Contributed by Todd Morris, VP Commercial Lines, CB Insurnace
In today’s economy it has become commonplace for companies to use independent contractors. However, there is new legislation outlining the requirements to qualify as an independent. It is critical that business owners correctly determine whether individuals providing services are employees or independent contractors and then have the correct documentation in place.
Colorado wage law defines an employee as any person, including a migratory laborer, performing labor or services for the benefit of an employer in which the employer may command when, where and how much labor or services shall be performed. An individual primarily free from control and direction in the performance of contracted labor or services and who is customarily engaged in an independent trade, occupation, profession or business related to the service is not an employee.
Our current administration has begun to crack down on misclassified, independent contractors who they believe are actually employees. The courts, U.S. Department of Labor, Internal Revenue Service, Colorado Division of Employment and Colorado Division of Labor may consider many different facts in making the determination of whether an individual is an independent contractor or an employee. However, all these agencies will use three main categories in that determination:
- Behavioral control
- Financial control
- Type of relationship
For more information on how to determine if an individual is an employee or an independent contractor go to www.irs.gov. If, after searching for information to help with the determination, it is still unclear, then you can download and submit the SS-8 form. The government will review the information and provide the correct status.