Do you think you have Independent Contractors instead of Employees? As a business owner, if you have Independent Contractors, you do not have to withhold taxes; provide benefits; or even pay minimum wage. Unfortunately, Nevada law and Federal law have recently made sweeping changes in how they define an “Independent Contractor.” If you improperly categorize the worker as an Independent Contractor, you may subject yourself to fines from both the State of Nevada as well as the Internal Revenue Service, including liability for unpaid payroll taxes (for which you will be personally liable); unpaid unemployment taxes; unpaid workers’ compensation premiums; overtime liability; as well as the costs of benefits that you offer to your other employees.
First, regardless of where you operate your business, you must be aware of Federal requirements. On July 15, 2015, the United States Department of Labor issued an Administrator’s Interpretation making it clear that “most workers are employees.” As such, there is now a presumption that any of your workers are employees rather than independent contractors. Under the Federal Standards, the government is going to look to the following factors:
- Is the work performed an integral part of the employer’s business;
- Does the worker have an opportunity for profit and loss;
- Does the worker have a significant personal investment in the work;
- Does the work require special skills or initiative;
- Is there a defined time for the length of the engagement; and
- How much control does the employer have over the job.
Not only do you need to be attentive to the new Federal requirements, but you should be aware that the Nevada Legislature also recently changed who is an independent contractor. Under Nevada law, the worker has to satisfy three or more of the following criteria to be an independent contractor:
- Whether the worker has control and discretion over when and how they work;
- Whether the worker performs services for other businesses;
- Whether the worker provides his/her own equipment or tools; and
- Whether the worker has his/her own costs in performing services such as insurance and other overhead.
Misclassifying your workers can be a costly mistake. Gordon Law has some strategies to help you to overcome the challenges of classifying your workers. We remain available as a resource for your to protect your business in this and all areas.