Nevada employers often are faced with the decision of whether to classify workers as independent contractors or employees, in an effort to save money on taxes and limit liability. Typically, employers don’t have to pay independent contractors minimum wage or overtime, and those workers can’t claim rights under federal or state discrimination laws.
The Nevada labor commissioner investigates possible misclassification of independent contractors.
The Nevada Supreme Court recently adopted the federal economic realities test to determine under Nevada wage laws whether someone is an independent contractor or employee. Criteria include:
• The degree to which the person’s work is controlled by the organization.
• The individual’s investment in facilities and equipment, if any.
• The individual’s opportunities for profit or loss, if any.
• Whether the service rendered requires a special skill.
• The permanency of the relationship.
• Whether the service rendered is an integral part of the organization’s business.
The Nevada Employment Security Division presumes that everyone is an employee unless each part of the following statutory test is met:
1. The person has been and will continue to be free from control or direction over the performance of the services, both under his or her contract of service and in fact.
2. The service is either outside the usual course of the business for which the service is performed or the service is performed outside of all the places of business of the enterprises for which the service is performed.
3. The service is performed in the course of an independently established trade, occupation, profession or business in which the person is customarily engaged, of the same nature as that involved in the contract of service.
If someone is properly classified as an independent contractor, the business wouldn’t need to contribute to unemployment or provide workers’ compensation insurance.
Do you have an employee or an independent contractor? Consider the following questions:
• Do you control the work time, location or method?
• Is the individual economically dependent on your business for his or her livelihood?
• Is the service integral to your business?
If the answer to any of those questions is “yes,” you probably have an employee. If there’s doubt, it’s safer to err on the side of classifying the individual as an employee and to consult legal counsel.
Anthony Golden is an associate with Fisher & Phillips LLP, an employment and labor law firm.