April 20, 2019

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 Court of Appeals: Volunteer Traveling to Meeting Was Employee for Workers’ Compensation Purposes

The Colorado Court of Appeals issued its opinion in Teller County, Colorado v. Industrial Claim Appeals Office on Thursday, April 23, 2015.

Workers’ Compensation—Volunteer as Employee—Coming and Going Rule.

Claimant is the president and incident commander for Teller County Search and Rescue (TCSAR). All employees of TCSAR, including claimant, are volunteers who receive no monetary compensation.

On May 10, 2013, claimant left his home in Florissant to attend a fire chiefs meeting in Divide. Before leaving, he contacted the Teller County dispatch to “mark in service,” thereby notifying Teller County that he was en route to the meeting. As he was driving, he was struck head on by an approaching vehicle and sustained severe injuries.

He filed a workers’ compensation benefits claim, asserting that as a volunteer he fell within the definition of “employee” set forth in CRS § 8-40-202(1)(a)(I)(A). The administrative law judge (ALJ) agreed and the Industrial Claim Appeals Office(Panel) affirmed.

On appeal, Teller County argued that (1) claimant’s actions did not fall within the statutory definition of “employee” because he was driving to a meeting and not actually performing duties or engaged in an organized drill or training when the accident occurred; (2) the Panel’s inclusion of “planning and preparation” activities under the definition of employee broadened the scope of the provision beyond the General Assembly’s intent; (3) the Panel engaged in improper fact finding in affirming the ALJ’s decision; and (4) claimant’s claim should have been barred by the “coming and going” rule.

The Court of Appeals was not persuaded by these arguments. Attending fire chief meetings was clearly a part of claimant’s position and duties as president of TCSAR. It was, contrary to Teller County’s argument, a part of the custom and practice of claimant’s position. In addition, the Court reviewed the record and found no improper fact finding by the Panel. Finally, the Court found that the circumstances here fell squarely in one of the many exceptions to the coming and going rule, which ordinarily does not allow workers benefits if they are injured coming from or going to work. The order was affirmed.

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

Recent Colorado Cases Broaden Independent Contractor versus Employee Considerations

Mike-Schreiner_WEBBy Michael Schreiner

Two recent Colorado Supreme Court cases, Industrial Claims Appeals Office v. Softrock Geological Services, Inc., 2014 CO 30, No. 12SC501 (May 12, 2014) and its companion Western Logistics, Inc. v. Industrial Claims Office2014 CO 31, No. 12SC911 (May 12, 2014), clarify that the determination of whether an individual is an independent contractor or employee for purposes of unemployment tax liability is based on the “totality of the circumstances” and not the rigid application of the nine-factor test set forth in C.R.S. § 8-70-115(1)(c).

Under the Colorado Employment Security Act (CESA), employers are required to pay unemployment taxes on wages paid to employees but not on payments made to independent contractors. A division of the Industrial Claims Appeal Office (ICAO) routinely audits businesses to determine whether a business is classifying its employees appropriately and collecting and submitting the correct amount of tax. Under CESA, an employer can prove that an individual is an independent contractor by demonstrating that (1) the individual is free from the employer’s control and direction, and (2) the individual is “customarily engaged in an independent trade, occupation, profession or business related to the service performed.” C.R.S. § 8-70-115(1)(b).

Alternatively, under C.R.S. § 8-70-115(1)(c), an employer could submit a written document signed by both the employer and the individual that meets nine conditions. These conditions are that the employer will not do any of the following:

  1. Require the individual to work exclusively for the person for whom services are performed, except that the individual may choose to work exclusively for the said person for a finite period of time specified in the document;
  2. Establish a quality standard for the individual, except that the employer can provide plans and specifications regarding the work but cannot oversee the actual work or instruct the individual as to how the work will be performed;
  3. Pay a salary or hourly rate but rather a fixed or contract rate;
  4. Terminate the work during the contract period unless the individual violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
  5. Provide more than minimal training for the individual;
  6. Provide tools or benefits to the individual, except that the materials and equipment may be supplied;
  7. Dictate the time of performance, except that a completion schedule and a range of mutually agreeable work hours may be established;
  8. Pay the individual personally, except for making checks payable to the trade or business name of the individual; and
  9. Combine the employer’s business operations in any way with the individual’s business, but instead maintains such operations as separate and distinct.

In Softrock, ICAO held that an individual was an employee because he provided services only to the employer during the period in question and therefore he did not have an independent trade or business. The Colorado Court of Appeals reversed, holding that ICAO incorrectly relied on a single factor. Instead, the court of appeals found that ICAO should have determined whether the individual was an employee by considering the nine factors set forth in C.R.S. § 8-70-115(1)(c).

The Colorado Supreme Court agreed with the court of appeals that the there is no single factor test and that the nine factors should be considered. However, the supreme court found that the nine factors required to be set forth in a document are not exclusive, but rather a fact-finder should also consider “the dynamics of the relationship between the employer and the putative employee and should not be limited to only considering nine factors.” According to the court, it would also be appropriate to consider such factors as “whether the putative employee maintained an independent business card, listing, address or telephone; had a financial investment such that there was a risk of suffering a loss on the project; used his or her own equipment on the project; set the price for performing the project; employed others to complete the project; and carried liability insurance.”

The court also held that the fact that the putative employee did not provide services to another does not conclusively establish that the individual is an employee. Rather, the determinative issue is “whether the putative employee chose to work for another in the field, regardless of, among other things, the intent of the parties, the number of weekly hours the putative employee actually worked for the employer, or whether the putative employee even sought other work in the field.”

The decision in Softrock means that the determination of whether an individual is an independent contractor or an employee for purposes of collecting unemployment compensation tax is no longer limited to the application of the nine factors set out in C.R.S. § 8-70-115(1)(c), or that the alternative single factor test factor test is dispositive. Instead, an employer can present additional information beyond the nine factors to establish the relationship. Further, the fact that an individual provides services only to one business does not conclusively establish that the individual is an employee. Rather, it is appropriate to determine the motivation of the individual and the circumstances surrounding the individual’s actions. In sum, a fact-finder will be required to look at the totality of the circumstances surrounding the relationship to determine whether a service provider is an employee or an independent contractor.

Michael Schreiner is a senior litigator at Caplan and Earnest LLC. His practice focuses on employment matters, employment-related litigation, commercial litigation and public education. He previously worked in the Colorado’s attorney general’s office, Colorado State University and the University of Colorado. He may be reached at mschreiner@celaw.com.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

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.