During this economic recession, Colorado companies need to be aware of the CDLE’s ability to investigate companies looking for additional tax revenues. The Colorado Department of Labor and Employment (CDLE) is required by House Bill HB09-1310, to accept complaints and conduct investigations regarding alleged misclassification of employees as independent contractors. An additional notification has also been added to the required Unemployment Notice Poster, alerting employees and contractors of their right to file a complaint.
Any person may file a written complaint alleging that an employer has misclassified an individual, who is performing work, as an independent contractor. After a complaint is received, the CDLE determines within 30 days whether an investigation is needed. If it is determined that an investigation is warranted, the CDLE will notify the company that an investigation will be conducted. Once the investigation is completed, the CDLE will issue a written order either dismissing the complaint or finding that the company has engaged in the act of misclassifying employees.
If an investigation finds that an employer has misclassified employees, the employer must pay all back taxes owed with interest. Additionally, the employer may be fined up to $5,000 per misclassified employee for the first misclassification and up to $25,000 per misclassified employee for a second or subsequent misclassification. In addition, upon a second or subsequent misclassification, the employer is prohibited from contracting with, or receiving any funds from, the state of Colorado for up to two years.
The law also allows an employer to request an advisory opinion. The opinion is available to employers seeking advice on proper classification of workers. If you would like to request an advisory opinion on whether you should classify individuals as employees or independent contractors a written, signed request must be submitted. Some of the questions CDLE will base their determination on are:
• Does the individual(s) have an independent trade, profession, or occupation? If so, what is that trade, profession, or occupation?
• How is the rate of pay determined? Is the individual paid a salary, hourly rate, fixed rate, contract rate, or by the completion of work?
• Does the individual(s) work exclusively for you?
• Do you oversee the actual work or instruct the individual as to how the work will be performed?
• Can you terminate the work the individual is performing at any time? If so, for what reasons?
• What training do you provide the individual(s)?
• What tools or benefits do you provide to the individual(s)?
• What materials and equipment do you provide to the individual(s)?
• What are the individual’s work hours? How is the time he or she works determined?
• How is the individual(s) paid? If by check, who is the check made payable to?
• Is the individual(s) business a part of your business? Is it separate and distinct?