Assembly Bill No. 288

Assembly Bill No. 288-Committee on Government Affairs

March 19, 1997
____________

Referred to Committee on Government Affairs

SUMMARY--Limits use of independent contractors by state agencies. (BDR 23-802)

FISCAL NOTE: Effect on Local Government: No.

Effect on the State or on Industrial Insurance: Yes.

EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.

AN ACT relating to state personnel; limiting the use of independent contractors by state agencies; and providing other matters properly relating thereto.

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

~^
Section 1 Chapter 284 of NRS is hereby amended by adding thereto the provisions set forth as sections 2, 3 and 4 of this act.
Sec. 2 1. A state agency may contract for the services of persons as independent contractors pursuant to NRS 284.173 under any of the following circumstances:
(a) The contracting agency clearly demonstrates that the proposed contract will result in cost savings to this state and the proposed contract complies with the provisions of subsection 2. In comparing the costs of contracting with the costs of not contracting, the agency:
(1) Shall include in the costs of contracting any costs to the state that can be attributed to the performance of the service by the contractor, including, without limitation, the costs of inspection, supervision and monitoring.
(2) Shall include in the costs of not contracting the additional costs that the state would incur if it provided the service proposed by the independent contractor, including, without limitation, the costs of the additional space, equipment and materials, and the salaries and benefits of the additional staff members, needed to perform the service, but shall not include in such costs the state's indirect overhead costs unless such costs can be attributed solely to the performance of the service and would not exist if that service was not performed by state personnel. As used in this subparagraph, "indirect overhead costs" mean the proportionate share of existing salaries and benefits of administrative personnel, and costs of equipment rental, utilities and materials, that can be attributed to the performance of the service.
(b) The services are not available within the classified service, cannot be performed by classified employees or are of such a highly specialized or technical nature that the necessary expertise or experience is not available through the state personnel system.
(c) The services are incidental to a contract for the lease of real or personal property, including, without limitation, services that are provided pursuant to an agreement to service or maintain office equipment and computers.
(d) The independent contractor will provide equipment, materials, facilities or support services that could not practicably be provided by this state in the location where the services are to be performed.
(e) The independent contractor will conduct temporary training courses.
(f) The services are of such an urgent, temporary or occasional nature that the delay caused by following the normal procedure to secure the services would frustrate the purpose the services are intended to fulfill.
2. In addition to the requirements of paragraph (a) of subsection 1, the following provisions apply to a contract with an independent contractor which is proposed on the basis that it will result in cost savings to this state:
(a) Proposals to enter into such a contract must not be approved solely on the basis that savings will result from lower rates of pay and benefits being provided by the independent contractor. A contract must not be approved if the wages paid by the contractor are less than the standard wages in the industry or are significantly less than the rates of pay and benefits provided by this state for comparable work.
(b) The contract must not result in the displacement of classified employees or adversely affect the efforts of the state regarding affirmative action. As used in this paragraph, "displacement" means any layoff, demotion, involuntary transfer or reduction in full-time employment.
(c) The cost savings must be large enough to ensure that it will not be eliminated by the cost fluctuations to private industry and to this state that would normally be expected during the term of the contract.
(d) The contract must include provisions regarding the qualifications of the staff of the contractor who will perform work pursuant to the contract and an assurance that the hiring practices of the contractor satisfy the provisions of NRS 281.370 regarding nondiscrimination.
(e) The monetary risk to this state from future increases in the prices charged by the independent contractor is minimal.
Sec. 3 Any state agency that intends to enter into a contract pursuant to section 2 of this act shall provide notification of its intent to the department. The department shall then notify each employee organization representing employees of this state that has registered with the department to receive such a notice. The employee organization may request, within 10 days after receiving such notification, that the commission review the proposed contract for compliance with the provisions of section 2 of this act.
Sec. 4 The state board of examiners shall cause each contract entered into pursuant to section 2 of this act to be reviewed at least once every 3 years to determine whether the contract is still in compliance with that section.
Sec. 5 NRS 284.173 is hereby amended to read as follows:
284.1731. Elective officers and heads of departments, boards, commissions or institutions may , in accordance with section 2 of this act, contract for the services of persons as independent contractors.
2. An independent contractor is a natural person, firm or corporation who agrees to perform services for a fixed price according to his or its own methods and without subjection to the supervision or control of the other contracting party, except as to the results of the work, and not as to the means by which the services are accomplished.
3. For the purposes of this section:
(a) Travel, subsistence and other personal expenses may be paid to an independent contractor, if provided for in the contract, in such amounts as provided for in the contract. Those expenses must not be paid under the provisions of NRS 281.160.
(b) There must be no:
(1) Withholding of income taxes by the state;
(2) Industrial insurance coverage provided by the state;
(3) Participation in group insurance plans which may be available to employees of the state;
(4) Participation or contributions by either the independent contractor or the state to the public employees' retirement system;
(5) Accumulation of vacation leave or sick leave; or
(6) Unemployment compensation coverage provided by the state if the requirements of NRS 612.085 for independent contractors are met.
4. An independent contractor is not in the classified or unclassified service of the state, and has none of the rights or privileges available to officers or employees of the State of Nevada.
5. Except as otherwise provided in this subsection, each contract for the services of an independent contractor must be in writing. The form of the contract must be first approved by the attorney general, and, except as otherwise provided in subsection 7, an executed copy of each contract must be filed with the fiscal analysis division of the legislative counsel bureau and the clerk of the state board of examiners. The state board of examiners may waive the requirements of this subsection in the case of contracts which are for amounts less than $750.
6. Except as otherwise provided in subsection 7, and except contracts entered into by the University and Community College System of Nevada, each proposed contract with an independent contractor must be submitted to the state board of examiners. The contracts do not become effective without the prior approval of the state board of examiners, but the state board of examiners may authorize its clerk to approve contracts which are for amounts less than $2,000 or, in contracts necessary to preserve life and property, for amounts less than $5,000. The state board of examiners shall adopt regulations to carry out the provisions of this section.
7. Copies of the following types of contracts need not be filed or approved as provided in subsections 5 and 6:
(a) Contracts executed by the department of transportation for any work of construction or reconstruction of highways.
(b) Contracts executed by the state public works board or any other state department or agency for any work of construction or major repairs of state buildings if the contracting process was controlled by the rules of open competitive bidding.
(c) Contracts executed by the housing division of the department of business and industry.
(d) Contracts executed with business entities for any work of maintenance or repair of office machines and equipment.
8. The state board of examiners shall review each contract submitted for approval pursuant to subsection 6 to consider:
(a) Whether sufficient authority exists to expend the money required by the contract; and
(b) Whether the service which is the subject of the contract could be provided by a state agency in a more cost-effective manner.
If the contract submitted for approval continues an existing contractual relationship, the board shall ask each agency to ensure that the state is receiving the services that the contract purports to provide.
9. If the services of an independent contractor are contracted for to represent an agency of the state in any proceeding in any court, the contract must require the independent contractor to identify in all pleadings the specific state agency which he is representing.
Sec. 6 Section 126 of chapter 580, Statutes of Nevada 1995, at page 2042, is hereby amended to read as follows:

Sec. 126. NRS 284.173 is hereby amended to read as follows:

284.173 1. Elective officers and heads of departments, boards, commissions or institutions may, in accordance with section 2 of this act, contract for the services of persons as independent contractors.

2. An independent contractor is a natural person, firm or corporation who agrees to perform services for a fixed price according to his or its own methods and without subjection to the supervision or control of the other contracting party, except as to the results of the work, and not as to the means by which the services are accomplished.

3. For the purposes of this section:

(a) Travel, subsistence and other personal expenses may be paid to an independent contractor, if provided for in the contract, in such amounts as provided for in the contract. Those expenses must not be paid [under] pursuant to the provisions of NRS 281.160.

(b) There must be no:

(1) Withholding of income taxes by the state;

(2) [Industrial insurance coverage] Coverage for industrial insurance provided by the state;

(3) Participation in group insurance plans which may be available to employees of the state;

(4) Participation or contributions by either the independent contractor or the state to the public employees' retirement system;

(5) Accumulation of vacation leave or sick leave; or

(6) [Unemployment compensation coverage] Coverage for unemployment compensation provided by the state if the requirements of NRS 612.085 for independent contractors are met.

4. An independent contractor is not in the classified or unclassified service of the state, and has none of the rights or privileges available to officers or employees of the State of Nevada.

5. Except as otherwise provided in this subsection, each contract for the services of an independent contractor must be in writing. The form of the contract must be first approved by the attorney general, and, except as otherwise provided in subsection 7, an executed copy of each contract must be filed with the fiscal analysis division of the legislative counsel bureau and the clerk of the state board of examiners. The state board of examiners may waive the requirements of this subsection in the case of contracts which are for amounts less than $750.

6. Except as otherwise provided in subsection 7, and except contracts entered into by the University and Community College System of Nevada, each proposed contract with an independent contractor must be submitted to the state board of examiners. The contracts do not become effective without the prior approval of the state board of examiners, but the state board of examiners may authorize its clerk to approve contracts which are for amounts less than $2,000 or, in contracts necessary to preserve life and property, for amounts less than $5,000. The state board of examiners shall adopt regulations to carry out the provisions of this section.

7. Copies of the following types of contracts need not be filed or approved as provided in subsections 5 and 6:

(a) Contracts executed by the department of transportation for any work of construction or reconstruction of highways.

(b) Contracts executed by the state public works board or any other state department or agency for any work of construction or major repairs of state buildings if the contracting process was controlled by the rules of open competitive bidding.

(d) Contracts executed by the state industrial insurance system.

(e) Contracts executed with business entities for any work of maintenance or repair of office machines and equipment.

8. The state board of examiners shall review each contract submitted for approval pursuant to subsection 6 to consider:

(a) Whether sufficient authority exists to expend the money required by the contract; and

(b) Whether the service which is the subject of the contract could be provided by a state agency in a more cost-effective manner.

If the contract submitted for approval continues an existing contractual relationship, the board shall ask each agency to ensure that the state is receiving the services that the contract purports to provide.

9. If the services of an independent contractor are contracted for to represent an agency of the state in any proceeding in any court, the contract must require the independent contractor to identify in all pleadings the specific state agency which he is representing.

Sec. 7 This act becomes effective on July 1, 1997.