New Mexico Independent Contractor Agreement Template

Introduction

Key Things to Know

1. 1

   New Mexico applies three separate tests, and the state labor department says so plainly. Unemployment insurance runs the ABC test, wage and hour runs economic realities, and workers' compensation runs the common law right to control. The Department of Workforce Solutions warns that businesses are subject to different tests depending on the relevant substantive area of law, and that the federal tax agency's test does not apply in the context of the Fair Labor Standards Act, New Mexico's Unemployment Compensation Law, or New Mexico's wage and hour laws.

2. 2

   Unemployment insurance uses a full ABC test with an express burden standard. Under NMSA 1978, Section 51-1-42(F)(5), services performed for wages or other remuneration are employment unless and until it is established by a preponderance of evidence that the individual is free from control or direction over performance both under the individual's contract of service and in fact, that the service is either outside the usual course of business or performed outside all of the places of business of the enterprise, and that the individual is customarily engaged in an independently established trade, occupation, profession or business. The burden sits on the party asserting contractor status.

3. 3

   New Mexico's prong C is narrower than the version most states use. The statute requires the independent trade, occupation, profession or business to be of the same nature as that involved in the contract of service. A worker engaged for graphic design who also runs a weekend landscaping business has an independent business, but not one of the same nature as the engagement, so the extra words matter when identifying the trade the worker genuinely operates in.

4. 4

   Prong B is disjunctive, which is where most engagements are won or lost. The service qualifies if it is either outside the usual course of business for which it is performed or performed outside all of the places of business of the enterprise. Identify which branch the engagement relies on and describe the supporting facts, rather than asserting both loosely.

5. 5

   Wage and hour has no home-grown test. The Minimum Wage Act defines employee only as an individual employed by an employer, with statutory exceptions, at NMSA 1978, Section 50-4-21, and defines employ to include suffer or permit to work. The Department of Workforce Solutions Labor Relations Division fills the gap with the Tenth Circuit's six factor economic realities analysis, drawn from Johnson v. Unified Government of Wyandotte County, 371 F.3d 723, 729 (10th Cir. 2004): degree of control, opportunity for profit or loss, investment in the business, permanence of the relationship, degree of skill required, and the extent to which the work is an integral part of the alleged employer's business. Because the controlling authority is federal case law, shifts in that case law move New Mexico's wage and hour line without any state legislation.

6. 6

   Workers' compensation was deliberately left to the common law. In Harger v. Structural Services, Inc., 1996-NMSC-018, 121 N.M. 657, 916 P.2d 1324, the New Mexico Supreme Court treated independent contractor as a common law term of art with no special statutory definition, held that the principal consideration is the right to control, and drew the line on the character of that control, citing Burruss v. B.M.C. Logging Co., 38 N.M. 254, 31 P.2d 263 (1934): the employer controls the result the contractor achieves, but when the control descends to the details or to the means and methods of performance, the contractor becomes an employee. A general contractor claiming statutory employer immunity under NMSA 1978, Section 52-1-22 must show both that the subcontractor is not an independent contractor and that the work is a part or process in its trade, business or undertaking.

7. 7

   There is no document mandate in New Mexico, and the written contract point is often misread. No statute requires the agreement to be in writing, prescribes contract terms, mandates disclosure wording, or turns a classification presumption on what the agreement says. Putting the engagement in writing does buy time to sue on the contract, because NMSA 1978, Section 37-1-3(A) gives six years for actions founded upon a contract in writing while Section 37-1-4 gives four years for accounts and unwritten contracts, but that is a contract enforcement rule and changes nothing about classification.

New Mexico Requirements for Independent Contractor Agreement

• New Mexico ABC Test for Unemployment Insurance (NMSA 1978, Section 51-1-42(F)(5))

  Services performed by an individual for an employer for wages or other remuneration are employment unless and until it is established by a preponderance of evidence that the individual has been and will continue to be free from control or direction over performance both under the individual's contract of service and in fact, that the service is either outside the usual course of business or performed outside all of the places of business of the enterprise, and that the individual is customarily engaged in an independently established trade, occupation, profession or business. All three prongs are required and the burden falls on the party asserting contractor status.

• New Mexico Prong C Requires a Business of the Same Nature (NMSA 1978, Section 51-1-42(F)(5)(c))

  The independently established trade, occupation, profession or business must be of the same nature as that involved in the contract of service. That trailing requirement narrows prong C compared with the standard formulation used in other ABC states, because an unrelated side business does not qualify. Identify in the agreement the trade the contractor actually operates in and match it to the services being engaged.

• New Mexico Prong B Is Satisfied by Either Branch (NMSA 1978, Section 51-1-42(F)(5)(b))

  The service qualifies if it is either outside the usual course of business for which the service is performed or performed outside of all of the places of business of the enterprise. Because the prong is disjunctive, the agreement should state which branch the engagement relies on, describing either the contrast between the hiring party's usual line of business and the services, or the place of performance away from every location of the enterprise.

• New Mexico Wage and Hour Uses Economic Realities (NMSA 1978, Section 50-4-21)

  The Minimum Wage Act defines employee only as an individual employed by an employer, with enumerated exceptions, and defines employ to include suffer or permit to work. It supplies no independent contractor test. The Department of Workforce Solutions Labor Relations Division applies the Tenth Circuit's six factor economic realities analysis: degree of control, opportunity for profit or loss, investment in the business, permanence of the relationship, degree of skill required, and how integral the work is to the alleged employer's business.

• New Mexico Workers' Compensation Runs on the Right to Control (NMSA 1978, Section 52-1-22; Harger v. Structural Services, Inc.)

  Independent contractor is a common law term of art in the Workers' Compensation Act with no special statutory definition. The principal consideration is the right to control, and the distinguishing feature is the character of that control: the employer controls the result an independent contractor achieves, but when the control descends to the details or to the means and methods of performance, the contractor becomes an employee. See Harger v. Structural Services, Inc., 1996-NMSC-018, 121 N.M. 657, 916 P.2d 1324, citing Burruss v. B.M.C. Logging Co., 38 N.M. 254, 31 P.2d 263 (1934).

• New Mexico Statutory Employer Immunity Has Two Elements (NMSA 1978, Section 52-1-22)

  A general contractor claiming statutory employer immunity must affirmatively show both that the subcontractor is not an independent contractor and that the work is a part or process in its trade, business or undertaking. Related authority holds that immunity cannot be acquired merely by paying for the subcontractor's coverage. See Chavez v. Sundt Corp., 1996-NMSC-046, 122 N.M. 78, 920 P.2d 1032. Multi-tier construction arrangements should be assessed on both elements rather than on the subcontract alone.

• New Mexico Has No Written Contract Mandate for Classification

  No New Mexico statute requires an independent contractor agreement to be in writing, prescribes its terms, mandates disclosure wording, or conditions a classification presumption on contract content. The Department of Workforce Solutions warns that the difference between an employee and an independent contractor is not a matter of labels and that the parties cannot agree to designate the individual as a contractor. Draft the agreement to record accurate facts under each applicable test rather than to assert a conclusion.

• New Mexico Written Contracts Carry a Longer Limitation Period (NMSA 1978, Sections 37-1-3(A) and 37-1-4)

  Actions founded upon a bond, promissory note, bill of exchange or other contract in writing may be brought within six years, while actions on accounts and unwritten contracts must be brought within four years. Reducing the engagement to a signed writing therefore gives either party materially longer to enforce the contract itself. This is a limitation period consequence of the written form and has no effect on whether the worker is classified as an employee or an independent contractor.