It is advantageous to employers to retain the services of independent contractors when possible. Contractors are not required to be covered by workers’ compensation insurance and employers need not pay unemployment tax out of the contractors’ wages. However, classifying workers as contractors has its risks; after an audit, the employer may be found liable for back taxes on workers who are found to be employees rather than contractors.
That is precisely what happened to Carpet Exchange in 1993, when the Colorado Court of Appeals issued its opinion in Carpet Exchange of Denver v. Industrial Claim Appeals Office, 859 P.2d 278 (Colo. App. 1993). The court of appeals analyzed C.R.S. § 8-70-115(1)(b) and, after applying the factors, decided that the workers in question were employees rather than contractors because they were not “customarily engaged in an independent trade, occupation, profession, or business related to the service performed.” Since then, courts have relied on this one-factor test to determine whether long-term workers are employees or contractors.
Industrial Claim Appeals Office v. Softrock Geological Services, 2014 CO 30 (Colo. May 12, 2014), reversed that precedent. In Softrock, the Colorado Supreme Court rejected the outside employment test as dispositive of whether a worker is an employee or an independent contractor, ruling instead that the totality of the circumstances must be considered and no single factor can be dispositive in deciding whether an individual is customarily engaged in an independent business or trade.
Michael Santo, lead counsel in Softrock, will present a lunchtime program on Friday, August 22, 2014 at the CLE offices to discuss Softrock‘s impact on employment law. Santo will also discuss Western Logistics, Inc. v. Industrial Claim Appeals Office, 2014 CO 31 (Colo. May 12, 2014), a related opinion that the supreme court delivered the same day as Softrock. Employment attorneys, business attorneys, and in-house counsel should attend this informative lunchtime program.