State (and local) governments also hire private parties to perform services, which results in tort liability issues. For example, if a local health department contracts with a physician to work part-time in its clinic, is the state or the physician liable under state law for damages from medical malpractice?

Whether a contractor is covered by the state's tort claims act or is liable as a private party depends on similar factors as the FTCA analysis for federal government tort liability. Again, the worker must be deemed a state employee to receive state tort claims act protection from liability. If the employee is not considered a government worker, there is no reason for special liability protection. State law may differ on this point, of course. Factors analyzed include the amount of control the state has in the operations of the facility or employees and the terms of the contract between the state and the facility/employee.

In New Mexico, a health facility and its employees were not liable under the state tort law because their relationship with the Dept. of Health and Environment did not suffice to make them government employees. The court examined the terms of the contract and the amount of control the state had, and found that the state did not operate the facility. Armijo v. Department of Health and Environment, 775 P.2d 1333 (N.M. App. 1989).