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Employment Law: Independent Contractors

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Any individual who performs services for pay for another is deemed to be an employee, irrespective of whether the common law relationship of master and servant exists, unless such individual is free from control and direction in the performance of the service, both under the contract for performance of service and in fact and such individual is customarily engaged in an independent trade, occupation, profession, or business related to the service performed. The degree of control exercised by the person for whom the service is performed over the performance of the service or over the individual performing the service is not considered if such control is exercised pursuant to the requirements of any state or federal statute or regulation.

To prove that an individual is engaged in an independent trade, occupation, profession, or business and is free from control and direction in the performance of the service, the individual and the person for whom services are performed may show by a preponderance of the evidence that various conditions have been met. The parties may also prove independence through a written document.

To prove independence through a written document the document must have been signed by both parties and must show that the person for whom services are performed does not:

(A) Require the individual to work exclusively for the person for whom services are performed; except that the individual may choose to work exclusively for such person for a finite period of time specified in the document;

(B) Establish a quality standard for the individual; except that the person may 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;

(C) Pay a salary or at an hourly rate instead of at a fixed or contract rate;

(D) Terminate the work of the service provider during the contract period unless such service provider violates the terms of the contract or fails to produce a result that meets the specifications of the contract;

(E) Provide more than minimal training for the individual;

(F) Provide tools or benefits to the individual; except that materials and equipment may be supplied;

(G) Dictate the time of performance; except that a completion schedule and a range of negotiated and mutually agreeable work hours may be established;

(H) Pay the service provider personally instead of making checks payable to the trade or business name of such service provider; and

(I) Combine the business operations of the person for whom service is provided in any way with the business operations of the service provider instead of maintaining all such operations separately and distinctly.

A document may satisfy the above requirements if such document demonstrates by a preponderance of the evidence the existence of the factors listed.

If the parties use a written document such document may be the contract for performance of service or a separate document. Such document shall contain a disclosure, in type which is larger than the other provisions in the document or in boldface or underlined type, that the independent contractor is not entitled to workers' compensation benefits and that the independent contractor is obligated to pay federal and state income tax on any moneys earned pursuant to the contract relationship. All signatures on any such document must be duly notarized.¹

¹ See C.R.S. 8-40-202, 2002.