Misclassification of Employees Act

Misclassification of Employees as Independent Contractors Act

While the issue of misclassification of workers as independent contractors has received significant attention, many companies and workers are unaware that Colorado has adopted a statute specifically addressing the issue.

The statute, called the “Misclassification of Employees as Independent Contractors Act,” imposes significant penalties and other sanctions on companies that improperly classify employees as independent contractors. Under the Act, workers may file confidential complaints with the Division of Employment and Training of the Colorado Department of Labor. The Division is empowered to investigate the complaint by requesting information from the employer, as well as and current and former workers.

If an employer is found to have misclassified an employee as an independent contractor, it may be subject to the following penalties:

• Paying all unemployment insurance back taxes, plus interest;

• If the employer had willful disregard of the law (first offense), the employer may be fined up to $5,000 per misclassified employee;

• If the employer subsequently misclassifies a worker with willful disregard of the law, the employer may be fined up to $25,000 per misclassified employee. 

• An employer may also be barred from receiving funds from, or contracting with the State of Colorado, for up to two years.

These are significant sanctions and companies should make sure that workers have been properly classified as independent contractors.  Further, in addition to penalties and sanctions under the Act, companies could be subject to liability for other damages in civil actions brought by misclassified employees.  The factors to consider in this determination may be found here. Independent Contractor Factors. This is a fact intensive inquiry and often the line between employee and independent contractor may be clear. Baird Quinn’s Colorado employment lawyers regularly address these issues and can help you navigate this complicated issue.