Key Takeaways

  • Nevada law presumes a worker is an independent contractor if specific criteria are met, but courts may still review the relationship's substance.
  • A well-drafted independent contractor agreement should clarify project scope, compensation, responsibilities, and legal protections.
  • Misclassification of employees as independent contractors in Nevada can lead to legal and financial consequences for businesses.
  • Nevada contractors should be aware of the state’s legal presumptions and evolving federal rules from the Department of Labor.
  • Businesses should review agreements periodically to ensure compliance with Nevada and federal law and avoid penalties.
  • UpCounsel connects businesses with experienced attorneys who can help draft or review independent contractor agreements.

Nevada Independent Contractor Law

Most Nevada independent contractor agreements are governed by state law, but federal law comes into effect under certain circumstances. Nevada almost always governs areas such as:

  • State wage and hour requirements
  • Workers' compensation
  • Unemployment tax liability

A 2015 state law establishes the presumption that a worker is an independent contractor instead of an employee if the worker maintains insurance or an occupational license, bonding, a Social Security or employer identification number, or has filed self-employment taxes during the previous year. In addition to these criteria, the worker must also satisfy at least three of the following:

  • Maintain discretion and control over work performance
  • Maintain discretion and control over when the work is performed and completed
  • Free to work for more than one business
  • Free to hire employees to assist with the work
  • Has invested capital in the business, such as purchasing equipment and tools or obtaining licenses

Senate Bill 224 was signed into law in 2015 by Nevada Governor Brian Sandoval, creating a conclusive definition of an independent contractor relationship when key elements are present. Because of this bill, Nevada employers whose relationships with workers who are categorized as independent contractors are not obligated to pay them based on the state's minimum wage. They are also freed from other state-imposed obligations regarding employer-employee relationships.

It's worth noting that just because a working relationship doesn't satisfy the new criteria, it doesn't mean a court won't find that a contractor relationship exists. The courts look at all the aforementioned factors, as well as others from case law to determine the nature of the working relationship. It's also worth noting that the new law does not create presumptions that a person is a company employee.

Risks of Misclassification in Nevada

Incorrectly labeling an employee as an independent contractor in Nevada can expose businesses to significant legal and financial risks. Employers may be liable for unpaid wages, back taxes, workers’ compensation, unemployment benefits, and potential penalties if the classification is deemed improper.

Nevada law provides a presumption of independent contractor status under specific conditions, but this presumption is not absolute. Courts may still analyze the nature of the working relationship using various tests, including the degree of control exercised by the employer, the method of compensation, and whether the work performed is integral to the business.

Employers found to have misclassified workers may also face:

  • Liability for unpaid overtime and minimum wage violations.
  • Back payment of employment taxes (Social Security, Medicare, and unemployment insurance).
  • Exposure to civil lawsuits or class actions from misclassified workers.
  • Government audits or investigations from agencies like the IRS, Nevada Department of Employment, Training and Rehabilitation (DETR), or the U.S. Department of Labor.

Maintaining documentation and ensuring clarity in the contractor’s duties and independence is crucial to reduce this risk.

What is an Independent Contractor Agreement?

An independent contractor agreement is a document used when someone is hired to complete a short-term project. The agreement is a written contract between the worker and employer specifically for the outlined service or project. Unlike an employment agreement, the independent contractor agreement details why the worker being hired is not an employee for tax and legal reasons.

The independent contractor agreement may also be referred to as:

  • Freelancer contractor agreement
  • Client/service freelancer agreement
  • Contractor agreement
  • Company contractor agreement
  • Independent consultant agreement
  • Freelancer agreement

The independent contractor agreement should contain these elements:

  • Hiring company: the name of the person or business that requires the worker's services
  • Contractor: the name of the person or business hired for the specific task or project
  • Services: a description of the project or tasks which need to be performed
  • Compensation: how often and how much the contractor will be paid by the employer
  • Effective date: the date at which the agreement begins and the job starts
  • Termination: whether the hiring party can end the relationship at will and how many days a written notice is required beforehand
  • Assistants: a stipulation that the contractor can hire their own assistants must state that they are fully responsible for expenses, including Medicare and Social Security taxes
  • Fringe benefits: the worker cannot participate in the employer's sick pay, vacation pay, health, pension or unemployment benefits

In some cases, additional legal details may be included in the independent contractor agreement. These sections include:

  • Binding effect: a statement that the agreement is still in effect if someone else takes over the hiring company or contractor company
  • Assignment: neither party involved may transfer rights to the job or the right to get paid without prior written permission
  • Expenses: each party is responsible for his or her own out-of-pocket expenses, unless the employer has agreed to cover certain costs and the contractor submits invoices
  • Entire agreement: previous agreements are considered invalid and future changes must be made via a written amendment to the agreement
  • Governing law: state laws apply
  • Indemnification: when problems arise, the contracting party is responsible and must defend the employer from liability
  • Insurance: the contractor is responsible for their own insurance
  • Representations: both parties have the authority and power to enter into the agreement
  • Notices: communications must be written and delivered properly

When to Consult a Nevada Business Attorney

Given the complexity of Nevada's independent contractor laws and the consequences of misclassification, consulting a business attorney is often advisable. A qualified attorney can:

  • Draft a compliant and customized agreement tailored to your business needs.
  • Review existing agreements for legal sufficiency and risk.
  • Advise on worker classification based on the latest state and federal guidelines.
  • Represent you in disputes with contractors or government agencies.

If you're unsure about how to structure your independent contractor relationship or agreement in Nevada, consider finding a vetted attorney on UpCounsel. You’ll gain peace of mind knowing your business is legally protected.

Best Practices for Drafting a Nevada Independent Contractor Agreement

To ensure your agreement is enforceable and protects your business under Nevada law, consider the following best practices:

  1. Use Clear, Unambiguous Language
    Avoid jargon and ensure each clause is understandable to both parties.
  2. Include a Detailed Scope of Work
    Outline the specific services to be performed, deadlines, and expected deliverables.
  3. Define Payment Terms Precisely
    Specify whether the contractor is paid hourly, per project, or on a retainer basis. Include payment schedule and method.
  4. Add Confidentiality and IP Clauses
    Protect sensitive business information and establish who owns the work product.
  5. Include a Dispute Resolution Clause
    Indicate whether disputes will be resolved through arbitration, mediation, or litigation, and in what jurisdiction.
  6. Clarify Independent Contractor Status
    Include a declaration that the contractor is not an employee and is responsible for taxes, insurance, and compliance with all applicable laws.

Nevada and Federal Classification Standards

Nevada’s statutory standard for defining an independent contractor focuses on independence and control. However, employers must also be aware of federal standards, particularly those used by the IRS and the Department of Labor (DOL).

  • IRS Standard: Evaluates behavioral control, financial control, and the type of relationship. If an employer dictates how a worker performs tasks or provides ongoing benefits, it may suggest an employment relationship.
  • DOL’s “Economic Realities Test”: Considers whether the worker is economically dependent on the employer or truly in business for themselves.

Recent changes in federal rules, such as the 2024 DOL update to the Fair Labor Standards Act’s independent contractor rule, may impact how businesses structure relationships with contractors. Nevada businesses should regularly review their agreements in light of both state and federal guidance.

Key Legal Considerations in Nevada Agreements

When drafting an independent contractor agreement in Nevada, several state-specific legal considerations should be addressed to ensure compliance and minimize misclassification risks:

  • Right to Control: The agreement should emphasize that the contractor maintains control over how the work is performed, not just the final outcome.
  • Tools and Expenses: Contractors typically provide their own tools and cover business expenses. If employers reimburse certain expenses, it should be clearly outlined.
  • Project-Based vs. Ongoing Work: Agreements for one-off projects help support contractor status. Ongoing, indefinite work may suggest an employment relationship.
  • Exclusivity: Contractors should not be restricted from offering services to other clients unless there is a valid business justification.
  • Tax Responsibilities: Clearly state that the contractor is responsible for paying their own income and self-employment taxes.
  • No Benefits: The agreement must clarify that the contractor is not entitled to benefits such as health insurance, retirement contributions, or paid time off.

Frequently Asked Questions

1. How does Nevada determine if someone is an independent contractor or employee? Nevada uses specific statutory criteria, including control over work, business independence, and prior tax filings. Courts also look at the totality of the working relationship.

2. What happens if I misclassify a worker in Nevada? You may be liable for back wages, unpaid taxes, penalties, and legal fees. Agencies like the IRS or DETR may also audit your business.

3. Can I hire a contractor for ongoing work in Nevada? Yes, but it's riskier. Long-term, exclusive relationships may resemble employment. Ensure the contractor retains independence and meets statutory criteria.

4. Do I need a written agreement for every independent contractor? While not required by law, a written agreement helps define the relationship, protect both parties, and provide evidence in case of disputes.

5. Can a contractor file for unemployment in Nevada? Generally, no. Independent contractors are not eligible for unemployment benefits unless they were misclassified and the state determines they were actually employees.

If you need help writing an independent contractor agreement in Nevada, post your job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.