The lines are often blurred between employees and independent contractors, and, as a Boulder Business Attorney, I am always amazed by how often we are asked by business owners whether they have an employee or independent contractor on their hands. The distinction between employee and independent contractor is important to both the worker – in order to ensure you are receiving the proper benefits and are not being taken advantage of – and the business owner – to ensure it is complying with employment laws and regulations and protecting against liability.
In Colorado, a person hired to perform services for pay is presumed by law to be an employee unless they meet the definition of an “independent contractor” or qualify under a specific exemption provided by workers’ compensation laws. An employee is broadly defined as any person in the service of a private or public employer under a contract of employment. Conversely, an independent contractor is one who works for himself and is not under a contract of employment with an employer.
Here are some signs that a worker is likely an independent contractor:
- The Company does not tell you what hours to work;
- The Company does not tell you where to purchase supplies or services;
- You do the same type of work for multiple different companies;
- Your work for the Company is generally short-term;
- You are more likely to have expenses that are not reimbursed by the Company;
- You are typically paid by the job rather than hourly, weekly or monthly;
- You typically do not receive benefits, including health care, sick time, paid vacation or worker’s compensation from the Company.
While a written contract may be helpful in proving independent contractor status, the facts of the work relationship are actually more important than what the contract says. And remember, each of the above factors need not exist in order for you to be considered an independent contractor. All businesses should consider what they are trying to achieve with a worker before hiring or contracting with a worker. Further, different states have vastly different rules and employment laws regarding employment. If you are a Colorado company and hire an independent contractor salesperson in California, you may have actually just added an employee to your payroll.
Boulder Business Attorneys
The Boulder Business Attorneys at LaszloLaw provide legal counsel to startups, for-profit and non-profit businesses on a variety of business needs including corporate formation, employment law, risk management, corporate protection and legal compliance. Contact LaszloLaw today so we can help address your business needs.