Colorado Employment Law

Colorado Employment Law:

¹ Colo. Rev. Stat. § 8-40-202 (2018)
Under Colorado law, a worker is generally presumed to be an employee rather than an independent contractor unless certain specific factors are established. ¹ Under Colorado law, business owners are to withhold state taxes, provide workers’ compensation insurance coverage, and pay unemployment insurance contributions for its employees.  In the event a worker is properly classified as an independent contractor, the business owner is not required to make any withholds or liable for insurance coverage or contributions.

The test for determining whether a worker is an independent contractor can be found in Colo. Rev. Stat. § 8-40-202.  Under this regulation, a business owner must show by a preponderance of the evidence that the conditions set forth in the statute have been satisfied.  These conditions can be proven through a written document, and all independent contractor engagements should be reduced to a written agreement.  In order for a worker to be considered an independent contractor the written agreement between the business owner and the worker cannot contain any of the following requirements or provisions:

1.  Require the worker to work exclusively for business; except that the worker may choose to work exclusively for the business for a finite period of time specified in the independent contractor agreement;

2.  Establish a quality standard for the worker; except that the business owner may provide plans and specifications regarding the work but cannot oversee the actual work or instruct the worker as to how the work will be performed;

3.  Pay the worker a salary or an hourly rate rather than at a fixed or contract rate;

4.  Terminate the work of the worker during the contract period unless the worker violates the terms of the contract or fails to produce a result that meets the specifications of the contract;

5.  Provide more than minimal training for the worker;

6.  Provide tools or benefits to the individual; except that materials and equipment may be supplied;

7.  Dictate the time of performance; except that a completion schedule and a range of negotiated and mutually agreeable work hours may be established;
 

8.  Pay the service provider personally instead of making checks payable to the trade or business name of such service provider; or

9.  Combine the business operations of the business in any way with the business operations of the worker instead of maintaining all such operations separately and distinctly.

Any agreement between the business and worker must be signed by both parties and may be a contract for performance of service or a separate document.  Such document shall create a rebuttable presumption of an independent contractor relationship between the parties where such document contains a disclosure, in type which is larger than the other provisions in the document or in bold-faced or underlined type, that the worker is not entitled to workers’ compensation benefits and that the worker is obligated to pay federal and state income tax on any moneys earned pursuant to the contract relationship.  All signatures on any such document must be duly notarized.


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