On June 02, 2015, Nevada Governor Brian Sandoval signed into law Senate Bill 224, which creates a conclusive presumption of an independent contractor relationship if certain elements are present. As a result, a Nevada employer whose relationship with hired workers satisfies this independent contractor statute is relieved of the obligation to pay independent contractors according to the state minimum wage, and from any other obligations imposed by state law on employer-employee relationships.
The Elements of a Principal-Independent Contractor Relationship
In order to obtain the independent contractor conclusive presumption under the new Nevada law, the following elements must be present:
(1) The worker possesses or has applied for an employment identification number or social security number or has reported earnings from self-employment with the IRS. Foreign nationals who are legally present in the United States do not need to meet this element; and
(2) The worker is required by contract with the principal to hold any state or local business license, and if necessary, any occupational license, insurance or bonding; and
(3) The worker meets 3 or more of the following criteria:
– The worker has control over the means and manner in which any work is performed and the result of that work.
– The worker has control over the time the work is performed.
– The worker is not required to work exclusively for one principal, unless: (i) required by law; or (ii) by contract for a limited period of time.
– The worker can hire employees.
– The worker makes a substantial investment in the worker’s own business including lease or purchase of tools, licensing, and lease of workspace. Substantial investment is determined by the amount the worker makes and whether the expenses are common for that industry.
You can read the new law here: https://www.leg.state.nv.us/Session/78th2015/Bills/SB/SB224_EN.pdf
What Does this Mean for Nevada Employers?
Nevada employers should note the fact that in situations where a working relationship does not satisfy the criteria of the new statute, it does not automatically mean that a court or administrative agency cannot still find that an independent contractor relationship exists. Rather, if the conclusive presumption created by the new law is not triggered, a court will simply look at the same factors as those listed above, and perhaps others from case law, to determine what type of work relationship exists and make a decision after weighing those factors. In making that determination, courts look primarily to the control the employer exerted over the worker. Where, however, the conclusive presumption is triggered, no amount of evidence to the contrary will overcome the determination that an independent contractor relationship exists under Nevada law. Employers who desire to create an independent contractor relationship should consider the factors listed above and incorporate them into contracts with the worker.
Keep in mind this new law does not necessarily address federal law. It is also unlikely to impact decisions by the federal taxing authorities when determining whether or not the worker is an employee or independent contractor for purposes of whether federal payroll tax is owed. However, working relationships that satisfy the factors under the new law likely will put the employer in a good position to prevail on the same issue under federal law.
This topic, among others, was discussed by Brett Sutton, in a presentation to the Northern Nevada Human Resources Association meeting on June 10, 2015. If you would like a copy of the entire presentation, please contact SHLC and our office will provide a copy by email.