Under Colorado Law, an individual is presumed to be in covered employment unless and until it is shown that the individual is free from control and direction in the performance of services, both under contract and in fact, and that the individual is customarily engaged in an independent trade, occupation, profession or business related to the work performed. This means that the worker will be presumed to be in covered employment until the putative employer meets its burden to establish otherwise. This burden may be shifted to the Division, however, through the use of a written document or contract. If the contract meets all of the requirements of the law, the worker would be presumed to be an independent contractor and it would be the worker’s burden to establish otherwise. Please keep in mind this does not mean the worker would ultimately be determined to be an independent contractor, only that the burden of proof would be shifted.
To create the presumption of an independent contractor relationship, the writing or contract must contain the following clauses that both parties agree to and that, in fact, both parties act accordingly.
- The company 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 the said person for a finite period of time specified in the document;
- The company does not establish a quality standard for the individual; except that such person can 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;
- The company does not pay a salary or hourly rate but rather a fixed or contract rate;
- The company cannot terminate the work during the contract period unless the individual violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
- The company does not provide anything more than minimal training for the individual;
- The company does not provide tools or benefits to the individual; except that materials and equipment may be supplied;
- The company does not dictate the time of performance; except that a completion schedule and a range of mutually agreeable work hours may be established;
- The company does not pay the individual personally but rather makes checks payable to the trade or business name of the individual; and
- The company does not combine their business operations in any way with the individual's business, but instead maintains such operations as separate and distinct.
In addition to including the above factors, the contract must contain a disclosure, in type which is larger than the other provisions in the document or in bold-faced type or underlined type, that the independent contractor is not entitled to unemployment insurance benefits unless unemployment compensation coverage is provided by the independent contractor or some other entity, and that the independent contractor is obligated to pay federal and state income tax on any moneys paid pursuant to the contract relationship.
Only if both of the above requirements are met will the presumption of an independent contractor relationship be created.
Colorado Department of Labor and Employment
Unemployment Insurance Employer Services, Audits
P.O. Box 46538
Denver, CO 80201
303-318-9100, Option 4