Employee or Independent Contractor? The Difference Matters

Are you an employee or independent contractor?

The Colorado workers’ compensation attorneys at the Rocky Mountain Disability Law Group regularly consult with clients on potential workers’ compensation claims. One of the most common questions from clients is, “Am I entitled to workers’ compensation?” Ultimately, it depends on a variety of facts and issues. One of those is whether the injured worker is an independent contractor or an employee.

Employee vs. Independent Contractor

An employee is entitled to receive workers’ compensation to cover on the job injuries; an independent contractor is not. An individual who works for an hourly wage, and who works within the scope of the business, is generally presumed to be an employee. This is the default working relationship and it imposes a number of obligations on the employer, from overtime pay requirements to paying taxes, to maintaining workers’ compensation insurance.

The alternative to the employer-employee relationship is the independent contractor arrangement. This arrangement is governed by contract, an agreement between the worker and the company for which they are performing work. Typically, the agreement is written and signed by both parties. Pay may be fixed or per project, depending on the parties’ needs.

This arrangement appeals to many employers because it seems like a great way to save money – employers don’t have to worry about paying certain taxes and they don’t have to pay for workers’ compensation. However, the law protects workers against this. There is a legal definition of an “independent contractor.” If the requirements within the definition are not met, the worker is still considered an employee, and is entitled to employee benefits, even if the employer labels the worker as an independent contractor. In other words, it is substance, not title, that matters.

Location Matters

To make things even trickier, the definition of independent contractor can vary from state to state and may depend on the area of law involved (workers’ comp, labor laws, tax laws, etc). In all cases, the core issue is how much control the company paying the worker has. If the company sets the hours and manner of completion of the work, the worker is most likely an employee. In contrast, if the company provides the goal, what they want completed, and allows the worker to complete the assignment during the hours they want and in the manner they want, the worker may be considered an independent contractor.

For purposes of Colorado workers’ compensation law, a nine-factor test set forth in Colo. Rev. Stat. § 8-40-202(2)(b)(II) is applied. The statute provides that for an employer to prove that a worker is truly an independent contractor, they must show that the person for whom work is performed (ie the company or hiring individual) does NOT:

  • “Require the individual to work exclusively for the person for whom services are performed; except that the individual may choose to work exclusively for such person for a finite period of time specified in the document;
  • Establish a quality standard for the individual; except that the person may provide plans and specifications regarding the work but cannot oversee the actual work or instruct the individual as to how the work will be performed;
  • Pay a salary or at an hourly rate instead of at a fixed or contract rate;
  • Terminate the work of the service provider during the contract period unless such service provider violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
  • Provide more than minimal training for the individual;
  • Provide tools or benefits to the individual; except that materials and equipment may be supplied;
  • Dictate the time of performance; except that a completion schedule and a range of negotiated and mutually agreeable work hours may be established;
  • Pay the service provider personally instead of making checks payable to the trade or business name of such service provider; and
  • Combine the business operations of the person for whom service is provided in any way with the business operations of the service provider instead of maintaining all such operations separately and distinctly.”

The statute replaces prior case law that was scattered and provides stronger protection for workers. Whether you are an employee or an independent contractor, if you have questions about whether or not you are covered by Colorado workers’ compensation laws, contact the attorneys at the Rocky Mountain Disability Law Group today.

Leave a Reply

Your email address will not be published. Required fields are marked *