Owning your own small business in the Denver area can be a rewarding experience, but sometimes legal issues come up that you may have no means of resolving, especially if your business is small and you do not have a human resources office. One of the major issues that often comes up in small business is differentiating who is an employee and who is an independent contractor.
Who is an employee in Colorado?
Colorado law presumes a worker is an employee, not an independent contractor. Employees are under the control and direction of their employer with regards to their job duties and must perform them per their employer’s orders. If the proper requirements for a worker to be classified as an independent contractor do not exist, a worker’s relationship with their employer is an employee-employer relationship.
Who is an independent contractor in Colorado?
A worker is an independent contractor in Colorado if they are free to choose how to execute their job duties, both under contract and in fact. In addition, independent contractors are often in customary trades where independent contractors are hired. It is up to the putative employer to bear the burden of showing a worker is an independent contractor, not an employee. However, if there is a contract in place, this burden can be shifted. If the contract states in bold-faced or underlined type that the work relationship is that of an independent contractor, this can also add to the credence of a relationship between a business and an independent contractor.
Why does it matter?
It matters whether a worker is classified as an employee versus an independent contractor. Employees must be covered by the employer’s workers’ compensation insurance. Employees are entitled to benefits offered by their employer, such as health care benefits. In addition, some employees are eligible for overtime pay and other legal benefits. Independent contractors are not entitled to these rights and benefits. However, independent contractors are given more freedom and flexibility on how to achieve the agreed-upon job goals. Thus, it is essential to understand whether your workers are employees or an independent contractors, so you can provide them with the benefits, rights and options they are entitled to.