The Legislature passed revisions to NRS 624 last year that forbids contractors from performing work using independent contractors.  This goes both for work that requires a contractor’s license and work that does not require a contractor’s license. 

For work that does require a contractor’s license, the work can be performed by the contractor, the contractor’s employees, or other contractors’ employees (a subcontractor’s employees for example).  For work that does not require a contractor’s license, the work can be performed by anyone just listed or by a person that is employed by a licensed private employment agency.

The new revisions define an employee as someone that works under a contractor’s direction and control, fills out a W-4, and gets a W-2 at year’s end. 

The idea behind this new law is to try to prevent contractors from hiring workers “off the books” and paying them “under the table.”  Contractors that enter into such arrangements open themselves up to disciplinary action from the State Contractors Board.  Any such agreements are void and unenforceable.  UNLV Economist, Jeff Waddoups on behalf of the Institute for Construction Economic Research, testified that “misclassifying” employees as independent contractors or paying workers “off the books” resulted in a yearly loss of $49.5 million to the state in the form of unemployment insurance, workers comp, and modified business taxes. 

It also comes in response to a Court’s decision in Washoe County called Legacy Specialties, Inc. v. Nevada State Contractors Board, Case No. CV20-00404 issued in January 2021.  In that case, Legacy leased skilled labor through American Drywall Services, an employee leasing company which had no licensed contractors.  The Board wished to discipline Legacy for hiring an unlicensed contractor, but the District Court said the Board’s rules were too vague and if it wanted contractors to only use W-4/W-2 employees or licensed subcontractors, then they’d have to go to the Legislature and clarify it.  So, they did and now we have the AB 227.

What Does it Mean?

Put simply, it means every skilled or semi-skilled worker on your job has to be your employee or a licensed subcontractor.  You are permitted to use an employment agency for unskilled labor.  You cannot hire an independent contractor (someone to whom you’d send a 1099) that does not have their own contractor’s license and no “off the books” cash workers.

What Should You Do?

Every situation is different, so it’s best to consult with a legal professional on your specific situation.  However, in general, if there are independent contractors you use on a regular basis that do not have their own contractor’s license, you will need to process them as employees (W-4/W-2) from now on.  That will mean more administrative work and bookkeeping tasks.  That could mean revisiting your E&O insurance, workers comp, and other insurance products. 

Another option would be to have those folks get contractor licenses and then work out a contractual arrangement whereby they are an “on-call” subcontractor, for example.

At the very least, you will have to take a look at how you do business and adjust, if necessary.  If you need assistance, we’re here to help.