In Colorado, determining whether a worker is an employee or an independent contractor is important for a variety of reasons. These include the obligations of employers to provide workers’ compensation insurance, unemployment insurance, as well as other benefits.
Moreover, under Colorado law, an individual is presumed to be in covered employment unless it is shown:
- the individual is customarily engages in an independent trade, occupation, profession or business related to the work performed; AND
- the individual is free from control and direction in the performance of those services.
Shifting Burden of Proof
Typically, the if a worker performs services for a company, the presumption is they are an employee. The burden of proof is on the company to show that the worker is not an employee. The company must prove that they meet the criteria for being an independent contractor.
Companies can shift the burden of proof to the worker however, by using a written document which meets certain legal requirements. If a contract meets all the requirements under Colorado law, the worker is presumed to be an independent contractor. The shifts burden of proof is now on the worker to establish otherwise.
Independent Contractor Agreement Requirements
First, it must contain a disclosure. The disclosure must be in type which is either larger, in bold-faced type, or underlined, than the other parts of the document. This disclosure must state the independent contractor has no entitlement to unemployment insurance benefits unless provided by the independent contractor. The disclosure must also state the independent contractor pays their own federal and state income taxes.
Second, the contract must contain certain clauses that both parties agree to. These clauses include:
- The individual doesn’t work exclusively for the person for whom services are performed; unless by choice.
- There are no established quality standards for the individual. Plans and specifications can be provided, but there is no oversight of the actual work.
- The company does not pay a salary or hourly rate but rather a fixed or contract rate.
- The individual generally cannot be terminated during the contract period. But can be let go if; the individual violates the terms of the contract, or fails to produce a result that meets the specifications of the agreement.
- The company will provide nothing more than minimal training for the individual.
- The individual provides their own tools for the work to be completed. The company may supply materials and equipment.
- The company does not dictate the time of performance. A completion schedule and a range of mutually agreeable work hours is acceptable.
- The company does not pay the individual personally. It makes checks payable to the trade or business name of the individual.
- The company doesn’t combine their business operations with the individual’s business. Instead both operations must be separate and distinct.
To Wrap Up
Meeting all of the above requirements does not guarantee a worker is considered an independent contractor under Colorado law.
Although, it does shift the burden of proof to the worker to establish that they are not in covered employment. It’s important for both the employer and the worker to carefully review the terms of any contract to ensure that they are in compliance with the law and it accurately reflects the nature of their working relationship. Failing to do so can result in significant legal and financial consequences for both parties.
If you have any questions or concerns about your employment status or your rights and responsibilities as an employer; please feel free to schedule an initial consultation.Follow me on social media: