Last Revised: January 2008
To determine whether an individual is an employee or an independent contractor, the relationship of the worker and NSHE must be examined. All evidence of control and independence must be established based on the following criteria:
The consequences of misclassifying an employee as an independent contractor have serious legal implications under employment and tax laws. The NSHE can be held liable for retroactive federal taxes as well as social security, state industrial insurance and unemployment taxes. In addition, interest and severe penalties can be assessed by the IRS.
Independent contractor determinations are facts and circumstance based. A person is not an independent contractor simply because there is an agreement as such or because the hiring department permits him considerable discretion and freedom of action. Substantiation of an independent contractor relationship must be provided through the Internal Revenue Service's 20 common-law factors to determine whether an individual is an independent contractor or an employee. For more information, see the Controller's web page on independent contractors at: