Nevada Supreme Court paves the way for new liability for injured independent contractors

In Nevada (and indeed, across the country), it's a common practice for businesses needing only short-term help to enter into independent contractor arrangements with the service providers who are selected to fulfill the short-term need. Typically, they will sign an independent contractor agreement in which both parties agree they aren't entering into an employment relationship (and as a result, the individual is responsible for providing her own workers' compensation coverage and health benefits).

For the last several years, agencies such as the U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) have been cracking down on these arrangements, finding many individuals who agreed to be independent contractors were actually employees. When such a finding is made, the business risks liability in the form of lost wages and benefits as well as administrative penalties (including penalties associated with the failure to pay minimum wage and overtime, and the failure to withhold taxes and other mandatory withholdings).

In a decision issued in December 2019, the Nevada Supreme Court added an additional risk to businesses that enter into independent contractor arrangements.

Facts

Teklle Abate entered into an agreement with American Expressway Inc. (AEI) to be an independent contractor. He further agreed that as an independent contractor, he would (a) provide his own workers' comp insurance and (b) indemnify AEI for any work-related injury claims.