Employee misclassification occurs when an employer improperly categorizes a worker as an independent contractor or exempt employee instead of as an employee. This misclassification can have significant consequences for workers, including being denied important employment protections and benefits. In Nevada, the state labor laws provide guidelines for determining whether a worker is an employee or an independent contractor, and for identifying which employees are exempt from certain wage and hour laws.
Employee vs. Independent Contractor
Under Nevada law, the primary factor in determining whether a worker is an employee or an independent contractor is the degree of control that the employer has over the worker’s work. If the employer has the right to control the manner and means of the worker’s performance, then the worker is likely an employee, even if the employer allows the worker to set their own hours or work from home.
Other factors that may be considered include the worker’s level of skill, the degree of supervision that the worker receives, and the extent to which the worker is integrated into the employer’s business. In general, if the worker is an integral part of the employer’s business and is economically dependent on the employer, then they are likely an employee.
Exempt vs. Nonexempt Employees
Nevada law also provides guidelines for determining which employees are exempt from certain wage and hour laws. Exempt employees are typically those who hold executive, administrative, or professional positions, and who are paid a salary rather than an hourly wage.
To be considered exempt, employees must meet certain criteria, including earning a minimum salary and performing certain job duties. For example, to be classified as an exempt executive employee, the employee must be responsible for managing the business or a department, have the authority to hire and fire employees, and exercise discretion and independent judgment in their work.
Penalties for Misclassification
Employers who misclassify employees as independent contractors or exempt employees can face significant penalties and legal action. For example, if an employee is misclassified as an independent contractor, they may be denied important employment benefits such as workers’ compensation insurance and unemployment insurance. If they are misclassified as exempt, they may be denied overtime pay and other wage and hour protections.
In addition, employers who misclassify workers may be subject to investigations and lawsuits by state labor agencies and by individual employees. Employers who violate wage and hour laws can be required to pay back wages, interest, and other damages to their employees. They can also be subject to civil penalties of up to $5,000 per violation.
Defenses to Misclassification
Employers who misclassify employees may be able to defend themselves by showing that they made a good faith effort to classify their workers correctly. For example, if an employer relied on the advice of legal counsel or a tax advisor in classifying their workers, they may be able to avoid liability for misclassification.
Employers can also argue that the misclassification was a result of a misunderstanding of the law, or that the worker was an independent contractor by choice. However, these defenses are often difficult to prove and may not be accepted by state labor agencies or courts.
