From time to time there is a change in the legal world that we feel is important enough to justify sending a note to our clients. We don’t do it often, but such an event just happened.
With tax revenues down some 30% last year, governments are trying to raise money however they can. One way to raise taxes is by ensuring more workers are classified as employees vs. independent contractors. On June 3, Governor Ritter signed House Bill 09-1310, which substantially increases the ramifications against employers who misclassify employees as independent contractors in an attempt to avoid their workers’ compensation and unemployment insurance obligations.
The new law empowers the Colorado Department of Labor to more easily investigate misclassifications. If a violation is found, the Department may order employers to pay back taxes and interest. If the investigation reveals that the employer has willfully misclassified an employee, the law authorizes fines of up to $5,000 for the first misclassification, and up to $25,000 per misclassified employee for the second and any subsequent misclassification. Employers found to have engaged in multiple, willful violations also may be barred from contracting with the state for a period of two years.
As you may know, there are several requirements for a party to be considered an independent contractor in Colorado. If you are concerned about meeting the independent contractor requirements, we are happy to discuss your situation and help ensure you are doing what you can to comply with Colorado law.