Employers routinely misclassify workers for their own benefit. Recently, more and more employers are classifying their workers as independent contractors in the state of Colorado to save money. If workers are classified as independent contractors, employers do not have to pay for health insurance, workers’ compensation insurance and unemployment benefits for their workers and employers a lot save money on taxes. This classification only benefits the employer.
However, workers are routinely misclassified by their employers as independent contractors. This is done so the employers can save money on the costs of employment. More than 80% of independent contractors are really employees according to Colorado Law. The fact that a worker is called an “independent contractor,” or has even entered into an “independent contractor” agreement, does not automatically make them an independent contractor. This is an important classification not only for unemployment benefits and workers’ compensation insurance, but for the wrong withholding of wages. In Colorado, there is a statute entitled the “Colorado Wage Act,” that severely penalizes employers for wrongfully withholding of wages from employees. For this reason it is important to know the definition of employee under the “Colorado Wage Act.”
“Employee” means any person performing labor or services for the benefit of an employer in which the employer may command when, where, and how much labor or services shall be performed. Factors that go into this determination include the following:
1. Control over day-to-day operations of the worker
2. Control over hours worked and whether hours are monitored and tracked by the employer
3. Whether the employer instructs the worker on how to perform job, where to perform job and where she need to be while employee performs work
4. Whether the worker uses the employer’s equipment, software, etc.
5. Who the employer pays compensation to – an individual or company
An independent contractor is an individual primarily free from control and direction in the performance of the service, both under his or her contract for the performance of service and in fact. Therefore, for an independent contractor status to exist, it must be shown that the company does not have the right to control the manner in which the work is done.
This is a very important distinction under the Colorado Wage Act. If an employer has wrongfully withheld wages or misclassified you as an independent contractor you should contact an attorney immediately.