Colorado Law Targets Misclassifying Employees as Contractors

Colorado employers that misclassify employees as independent contractors will be liable for penalties of up to $5,000 per employee and up to $25,000 for subsequent violations under a bill signed into law by Colorado Gov. Bill Ritter.

The state’s division of employment and training in the Department of Labor and Employment is responsible for conducting investigations under the new law.

According to the legislation—H.B. 1310—that was signed last week, businesses that misclassify employees can gain an unfair competitive advantage over firms that properly classify employees and pay appropriate state taxes.

The law could create problems for employers as it is not always clear when a person should be classified as a worker or contractor, said an employment attorney.

“A lot of times employers have a difficult time determining whether someone really does fit into the status of an independent contractor,” said Mark Wiletsky, of counsel to law firm Holland & Hart in Boulder, Colorado.

“My worry is that employers are going to be held to a very high standard, even though the law in this area is gray at best,” he said.

“We’re going to have to see how the agency and how the courts ultimately interpret this law,” Wiletsky said.

Filed by Judy Greenwald of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.