September 24, 2017

Colorado Court of Appeals: Internet has Made Some Aspects of Independent Contractor Test Obsolete

The Colorado Court of Appeals issued its opinion in Varsity Tutors LLC v. Industrial Claim Appeals Office on Thursday, July 27, 2017.

Employee—Independent Contractor–Unemployment Taxes.

Varsity Tutors LLC (Varsity) provided an online platform that connected tutors with students. Varsity had individual contracts with tutors, who advertised their services on Varsity’s website. Students who were interested in working with particular tutors contacted Varsity. Varsity then put the tutors and students together by providing contact information. Students and tutors then contacted one another to arrange tutoring sessions. Varsity and tutors agreed to an hourly rate that Varsity would pay them for tutoring, and Varsity generally charged students about twice that rate.

In 2014 the Division of Unemployment Insurance Employer Services—Integrity/Employer Audits for the Colorado Department of Labor and Employment (Division) audited Varsity’s 2013 books and decided that at least 22 tutors were Varsity’s employees for purposes of the Colorado Employment Security Act (CESA). The Division determined that Varsity owed $133.73 in unemployment taxes on the amounts it had paid the tutors. Varsity claimed that the tutors were independent contractors and it was thus not obligated to pay unemployment insurance taxes on wages it paid to them. A hearing officer and a panel of the Industrial Claim Appeals Office (Panel) decided the tutors were in “covered employment” and ordered Varsity to pay delinquent unemployment insurance taxes.

On appeal, Varsity asserted that the tutors were independent contractors and the Panel erred in concluding that Varsity was required to pay unemployment taxes. Varsity argued that the Panel erred by not applying the totality of the circumstances test.  CESA provides that a business can show that a worker is an independent contractor by proving by a preponderance of the evidence that the worker was (1) “free from control and direction in the performance of the service” under any “contract for the performance of the service” and “in fact”; and (2) “customarily engaged in an independent trade, occupation, profession, or business related to the service performed.” Both the panel and the hearing officer found the first part of this test was met. The second part of the test is guided by a totality of the circumstances analysis under Industrial Claim Appeals Office v. Softrock Geological Services, Inc. Alternatively, a business can establish that its workers are independent contractors by a written document signed by the business and the worker, documenting that the business did not do nine things listed in CRS § 8-70-115(1)(c). Such a document creates a rebuttable presumption of an independent contractor relationship as long as it also contains a disclosure in specific font that the worker as an independent contractor “is not entitled to unemployment insurance benefits” unless the worker or “some other entity” provides them and the worker must “pay federal and state income tax on any moneys paid pursuant to the contract relationship.”

Varsity’s contracts did not create a rebuttable presumption that the tutors were independent contractors. As to the second part of the CESA test, the contracts with the tutors stated in bold, “Independent Contractor Agreement for Services.” The disclosures in the contract are indicative that the tutors were independent contractors. The term “independent contractor” appears at least 16 times in the contract. The contract does not provide the tutors with training and provides minimal oversight of the tutors’ work, and does not establish a curriculum or require tutors to use specific materials. Applying the Softrock totality-of-the-circumstances test, the Court of Appeals found that the undisputed evidence in the record established that Varsity satisfied its burden of proving that the tutors were independent contractors because they were customarily engaged in independent businesses in 2013 that were related to the tutoring services they were performing.

The order was reversed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Inquiry into Unemployment Claimant’s Mental Condition Beyond Scope of Simplified Administrative Proceedings

The Colorado Supreme Court issued its opinion in Mesa County Public Library District v. Industrial Claim Appeals Office on Monday, June 26, 2017.

Unemployment Compensation—Fault or Misconduct—Illness or Physical Disability of Employee.

The supreme court held that where the Division of Unemployment Insurance determines a claimant was mentally unable to perform assigned work under C.R.S. § 8-73-108(4)(j) of the Colorado Employment Security Act, C.R.S. §§ 8-70-101 to 8-82-105, neither the text of C.R.S. § 8-73-108(4)(j) nor related case law contemplates further inquiry into the cause of the claimant’s mental condition, and such an inquiry is beyond the scope of the simplified administrative proceedings to determine the claimant’s eligibility for benefits. Here, the court concluded that the Division’s hearing officer erred in determining that claimant committed a volitional act to cause her mental incapacity and thus was at fault for her separation from employment and was disqualified from receiving unemployment benefits. The court of appeals’ judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Hearing Officer Erred in Ascribing Fault to Claimant for her Mental Health Disorders

The Colorado Court of Appeals issued its opinion in Mesa County Public Library District v. Industrial Claim Appeals Office on Thursday, June 16, 2016.

Unemployment Compensation Benefits—Mental Health Disorder.

Gomez worked for the Mesa County Public Library District (Library) for almost 25 years. In 2013, she began having performance issues and was placed on two successive performance improvement plans (PIPs). In September 2014, she was placed on a third PIP and told to produce a satisfactory organizational capacity report by October 7 or face additional disciplinary action, including discharge. She called in sick on that date, and again on October 9, and did not return to work again. On October 14, she submitted a doctor’s note advising that she was suffering from acute stress disorder and major depressive disorder. She was granted a request to remain off work for four to six weeks. The Library director terminated her on October 20, 2014 for failing to provide the organizational capacity report.

The hearing officer in her unemployment compensation benefits case determined that Gomez had become mentally unable to perform her job duties but found her “at fault” for becoming mentally unable to complete the report, and under C.R.S. § 8-73-108(5)(e)(XX), disqualified her from receiving benefits. On review, the Industrial Claim Appeals Office (Panel) adopted the hearing officer’s evidentiary findings but rejected as a matter of law the conclusion that Gomez was disqualified from receiving benefits because she was at fault for her own diagnosed mental disorders. It awarded her benefits under C.R.S. § 8-73-108(4)(j).

On appeal, the Library argued that the Panel substituted its findings of fact for those of the hearing officer. The Court of Appeals found that the Panel adopted the hearing officer’s findings of fact. The Court also rejected the Library’s contention that the evidence demonstrated that Gomez’s mental health disorder did not affect her ability to complete the report. The Court agreed with the Panel that the hearing officer erred in determining that Gomez was at fault for her nonvolitional conduct.

The Panel’s order was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Talent Agency Not Employer for Unemployment Insurance Tax Purposes

The Colorado Court of Appeals issued its opinion in Division of Unemployment Insurance Employer Services/Integrity v. Industrial Claim Appeals Office on Thursday, October 8, 2015.

Employees of a Talent Agency for Unemployment Insurance Tax Purposes.

Marbles Kids, Inc. (Marbles) is a talent agency that represents individuals seeking acting and modeling work, most of whom are children. Marbles provides possible candidates for auditions, and the artists are free to turn down the auditions. The artists have contracts with Marbles stating that Marbles will receive a percentage commission on any assignments booked through them. The clients pay Marbles, and Marbles deducts its commission and pays the artist the remaining amount.

The Division of Unemployment Insurance Employer Services—Integrity/Employer Audits (Division) issued a liability determination that the artists were in covered employment with Marbles and thus Marbles was required to pay unemployment insurance tax premiums on amounts paid to artists. Marbles appealed, and the hearing officer affirmed. The Industrial Claim Appeals Office (Panel) reversed.

On appeal, the Division argued that the Panel erred in concluding that no employment relationship existed. Under the Colorado Employment Security Act, employment requires a showing that a “service [has been] performed by an individual for another.” Service has been defined as “an act done for the benefit or at the command of another.” The Division argued that the artists performed their acting and modeling services “at the command” of Marbles. The Court of Appeals disagreed. The artists were free to reject auditions or assignments from Marbles’ clients and were not “at the command” of Marbles. The Court also rejected the Division’s argument that the artists performed services “for the benefit of” Marbles. The artists did not provide a benefit for Marbles; rather, Marbles worked for the artists in finding them work with third parties. The artists worked for clients, not for Marbles.

Because the artists did not perform acting or modeling services for Marbles, Marbles was not an employer of the artists and they were not Marbles’ employees. Accordingly, Marbles was not required to pay unemployment insurance tax premiums on the amounts it paid the artists after deducting its agent commissions. The Panel’s order was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Supreme Court: Determination Regarding Employee or Independent Contractor Status Must Be Made on Case-by-Case Basis

The Colorado Supreme Court issued its opinion in Industrial Claim Appeals Office v. Softrock Geological Services, Inc. on Monday, May 12, 2014.

Colorado Employment Security Act—Employment Law.

The Supreme Court held that there is no dispositive single factor or set of factors to determine whether an individual is an independent contractor under the Colorado Employment Security Act. The question of whether an individual is “customarily engaged in an independent trade, occupation, profession, or business related to the service performed” can be resolved only by applying a totality of the circumstances test that evaluates the dynamics of the relationship between the putative employee and the employer. Therefore, the Court agreed with the court of appeals that several factors must be analyzed to make the determination, but disagreed that there was a set of defining factors. The judgment was affirmed and the case was remanded with directions.

Summary and full case available here.

Colorado Supreme Court: Totality of the Circumstances Must Be Considered to Determine Employment Status

The Colorado Supreme Court issued its opinion in Western Logistics, Inc. v. Industrial Claim Appeals Office on Monday, May 12, 2014.

Colorado Employment Security Act—Employment Law.

The Supreme Court held that there is no dispositive single factor or set of factors to determine whether an individual is an independent contractor under the Colorado Employment Security Act. The question of whether an individual is “customarily engaged in an independent trade, occupation, profession, or business related to the service performed” can be resolved only by applying a totality of the circumstances test, as laid out in Industrial Claim Appeals Office v. Softrock Geological Services, Inc., 2014 CO 30. The judgment was reversed and the case was remanded with directions.

Summary and full case available here.

Colorado Court of Appeals: Multi-Factor Approach Applied to Determine Whether Workers were Employees or Independent Contractors

The Colorado Court of Appeals issued its opinion in Visible Voices, Inc. v. Industrial Claim Appeals Office on Thursday, May 8, 2014.

Unemployment Compensation Tax Liability—Definition of “Employment.”

Visible Voices, Inc. (Visible) provides “computer-assisted realtime translation” (CART) services under contracts with clients. It supplies clients with “CART providers, or captionists, who perform live word-for-word speech-to-text translation for the deaf and hearing impaired.” Visible entered into agreements with thirteen individuals (workers) to provide CART services to Visible’s clients as independent contractors.

The Division of Employment and Training (Division) issued a liability determination, concluding that the workers’ services for Visible amounted to covered employment and that Visible was required to pay unemployment compensation taxes on those services. On appeal, a hearing officer determined the workers were independent contractors. The Industrial Claim Appeals Office (Panel) upheld the hearing officer’s determination that the workers were free from Visible’s control and direction, but remanded for further findings as to whether the workers were customarily engaged in an independent trade or business providing CART-related services.

On remand, a different hearing officer affirmed the original determination. The (Panel) overturned this hearing officer’s decision as to eleven of the thirteen workers, finding that these workers were not customarily engaged in independent businesses related to the CART services and therefore were engaged in covered employment. Visible appealed.

CRS § 8-70-115(1)(b) defines covered employment for unemployment tax liability purposes. To establish that a worker is customarily engaged in an independent trade or business related to the services performed, a putative employer must show that the worker is engaged in a separate business venture, other than the provision of services for the putative employer.

The Court of Appeals concluded that a multi-factor approach to determining whether a worker is customarily engaged in an independent trade, occupation, profession or business, as enunciated in Softrock Geological Services, Inc. v. Industrial Claim Appeals Office, 2012 COA 97, ¶ 10 (cert. granted March 25, 2013), is the standard to be applied. In Softrock, the Panel focused almost exclusively on whether the workers performed CART services for others besides Visible.

The Court affirmed the portion of the Panel’s order determining that two of the thirteen workers were independent contractors and not in covered employment with Visible. However, the Court found that evidence in the record supported the hearing officer’s determination that the eleven workers in question were customarily engaged in independent businesses related to the services provided by Visible. Accordingly, the remainder of the order was set aside and remanded with instructions to reinstate the hearing officer’s determination that the remaining eleven workers were also not in covered employment with Visible.

Summary and full case available here.

Colorado Court of Appeals: Employer Not Liable for Taxes on Employees Who Lived and Worked Out of State

The Colorado Court of Appeals issued its opinion in Foundation for Human Enrichment v. Industrial Claim Appeals Office on Thursday, December 19, 2013.

Unemployment Compensation Tax Liability—Out-of-State Workers—Colorado Employment Security Act.

In this unemployment compensation tax liability case, petitioner Foundation for Human Enrichment (Foundation) sought review of a final order of the Industrial Claim Appeals Office (Panel). The issue on appeal was whether coordinator services carried out by twenty-one individuals, who lived and worked out of state and performed various administrative and clerical duties for Foundation workshops, constituted covered “employment” for tax purposes under the Colorado Employment Security Act (CESA), CRS §§ 8-70-101 to 8-82-105. The Panel concluded that the out-of-state coordinators were covered employees under the CESA and that the Foundation was responsible for paying unemployment compensation taxes for these individuals.

The Court of Appeals disagreed with the Panel. The out-of-state coordinators’ services to the Foundation were not “employment” under the CESA. CRS § 8-70-117 applies only when the worker performs all his or her services in Colorado, performs a portion of his or services in Colorado, or resides in Colorado. None of those circumstances was present here. The coordinators lived in eleven states and provided all their services in those states. Based on the definition of “employment” enacted in each state, the coordinators’ services would have been covered under the unemployment compensation laws of the state where they worked and resided. Therefore, the Division of Unemployment Insurance lacked statutory authority to impose tax liability against the Foundation with regard to the out-of-state coordinators. The order was set aside and the case was remanded with directions.

Summary and full case available here.

Colorado Court of Appeals: Bankruptcy Court Order Effectively Precludes Determination of “Successor Entity” for Unemployment Insurance Purposes

The Colorado Court of Appeals issued its opinion in Ouray Sportswear, LLC v. Industrial Claim Appeals Office on Thursday, October 24, 2013.

Unemployment Insurance—Bankruptcy—Successor Entity.

Petitioner Ouray Sportswear, LLC (employer) sought review of a final order of the Industrial Claim Appeals Office (Panel). The order was set aside.

In April 2007, Ski Country Imports, Inc. and Ouray Sportswear Wyoming, Inc. (collectively, debtor) filed for bankruptcy. As part of the bankruptcy proceeding, employer, through a related entity called Jalex Holdings, LLC (Jalex), purchased substantially all of debtor’s assets. In May 2007, the U.S. Bankruptcy Court for the District of Colorado issued an order approving Jalex’s purchase of debtor’s assets. The order expressly provided that the purchase was free and clear of any and all liens, claims, charges, and encumbrances.

In June 2012, a deputy for the Colorado Department of Labor and Employment (Department) issued a liability determination concluding that debtor’s entire unemployment insurance account (which included the unpaid premiums) would transfer to employer because employer was a successor entity to debtor under CRS § 8-76-104(1)(a). The hearing officer affirmed the deputy’ ruling, and the Panel affirmed a hearing officer’s decision that employer is a “successor” entity for unemployment taxation purposes under § 8-76-104(1)(a), because it purchased substantially all of the assets of two businesses.

Employer contended that the Panel erred in affirming the hearing officer’s determination that it is a successor entity under § 8-76-104(1)(a). The bankruptcy court’s order effectively precluded the Department and the Panel from treating employer as a statutory successor entity. Therefore, the Panel’s order holding that employer is a successor entity to debtor under § 8-76-104(l)(a) conflicts with, and is therefore preempted by, the bankruptcy court’s prior order issued pursuant to 11 USC § 363(f). Consequently the Panel’s order was set aside.

Summary and full case available here.

Colorado Supreme Court: No Temporal Limitation in Statutory Language for Reduction in Unemployment Insurance Benefits

The Colorado Supreme Court issued its opinion in Industrial Claim Appeals Office v. Colorado Department of Labor and Employment on Monday, July 1, 2013.

Unemployment Benefits—Retirement Contributions—Offset Provision.

Respondent worked for the Colorado Department of Labor and Employment (Department) for a number of years, and then retired. The Department made contributions to respondent’s retirement fund, and once she retired, she began receiving retirement payments from that fund. When she was involuntarily separated from her job with the Department during a second period of employment, she applied for and was awarded unemployment benefits. Respondent’s benefits were discontinued when a panel of the Industrial Claim Appeals Office (Panel) reasoned that respondent was ineligible to receive unemployment benefits under the “offset provision” of CRS § 8-73-110(3)(a)(I)(B), which provides that “an individual’s weekly benefit amount shall be reduced (but not below zero) by . . . [t]he prorated weekly amount of a pension, retirement or retired pay, or annuity that has been contributed to by a base period employer.” The court of appeals reversed, holding that the offset provision applies only when the employer has contributed to the claimant’s retirement fund during the base period employment that made him or her eligible for unemployment benefits.

The Supreme Court reversed the judgment of the court of appeals. The offset provision applies when a claimant is receiving payments from a retirement fund “that has been contributed to by a base period employer.” In contrast to the definition of employer, which specifically includes a time frame during which the employing unit must pay wages, and in contrast to the definition of base period, which describes the time frame for determining eligibility for benefits, the offset provision contains no temporal limitation. Therefore, it applies any time the employer has contributed to the retirement fund from which the claimant is receiving payments, regardless of when the contributions were made. Accordingly, the Court held that respondent’s unemployment benefits can be offset by the retirement benefits she is receiving from a base period employer.

Summary and full case available here.

Bills Regarding Job Protection, Authorization for Foreign Investments, Electric Vehicle Charging Stations, and More Signed by Governor Hickenlooper

As the 2013 legislative session winds down, bills continue to reach Governor Hickenlooper’s desk for review and signature. Since January 31, 2013, the governor has signed 169 bills.

Governor Hickenlooper signed the “Job Protection and Civil Rights Enforcement Act,” HB 13-1136, on Monday, May 6, 2013. HB 13-1136 – Concerning the Creation of Remedies in Employment Discrimination Cases Brought Under State Law, by Reps. Claire Levy and Joe Salazar and Sens. Morgan Carroll and Lucia Guzman, establishes provisions for complaining parties who have exhausted administrative remedies to bring actions in state court. It also allows claims to be brought by employees of companies with fewer than 15 employees, which are exempt under Federal anti-discrimination provisions.

On May 5, the governor signed one bill, SB 13-176 – Concerning Authorization for the State Treasurer to Invest State Moneys in Debt Obligations Backed By the Full Faith and Credit of the State of Israel. This bill was sponsored by Sens. Mark Scheffel and Morgan Carroll and Reps. Justin Everett and Angela Williams, and it authorizes the state treasurer to invest state moneys in Israeli bonds.

The governor signed 10 bills on Friday, May 3, 2013. Three of the ten bills signed are summarized here.

  • SB 13-126 – Concerning the Removal of Unreasonable Restrictions on the Ability of the Owner of an Electric Vehicle to Access Charging Facilities, by Sen. Lucia Guzman and Rep. Crisanta Duran. The bill requires landlords and common interest communities to allow unit owners to install electric vehicle charging stations on their own property.
  • HB 13-1167 – Concerning the Collection of Business Information by the Secretary of State, by Reps. Brittany Pettersen and Crisanta Duran and Sen. Larry Crowder. The bill requires the Secretary of State to request certain demographic information from business owners, which will be available to the public on the Secretary of State website. The demographic information includes gender, race, veteran status, disability status, and NAICS code, and submission of the information is voluntary.
  • HB 13-1222 – Concerning the Expansion of the Group of Family Members for whom Colorado Employees are Entitled to Take Leave from Work under the “Family and Medical Leave Act of 1993″, by Rep. Cherylin Peniston and Sen. Jessie Ulibarri. The bill allows employees to take leave under FMLA to care for their partners in civil unions.

On April 29, 2013, the governor signed six bills. These included the long appropriations bill, three Joint Budget Committee bills regarding the General Fund, and a bill to allow students who complete high school in Colorado to qualify for in-state tuition classification (SB 13-033Concerning In-State Classification at Institutions of Higher Education for Students who Complete High School in Colorado, by Sens. Angela Giron and Mike Johnston and Reps. Crisanta Duran and Angela Williams.) Governor Hickenlooper also signed the budget bill, SB 13-230, on April 29.

On April 26, 2013, Governor Hickenlooper signed 16 bills. Five of these are summarized here.

  • HB 13-1025 Concerning an Increase in the Amount of the Authorized Deductible for Workers’ Compensation Insurance Policies, by Rep. Spencer Swalm and Sen. Cheri Jahn. The bill increases the allowable deductible for employers’ workers’ compensation insurance policies.
  • HB 13-1123 – Concerning the Right of a Person to Waive Confidentiality Requirements Protecting Personal Work Information Obtained by the Department of Labor and Employment for Unemployment Benefit Claims to Permit the Department to Forward Certain Information to Potential Employers, by Rep. Tony Exum and Sen. Jim Kerr. The bill allows the Department of Labor and Employment to offer job seekers the opportunity to waive confidentiality so that their personal information may be made available to bona fide employers seeking employees.
  • HB 13-1258 – Concerning Local Government Involvement with Federal Immigration Issues, by Rep. Joe Salazar and Sens. Irene Aguilar and Morgan Carroll. The bill repeals C.R.S. Title 29, Article 29, which required local law enforcement officers to report any suspected illegal immigrants to federal immigration officials.
  • SB 13-048 – Concerning the Use of Highway User Tax Fund Moneys Allocated to Local Governments for Multimodal Transportation Infrastructure, by Sen. Nancy Todd and Reps. Max Tyler and Jeanne Labuda. The bill allows counties and municipalities to spend moneys received from the Highway User Tax Fund on transit-related projects.
  • SB 13-070 – Concerning the Purchase of Vehicles that Operate on Alternative Fuels for the State Motor Vehicle Fleet System, by Sen. Gail Schwartz and Reps. Ray Scott and Max Tyler. The bill requires the Department of Personnel and Administration to report on the number of alternative fuel vehicles purchased, the use of alternative fuel, and a plan to develop the infrastructure necessary to utilize more alternative fuel vehicles.

For a complete list of legislation signed into law by the governor in 2013, click here.

HB 13-1304: Allowing Unemployment Benefits to Employees Subject to Employer-Initiated Lockout

On April 11, 2013, Rep. Dominick Moreno and Sen. Lucia Guzman introduced HB 13-1304 – Concerning Eligibility for Unemployment Compensation Benefits when Unemployment is Due to a LockoutThis summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report and the legislative Fiscal Notes.

This bill allows an employee who is subject to an employer-initiated lockout to receive unemployment benefits. It also removes the existing definitions of an offensive lockout, defensive lockout, and multiemployer bargaining unit.

Labor-management disputes rarely escalate to the level of an employer locking out employees. Since 1996, Colorado workers have not experienced a lockout by any employer. If no lockouts are experienced in any given year, there will be no impact on the Unemployment Compensation (UC) Trust Fund.

This bill was amended upon Second Reading in the House, but passed Third Reading unamended and was introduced in the Senate on April 22. It was assigned to the Senate Judiciary Committee, where it was not amended and was referred to the Senate Committee of the Whole for Second Reading.