A Colorado independent contractor agreement is an essential document for employers to clarify the terms of a contractor’s work.
Understanding Colorado’s laws regarding independent contractors is crucial, as misclassifying them as employees can lead to significant financial and resource implications.
- Worker Classification: ABC Test
- Tax Structure: Flat Income Tax
- Definition: § 8-70-115(c)
- At-Will Employment: Yes (with exceptions)
Independent Contractor Definition
Colorado defines employees and independent contractors differently. According to Colorado labor law, an independent contractor is a paid worker who does not meet the criteria of an employee under Colorado labor laws.
As for an employee, the state defers to the definition laid out in the Federal Unemployment Tax Act (FUTA):
- A corporation officer
- Those who can be defined as an employee under common law rules
- A person who performs paid services for another person (1) as a driver who distributes food products, beverages other than milk, or laundry services; or (2) as a full-time sales representative
Worker Classification Test
Colorado uses prongs A and C of the ABC Test to determine whether the state legally classifies your worker as an independent contractor or an employee for tax and labor rights purposes [1] .
Prong A asks whether the worker is free from direction and control in the performance of their service. This freedom should be evident in (1) their performance contract, (2) in fact, and (3) the fact that the worker, when not providing a service for you, does independent work related to that service.
Prong C asks you to prove that the worker is typically occupied in independent work and in control of the performance of their service. To do this, you may provide evidence supporting Prong A and a written document.
If you can meet both prongs of Colorado’s test, your worker qualifies as an independent contractor. Otherwise, Colorado will classify them as an employee.
Rights and Responsibilities
Individuals, including independent contractors, are presumed to be in covered employment until proven otherwise. A strong independent contractor agreement can help establish their classification.
Independent contractors in Colorado do not have the following rights:
- Workers’ compensation
- Overtime
- Minimum wage requirements
- Unemployment benefits
State Taxes
Colorado’s Department of Revenue follows the IRS standard for classification. Independent contractors earning more than $400 in a year have self-employment tax obligations of 15.3 percent.
Filing for Unemployment
Independent contractors in Colorado generally cannot file for unemployment benefits unless the contractor or another entity provides the compensation coverage.
Sample
Below, you can download a Colorado independent contractor agreement in PDF and Word format:
