The Colorado Court of Appeals recently considered the issue of whether a company’s independent contractor qualified as a “covered employee” for unemployment tax liability purposes. In Softrock Geological Services, Inc. v. Industrial Claim Appeals Office the court considered whether an individual who provided oil and gas well site services to a geological services company was an employee of the company for purposes of the Colorado Employment Security Act.
In providing services to the company, the individual used his own vehicle, clothing, tools, and equipment, except for some specialized and expensive laboratory equipment that he rented from company. He had his own business cards, paid his own liability insurance, and did not represent himself to be an employee of the company. However, the individual served as an independent contractor to only a single company for a three year period which served as the basis for a determination by the Division of Employment that the individual was in essence an employee of the company rather than an independent contractor.
However, the Court ruled that the individual’s reliance on a single client was not determinative of the issue of whether the individual was an independent contractor or an employee. The Court then cited to the following nine considerations set forth in C.R.S. 8-70-115(1)(c) to be used when considering whether an individual is an employee or independent contractor:
- Does the company require the person to work exclusively for the company?
- Does the company oversee the actual work or instruct the individual as to how the work will be performed?
- Does the company pay a fixed/contract price or a salary/hourly rate?
- Can the company terminate the work during the contract period for any reason or only upon a violation of the terms of the contact?
- Does the company provide significant training for the individual?
- Does the company or the individual provide necessary tools?
- Does the company dictate the time for work performance or only a completion schedule?
- Does the company pay an individual directly or make payment to a company owned by the individual?
- Do the company and individual maintain separate business operations?
This case continues to highlight the fine line between employees and independent contractors and the financial significance to business owners. If you would like more information regarding the status of your independent contractors or to discuss other employment issues, please contact our Business Law Group partner, David A. Closson at [email protected].