State protests retroactively making NDOT contractors into employees

State lawyers Monday told the Supreme Court there should be limits on the Public Employee Retirement System's ability to retroactively declare that contract workers are state employees.

The issue was raised after the retirement system decided five contract archaeologists employed by the Nevada Department of Transportation were actually state employees for nine of the past 17 years. State officials sent the department a bill for more than $350,000 to cover retirement contributions for that period.

State transportation lawyer John Lambert said allowing that sort of action could "cripple an agency's ability to perform its legislative mandate by raiding its budget."

He asked the high court to order a hearing before the retirement system, saying the determination was made without allowing transportation officials to present evidence and witnesses. Instead, system officials accepted the 103-page report by its own auditor and ordered the payment.

"We have no record at all," said Lambert. "Just a letter written by an auditor demanding payment six weeks later."

The issue was raised by a longtime transportation archaeologist who said, given the restrictions and control over his activities on behalf of the state, he should be considered an employee with full benefits rather than an independent contractor.

The agency has used archaeologists over the years to ensure any historic or culturally significant finds during roadway work are identified and properly protected. In Nevada, that primarily means Native American historic sites. Typically, the state has contracted for their professional services.

Chris Wicker, representing the retirement system, said even though the claims involved work done as much as 17 years ago, he believes the system had no choice but to review them and determine whether the workers were employees or independent contractors. And he said that determination is solely up to system officials.

He also said he believes transporation officials had enough opportunity to present their side of the case to the auditor.

Justice Nancy Becker questioned how it would affect state budgets if the retirement system is allowed to retroactively audit agencies at any time. She said the effect on agency budgets could be serious.

"Doesn't that raise some very serious policy considerations?"

Chief Justice Deborah Agosti and Justice Bill Maupin questioned whether there should be some reasonable limits on retroactive findings, saying it seems to give the worker the upper hand.

"I'd say it would be a pretty good strategy by the employee," said Wicker.

But he said it's up to the Legislature to change the situation by putting on a statute of limitations past which contract workers can't raise the issue. Until then, he said, the retirement system has a responsibility to perform the audits and order benefit contributions from the state where appropriate.

Lambert said the Transportation Department wants the issue sent back for a proper hearing. He said the documentation used by the auditor was "woefully insufficient."

"For four of the nine years, there was no documentation," he said.

The court took the case under submission.