, the principal is the person who engages another to do any work.
If a person does not meet three or more of the requirements of section (c), that does not mean they will be considered an employee, rather there will be no conclusive presumption made regarding the person’s status as an independent contractor. A finder of fact, meaning a judge or jury depending on the proceeding, will have to determine whether the worker is an independent contractor or an employee under the law.
In interpreting the factors presented in NRS 608, the important word to keep in mind is control. Does the worker or the principal (employer) have control over the timing and the manner in which the work is performed? Does the worker or the principal have control over the materials, tools, and space in which the person is working? Who has control over the financial aspects of the tasks to be performed? the principal? If the general answer is that the worker has the control over those aspects, it is likely that the person will be deemed an independent contractor under the law.
Please note that the conclusive presumption of an independent contractor under NRS 608 only applies to Nevada’s wage and hour and benefits laws. The tests for determining whether someone in an independent contractor for the purposes of unemployment, the Nevada Industrial Insurance Act (NIIA), and for tax purposes can be found in other places within the Nevada Revised Statutes and the Federal Tax Laws.
As always, it is of the utmost importance for business owners to have a signed, written agreement with independent contractors that outlines their duties, responsibilities, and the expectations of the task or job to be performed. Be aware, however, that merely classifying a worker as an “independent contractor” in an agreement or contract will not be conclusive as to whether that worker is indeed an independent contractor or employee under the law.
This article was written by Jennifer McMenomy, an attorney with Allison MacKenzie in Carson City, which sponsors this content.
Heather Ashbridge, who started with Nevada State Development Corporation in 2008, previously served in several roles with the organization, including assistant vice president and loan officer. She is based in NSDC’s Reno office.