Misclassification
Misclassification occurs when an employer incorrectly identifies a worker as an “independent contractor” rather than an employee.
With respect to Unemployment Insurance, New Mexico uses both the “ABC test”, which is found in New Mexico statute, as well as the “Economic Realities Test,” which is found in the Fair Labor Standards Act (FLSA). Those tests are used to determine whether a worker is an independent contractor or an employee. For employers, it is important to remember that no one factor in these tests can be weighed more heavily than the other factors when making a decision.
The "ABC" Test (3 parts)
The New Mexico statute defines a non-employee/contractor as one who established by a preponderance of the evidence that:
A. Such individual has been and will continue to be free from control or direction over the performance of such services both under his contract of service and in fact;
B. Such service is either outside the usual course of business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
C. Such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the contract of service. N.M. Stat. § 51-1-42(F)(5).
Additional Resources
“Independent Contractor or Employee?” Special Article
“Get the Facts on Misclassification Under the Fair Labor Standards Act, Employee or Independent Contractor?”
“Myths About Misclassification”
New Mexico Department of Taxation & Revenue
New Mexico Workers’ Compensation Administration
Contact us
For more information contact a Tax Customer Service Agent at 1-877-664-6984, Monday through Friday, from 8:00 a.m. to 4:30 p.m. Misclassification and Unemployment Insurance tax-related questions may be submitted to uitax.support@dws.nm.gov.