"Am I an employee or a contractor?" is the most common question we get from caregivers, and the most common answer they have been given is wrong: it is not a box you tick. The law looks at how the work is set up and decides for you. Here is how that works in Nebraska right now, and what each answer means for your paycheck.
The short version
- Most home care aides working for an agency are, and should be, W-2 employees.
- A caregiver who genuinely runs their own practice, sets their own rates, works for several clients or platforms and controls their own schedule can legitimately be a 1099 contractor.
- The federal test is being rewritten in 2026, and Nebraska has its own stricter test for unemployment insurance. Both are explained below.
- Neither status is "better". Each one moves money and risk around. The section on taxes shows exactly where.
Who decides
Three different bodies apply three different tests, and they can disagree.
1. The U.S. Department of Labor (minimum wage and overtime)
The federal test is called the "economic reality" test: is the worker economically dependent on the employer, or in business for themselves? In 2024 the Department adopted a six-factor version that leaned toward employee status. On February 26, 2026 it proposed rescinding that rule and returning to a version with two "core" factors: how much control the business has over the work, and whether the worker has a real opportunity for profit or loss from their own initiative and investment. The comment period closed in April 2026. As of this writing the 2026 rule is proposed, not final; check the Department's site for the current status.
2. The IRS (income and payroll tax)
The IRS uses its own common-law test built around behavioral control, financial control and the relationship between the parties. It does not follow the Labor Department's rule. An agency that tells you when to arrive, what to do, what to wear and what to charge is describing an employee, whatever the contract says.
3. The Nebraska Department of Labor (unemployment insurance)
For unemployment insurance, Nebraska uses a strict statutory test (Neb. Rev. Stat. § 48-604(5)), often called an ABC test. You are an employee unless the business can prove all three: you are free from its control, the work is outside its usual course of business, and you are customarily engaged in an independently established trade. For an agency whose business is home care, the second prong is hard to satisfy for a caregiver. Nebraska's Department of Labor names home health care as one of the industries it targets for misclassification audits.
The home care rule, and why 2025 matters
Separately from classification, home care has its own federal wrinkle. Since 2015, third-party employers (agencies) could not claim the "companionship services" exemption from minimum wage and overtime. In July 2025 the Department of Labor proposed reinstating that exemption for agencies and told its investigators to stop enforcing the 2013 rule in the meantime. If finalized, agencies could again classify some companionship work as exempt from overtime. Skilled work by CNAs, LPNs and RNs is not companionship, and the travel-time rules in our mileage article are unaffected, but aides doing companion and respite visits should watch this closely.
What each status does to your money
| W-2 employee | 1099 contractor | |
|---|---|---|
| Social Security and Medicare | 7.65% withheld; employer pays the other 7.65% | You pay the full 15.3% self-employment tax (half is deductible) |
| Income tax | Withheld each paycheck | You send quarterly estimated payments |
| Mileage and expenses | Not deductible (permanently, since the 2025 tax law) | Deductible on Schedule C at 72.5¢ a mile in 2026, plus supplies, phone, licensing |
| Overtime | 1.5x after 40 hours | None; you set your rate |
| Unemployment insurance | Covered | Not covered |
| Workers' compensation | Covered by the employer | Your own occupational accident policy, if you buy one |
| Liability coverage | Agency's | Your own, unless the platform provides it |
| Who sets the rate | Agency | You, or the market |
The pattern: as a contractor you keep more control and more deductions, and you take on payroll tax, insurance and the risk of a bad month. A contractor rate has to be meaningfully higher than an employee wage to come out even. As a rough rule, add 20 to 30 percent to cover the extra tax and insurance before comparing.
A worked example
Take a Nebraska CNA at the state median of $19.23 an hour, working 30 hours a week with 120 miles between patients.
- As a W-2 employee with no mileage reimbursement: $577 gross. Payroll tax withheld about $44. Unreimbursed mileage at the IRS rate, $87, is a real cost with no deduction. Effective pay after that cost: roughly $446 before income tax.
- As a 1099 contractor at a $24 rate: $720 gross. Self-employment tax about $102. Mileage deduction of $87 lowers taxable income. Net after SE tax and the car: roughly $531 before income tax, and you are responsible for your own coverage.
The point of the example is not that one wins. It is that the drive and the tax treatment matter as much as the headline rate, and most caregivers are never shown either.
How Rayva handles it
We are honest about this because the law does not give us a choice. Where independent work is allowed and the work is genuinely independent (you choose your visits, set your radius and hours, decline freely, and work through Rayva alongside anything else), you work as a 1099 professional, with professional liability coverage included on every visit and occupational accident coverage available at group rates. Where state law or the nature of the work requires it, you work W-2 through our agency of record. Either way the app, the offers and the rates work the same, and mileage is priced into every offer rather than left for you to absorb.
If you give care in Nebraska, the waitlist is free. You will know your status before you accept a single visit.
This article is general information, not legal or tax advice. Classification depends on facts, and the federal rules are changing during 2026. Talk to a tax professional about your situation.
Sources
- U.S. Department of Labor, 2026 proposed rule on independent contractor status (Jackson Lewis summary)
- U.S. Department of Labor, July 2025 proposal on the companionship and live-in exemptions (Littler summary)
- Neb. Rev. Stat. § 48-604(5), Nebraska Employment Security Law (Cline Williams summary)
- National Employment Law Project, independent contractor classification in home care
- Nursa, 1099-NEC tax guide for nurses and CNAs
- BLS OEWS May 2025, Nebraska nursing assistants (via AmericaByNumbers)
