Tag Archives: independent contractor

June 7, 2017

DOL Withdraws Obama-Era Interpretations On Independent Contractors and Joint Employment

By Brad Cave

On June 7, 2017, the U.S. Department of Labor (DOL) announced that it was withdrawing two informal guidances, namely a 2015 administrator interpretation on independent contractors and a 2016 administrator interpretation on joint employment, effective immediately. The DOL’s short announcement states that the removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), and that the DOL “will continue to fully and fairly enforce all laws within its jurisdiction.” Here’s an attempt to read between the lines and determine the DOL’s position on these two issues.

Withdrawal of Independent Contractor Interpretation

When we wrote about the July 15, 2015 independent contractor interpretation here, we noted that then-Wage and Hour Division Administrator David Weil stressed that most workers meet the criteria to be deemed employees under the FLSA, and therefore, should not be treated as independent contractors. Although noting that multiple factors are used to determine independent contractor status, former administrator Weil stated that the DOL would focus primarily on whether the worker runs his or her own independent business or if instead, the worker is economically dependent on the employer.

Withdrawal of the 2015 interpretation guidance does not change the fact that to “employ” is broadly defined in the FLSA as “to suffer or permit to work” and consequently, most individuals hired to perform work fall within that definition as an employee. In addition, the long-standing  multi-factor “economic realities” test used by courts to determine whether a worker is an employee or an independent contractor will continue to apply.

That said, the withdrawal of the 2015 administrator interpretation may be a signal that the DOL will no longer focus on misclassifications of independent contractors with the same fervor as it previously did. A more business-friendly DOL may choose to rely on certain factors, such as an independent contractor agreement setting forth the business relationship and the comparative degree of control over the work exerted by the two parties, over those factors that were highlighted in former administrator Weil’s interpretation, such as whether the worker runs his or her own independent business. The distinction between employees and independent contractors remains, but query whether this DOL, under the direction of new Secretary of Labor Alexander Acosta, will change the balance in determining independent contractor status.

Joint Employment Interpretation Withdrawn 

When the DOL issued its administrator interpretation on joint employer status in February 2016, we wrote here that the DOL made it clear that the agency planned to examine dual employer relationships very closely, with an apparent intent to find joint employer status in more circumstances under both the FLSA and the MSPA. By withdrawing that interpretation, the DOL may be suggesting a contraction of its efforts to find joint employer status. If that is the case, employers who utilize workers employed by a staffing agency or other workers provided by a third-party may face less scrutiny (and potentially, less liability) for wage and hour violations as a potential joint employer. In addition, companies that use the same workers across different subsidiaries or among other legally distinct entities may see a relaxation of the DOL’s emphasis on joint employer status.

The Tea Leaves Say . . .

Employers should stay vigilant about ensuring that workers they treat as independent contractors meet the multi-factor tests for independent contractor status. Similarly, organizations that could be subject to the joint employer analysis should examine their status under the applicable tests and are urged to review their third-party staffing arrangements to ensure compliance with wage and hour (and other DOL-enforced) laws. But, with the withdrawal of some of the more proactive enforcement approaches of the past administration, the DOL may be signaling its more business-friendly stance. Perhaps the National Labor Relations Board (NLRB) will be next to announce a less aggressive view towards finding joint employer status and a retraction of other arguably expansive positions taken in past years. We’ll keep you informed as new developments arise.

August 11, 2015

Misclassification of Independent Contractors Under Increased Scrutiny

Bennett_DBy A. Dean Bennett 

The Idaho Department of Labor is stepping up efforts to identify companies that misclassify employees as independent contractors. It recently signed a memorandum of understanding with the U.S. Department of Labor to work together to help prevent the misclassification of workers.  In doing so, Idaho joins 23 other states who have signed similar agreements, including Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Rhode Island, Texas, Utah, Washington, Wisconsin and Wyoming. 

Why Focus on Independent Contractor Status? 

Federal and state labor agencies care whether workers are classified as employees rather than independent contractors because the classification can determine whether the individual is entitled to important workplace benefits and protections. Many employment laws, such as those governing minimum wage and overtime pay, meal and break periods, family and medical leave, workers’ compensation, unemployment compensation, employment taxes and anti-discrimination, apply only to employees, not independent contractors. Consequently, if an employee is misclassified as an independent contractor, he or she misses out on the protections and benefits provided by such laws. 

Another reason cited by David Weil, Administrator of the U.S. Department of Labor Wage and Hour Division, is that employers who follow the law by properly classifying workers as employees often cannot compete on a level playing field with employers who misclassify their workers as independent contractors. Companies who misclassify workers often avoid the added costs of properly paying, insuring and withholding employment taxes for workers who should be treated as employees. According to the DOL, this lower cost of utilizing independent contractors may give non-compliant companies an unfair advantage in the marketplace. For these reasons, remedying misclassifications is at the forefront of the agencies’ enforcement efforts. 

What’s At Stake For You? 

Companies that misclassify employees as independent contractors face substantial liability. Ken Edmunds, Director of the Idaho Department of Labor, suggests that even though businesses often use independent contractors because they think it will save them money, in the end, misclassifications can cost them “a whole lot more,” with the potential for severe monetary fines and even criminal charges. 

The Internal Revenue Service (IRS) and state tax entities will pursue back taxes with interest based on the employer’s failure to withhold income taxes and make FICA contributions. Employers also remain liable for unemployment taxes related to the misclassified workers. In addition to the back taxes, employers may face criminal and civil penalties. 

Employers also face wage claims for unpaid overtime pay that would have been due to the worker if properly treated as an employee. If the misclassified individual was denied leave under the FMLA or participation in a group benefit plan, the employer may face claims under those respective laws. Failure to complete I-9 forms or other employment eligibility requirements may result in additional liability. In short, you may become liable for failing to comply with or offer any benefit or protection that was denied to the individual because of the misclassification. 

What Should You Do? 

If your company uses independent contractors in your workforce, take steps now to audit whether those workers meet the tests for independent contractor status.  Remember, you do not escape liability if the individual asks or agrees to be treated as an independent contractor. You must analyze whether the individual meets the requirements for that classification. 

Although numerous factors go into determining whether a worker is an independent contractor, the Idaho Department of Labor lists two criteria that must be met: 

  1. The worker must be free from the right of direction or control in performing work, both under a contract of service and in fact; and
  2. The worker must be engaged in an independently established trade, occupation, profession or business. 

A fact sheet titled “Independent Contractor or Employee?” provides additional detail to help you determine the proper classification of workers and is available on the Idaho Department of Labor’s website. A similar fact sheet on Employment Relationships Under the Fair Labor Standards Act (FLSA) is available from the U.S. Department of Labor, Wage and Hour Division. 

With both the federal and state labor departments stepping up efforts to audit companies to discover employee misclassifications, taking steps now to avoid the associated liability is warranted. It also will help your organization avoid costly lawsuits filed by independent contractors who missed out on overtime pay and other employee benefits.

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July 15, 2015

Independent Contractors: New DOL Interpretation Focuses on Economic Dependence of Workers

Cave_BBy Brad Cave 

If you hire workers as independent contractors, you need to review that status with fresh eyes in light of a new Administrator’s Interpretation issued by the U.S. Department of Labor (DOL). In his July 15th Interpretation, Wage and Hour Division Administrator David Weil stresses that most workers are employees under the Fair Labor Standards Act (FLSA), not independent contractors. Multiple factors still come into play when determining independent contractor status but the DOL ultimately will look to whether the worker runs his or her own independent business or instead, is economically dependent on the employer. 

Broad “Suffer or Permit to Work” Standard 

The FLSA defines “employ” as “to suffer or permit to work.” According to Administrator Weil, this broad definition will encompass most workers. He notes that the definition had roots in state child labor laws which sought to ferret out employers who used children as laborers illegally.

He also cites Supreme Court and federal court cases that state that the “suffer or permit to work” standard has broad applicability and extends to the farthest reaches in order to achieve the goals of protecting workers under the FLSA. 

Economic Realities Test 

Noting that courts have developed a multi-factor “economic realities” test to determine whether a worker is an employee or an independent contractor, the Administrator’s Interpretation goes through each factor, providing examples and cases that help in the analysis. While the factors haven’t really changed, here are some important distinctions made in this Interpretation: 

  • A contract setting forth an independent contractor relationship “is not relevant” in determining whether the worker is properly classified as an independent contractor; the actual working relationship is what matters, not the label given to it by the parties.
  • The individual’s opportunity to make a profit or realize a loss on the job must include whether the individual’s managerial skills result in that profit or loss; in other words, a worker’s willingness or ability to work more hours or work more efficiently is not enough to suggest independent contractor status, instead the individual must be making managerial decisions about hiring assistants, purchasing materials, advertising, etc., in order to support independent contractor status.
  • The worker’s investment in tools, equipment and doing the job must be compared to the employer’s investment; a worker who provides a few essential tools to do the job may not be enough to contribute toward independent contractor status; instead, the worker’s investment must be significant, particularly when compared to the entity’s investment in the job.
  • Being highly skilled in a particular type of work is not sufficient in suggesting independent contractor status as many employees are highly skilled in the services they provide to their employer; instead, an independent contractor must include “business-like initiative.”
  • The degree to which the entity controls the work of the individual should not play an oversized role in the analysis; many workers today are not under constant supervision of their employers but that lower degree of monitoring and control does not make them independent contractors. 

The Administrator’s Interpretation establishes that no single factor in the economic realities test is determinative and each factor should be analyzed in terms of whether the worker is economically dependent on the employing entity or is truly in business for him- or herself. 

Time to Review Your Independent Contractor Classifications 

The DOL has made misclassification of employees a high priority for the past few years and with this Administrator’s Interpretation, it is signaling its intent to crack down even further on businesses who classify workers as independent contractors. We suggest that you review the Interpretation, study the examples and then audit your independent contractor relationships to determine whether your classifications will pass DOL scrutiny. In difficult cases, consult with your employment counsel for guidance. Conducting the review yourself and making any necessary changes will go a long way in avoiding headaches and potential liability should the DOL appear at your door for an audit. And, keep in mind that this Interpretation does not carry the force of law. The Administrator’s view will undoubtedly be challenged in court as the DOL ramps up its aggressive posture.

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May 12, 2014

Independent Contractor Status Dependent On More Than One Factor, Says Second Colorado Court

Brad WilliamsBy Bradford J. Williams 

A second division of the Colorado Court of Appeals has just rejected a stringent, single-factor test for determining whether a worker is an employee or independent contractor for purposes of receiving unemployment insurance benefits. On May 8, 2014, a division of the Court of Appeals issued a decision in an unemployment insurance tax liability case, rejecting longstanding case law holding that a worker is an employee, and thus entitled to unemployment insurance benefits, unless he “actually and customarily provides similar services to others while working for the putative employer.” Visible Voices, Inc. v. ICAO, 2014 COA 63.  

For years, the Colorado Division of Employment and Training has rejected claims that workers are independent contractors, and thus ineligible for unemployment insurance benefits, based solely upon the fact that they do not provide similar services to others while working for the putative employer. It has not mattered whether the workers were directed or controlled by the putative employer, whether they maintained separate business entities, whether they set their own hours, whether they were trained by the putative employer, whether they were paid an hourly or fixed rate, whether they provided their own equipment, whether they had their own offices, or whether they advertised their own businesses. If they did not provide similar services to others while working for the putative employer, they were almost always deemed to be employees for purposes of receiving unemployment insurance benefits. 

In rejecting this stringent, single-factor test, the Visible Voices court followed the 2012 lead of another division of the Colorado Court of Appeals in Softrock Geological Servs. v. ICAO, 2012 COA 97 (cert. granted Mar. 25, 2013). First breaking with the decades-old, single-factor assessment, the Softrock court held that the Division of Employment and Training must instead apply a multi-factor test to determine whether an individual “is customarily engaged in an independent trade, occupation, or business related to the service performed.” This multi-factor test considers factors set forth in Colorado statute. 

While broadly adopting the Softrock court’s reasoning, the Visible Voices court went even further, holding that factors not listed in the Colorado statute may also be considered in assessing independent contractor status. The Visible Voices court further noted that some of the statutory factors might also not be relevant to a particular worker depending on the circumstances. In short, the Visible Voices court concluded that virtually any relevant circumstances may be considered when weighing independent contractor status, and rejected the argument that the multi-factor test is limited to just those factors specifically delineated in statute. 

By choosing to consider multiple factors, the Visible Voices court expressly declined to follow Western Logistics, Inc. v. ICAO, 2012 COA 186 (cert. granted Mar. 25, 2013), in which yet another division of the Colorado Court of Appeals recently reaffirmed the decades-old cases effectively mandating a single-factor test. Unlike the Western Logistics court, the Visible Voices and Softrock courts have decided that no single factor is determinative of independent contractor status. 

Two divisions of the Colorado Court of Appeals have now rejected the single-factor test that has long stymied putative employers’ attempts to prove that their workers are independent contractors for purposes of unemployment insurance benefits. However, the Colorado Supreme Court will have the last word on the proper test for determining independent contractor status as it is currently reviewing both the Softrock and Western Logistics cases. The Supreme Court heard oral arguments in both cases on March 6, 2014 (audio of the oral arguments may be accessed here), and a decision is expected in the coming months. Based on the oral arguments, a favorable ruling for putative employers seems possible. We will let you know the outcome as soon as the Supreme Court rules on this issue.

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March 25, 2014

2014 Wyoming Legislature Keeps Status Quo, But Changes On The Horizon?

By Brad Cave

The 2014 session of the Wyoming Legislature did not pass any significant employment legislation, but the Legislature’s actions on some of the measures it did consider could portend a much more interesting 2015 legislative session. 

Independent Contractors.  The issue of independent contractors garnered the most legislative attention of any employment issue in the 2014 session.  In February, we reported on House Bill 16 which would have created misdemeanor criminal penalties for “knowingly failing to properly classify an individual as an employee” leading to a reduction in unemployment contributions or workers compensation premiums or benefits. (A companion measure, Senate File 112, was introduced in the Senate but failed to get sufficient votes for introduction.)  This measure was sponsored by the Joint Corporations, Elections and Political Subdivisions Interim Committee.   Although it failed to garner the two-thirds vote required for introduction during a budget session, a majority of the representatives in the House voted in favor introduction in the 32-26 vote.  This bill may rear its ugly head again in the 2015 general session, where introduction requires only a majority vote. 

On the bright side of the independent contractor issue, Senate File 96 proposed an amendment that would have relaxed the definition of independent contractor in the unemployment and workers compensation statutes.  Those two identical definitions currently require that a person classified as an independent contractor meet three requirements: 

  • The person is free from control or direction over the details of the performance of services by contract and by fact;
  • The person represents his services to the public as a self-employed individual or an independent contractor; and,
  • The person may substitute another individual to perform his services. 

These three factors have always been part of the commonly accepted definition of an independent contractor, as recognized by courts, other statutes and the Internal Revenue Service.  But courts and the IRS weigh these and several other factors, without any single factor or group of factors controlling the determination.  This approach permits employers to fashion independent contractor relationships under a variety of circumstances.  Because of the “and” between the second and third factor, the Wyoming definition requires employers to meet all three of these factors, regardless of the other circumstances surrounding the independent contractor relationship.  Add to that the fact that the second factor is wholly outside of the employer’s control, and you have a very strict and onerous definition. 

Senate File 96 would have added a second test to the unemployment and workers compensation definitions to give employers two ways to prove independent contractor status.  Under the second option, a person providing services would be properly classified as an independent contractor if the person: 

  • is free from control or direction, asserted directly by the person or entity contracting for the services, over the details of the performance of services by contract and by fact; and,
  • has substantial investment used in connection with the performance of the services.  The investment may include physical assets, financial assets, education, experience, intellectual property or any combination of these factors. 

This proposed change would obviously open the door to a broader range of independent contractor relationships, and recognize the importance and prevalence of the sole proprietor independent contractor, particularly in technology services.  

Senate File 96 passed the Senate with strong support, but the House defeated the measure by a vote of 54 to 6.   Reasons for its demise may include timing – it was brought to the floor of the House on the last day for the entire House to consider new measures.  Also, there may have been some confusion about whether the changes would be consistent with the IRS definitions of independent contractors and other statutory definitions.  Because the House had little or no time to resolve these questions, the measure died.  We encourage the Legislature to address this topic again next session. 

Employer Access to Social Media Accounts.   The surprise proposal of the session was Senate File 81, which would have put Wyoming on the bandwagon of other states which are restricting employer access to employees’ social media accounts.  This proposal would have amended the Wyoming Fair Employment Practices Act to make it an unfair employment practice for employers to “request or require” any employee or applicant to disclose any username, password or other method of accessing personal social medial accounts.  Social media accounts was broadly defined under the proposal, to include videos, images, blogs, podcasts, instant and text messages, email, internet websites or locations and other online services or accounts.  

The measure included exceptions to the general restrictions for (1) access to employer social media accounts used for the employer’s business purposes; (2) when personal social media is reasonably believed to be relevant to an investigation of allegation of employee misconduct or violation of laws or regulations, if access is limited to the investigation or a related proceeding; (3) when conducting an investigation of an employee’s social media when required to comply with the requirements of state or federal law, or the rules of a self-regulating organization; or, (4) when an applicant applies for law enforcement employment. 

Senate File 81 flew through the Senate with strong support, and started strong in the House, but was then defeated by a House vote of 36-16. 

Our experience suggests that this is a solution in search of a problem.  The huge majority of employers already avoid efforts to access employees’ social media because learning such information can cause all sorts of headaches for employers.  In fact, employers usually learn about employees’ social media content when employees report to the employer some other employee’s bad behavior as described on social media, and usually expect the employer to do something about it.  Although the exception for investigation-related access is helpful, even that language forces employers to couch their requests in terms that will simply raise the stakes of workplace situations. 

Wyoming employers should pay attention next session to see if the Legislature takes up this topic. 

Misconduct Disqualifications from Unemployment Benefits.  Senate File 76 added a new definition of misconduct to the unemployment compensation statute to outline the circumstances under which a former employee may be disqualified from unemployment benefits.  It was signed by Governor Mead on March 10, 2014, and will become effective on July 1, 2014. 

The unemployment compensation statute already states that an employee will be disqualified from benefits if the Department of Workforce Services finds that the employee was discharged for “misconduct connected with his work”  but does not define that phrase.  To fill the gap, several years ago the Wyoming Supreme Court adopted a definition that required a showing of an act of the employee that indicated a disregard of the employer’s interests or the commonly accepted duties, obligations and responsibilities of an employee, to include carelessness or negligence of such a degree or recurrence as to reveal willful intent or intentional disregard of the employer’s interests or the employee’s duties and obligations.  Violation of company policies or rules could qualify as misconduct under the court’s definition, provided the employee acted intentionally.  The court’s definition also provided that inefficiency, failure of good performance due to incapacity or inability, ordinary negligence or good faith errors in judgment were not adequate to disqualify an employee. 

The new definition of “misconduct connected with work” seems to adopt much of the Wyoming Supreme Court’s interpretation of the phrase.  The phrase is now defined as “an act of an employee which indicates an intentional disregard of the employer’s interests or the commonly accepted duties, obligations and responsibilities of an employee.”  The amendment also excludes from the definition of misconduct, (1) ordinary negligence in isolated instances; (2) good faith errors in judgment and discretion, and (3) inefficiency or failure in good performance as the result of inability or incapacity. 

Because the new statutory definition is very similar to the definition the Supreme Court has used for years, we will need to see how the definition is applied by the Department and the courts to determine whether the misconduct standard has changed at all through this amendment. 

Computer Trespass.  Although not an employment measure, House Bill 178 created a new criminal offense that may give employers a new tool to help prevent employee sabotage.  This measure, which passed both houses and was signed by Governor Mead, created the crime of computer trespass.  A computer trespass occurs when a person knowingly and without authorization, with the intent to damage or cause the malfunction of a computer, system or network, sends malware, data or a program which alters, damages or causes the malfunction of the computer, system or network, or causes it to disseminate sensitive information. 

The measure also created a civil remedy for computer trespass, and permits a person who suffers damage due to a trespass to sue the computer trespasser for damage to computers, systems, or networks, and the costs incurred because of the loss of use of those assets.  The person brining the action can recover the damages caused by the trespass, as well as the costs incurred to identify the trespasser and to serve a complaint on the trespasser. 

House Bill 178 was passed by both houses, and signed by Governor Mead on March 10, 2014.  The new law will become effective on July 1, 2014. 

This new law may be useful to employers if former or disgruntled employees attempt to misuse an employer’s computer systems.  Employers should adopt and periodically review technology policies that carefully define when and how employees are authorized to use the employers’ computer, systems and networks.  If an employee causes computer damage under questionable circumstances, such policies may help employers draw clear lines about when an employee’s access is unauthorized and pursue civil remedies under the statute. 

And the Rest of the Pack.  A few other employment measures never saw the light of day during the 2014 session.  House Bill 45, which would have raised the minimum wage, and House Bill 57, which would have restricted employers’ ability to restrict the post-termination value of accrued vacation, both failed to get enough votes for introduction.  

Bottom Line.  The 2015 legislative session should be interesting, with the possible return of independent contractor and social media legislation.  These are significant issues for Wyoming employers.  We will keep you posted.

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June 21, 2012

New Case Clarifies Test for Contractor Status

By Mark Wiletsky

Many organizations rely on independent contractors–sometimes referred to as consultants or just contractors–to perform a variety of services.  But determining who is a contractor, as opposed to an employee, is not an easy task.  A variety of state and federal rules apply, each with different factors and tests.  If you misclassify an individual, the penalties can be severe.  For example, in Colorado, a business may be fined up to $5,000 per misclassified employee for the first offense, and up to $25,000 per misclassification for subsequent violations if the violations were willful.  Businesses may also be liable for back taxes, interest, failure to pay overtime, and a variety of other penalties for failure to provide benefits.  Therefore, it's very important to ensure an independent contractor fits the tests for contractor status.  A new Colorado case provides some important guidance on this subject.

In Softrock Geological Services, Inc. v. ICAO, the Colorado Court of Appeals had to decide whether an individual who provided services to Softrock as a contractor over a three-year period, without performing similar services for others during that period, was a contractor or employee.  Under Colorado's unemployment statute, an individual is presumed to be an employee unless the organization demonstrates that the individual: (1) is "free from control and direction in the performance of the service" and (2) "is customarily engaged in an independent trade, occupation, professional, or business related to the service performed."  The second part of the test is often difficult to prove.  A number of Colorado cases have concluded that unless the contractual arrangement is relatively brief, an individual must perform services for more than one entity to be a contractor.  Such a test, however, places a heavy, and often unfair, burden on businesses.

Businesses do not always track the outside activities of a consultant, and a consultant may choose to work for only one entity for a period of time.  Recognizing this, the Court of Appeals in Softrock concluded that it is improper to classify an individual as an employee solely because that person did not perform similar services for others while performing services for the alleged employer.  Instead, the failure to perform services for others is merely one factor to be considered.  The other factors include: the existence of a quality standard; payment of a salary/hourly rate as opposed to a fixed or contract rate; ability to terminate the individual for limited reasons, such as failing to produce results or violating the contract; whether training is provided; whether tools and benefits are provided; whether the individual is subject to a set schedule or has authority to set his or her own schedule; payment to a business or tradename as opposed to an individual; and whether the individual and the business have combined operations or maintain separate and distinct operations.  The court remanded the case to the Industrial Claims Appeals Office for reconsideration, though it is possible this case will be reviewed by the Colorado Supreme Court. 

The court's guidance in Softrock is helpful because many times, individuals will meet the test for contractor status even though they choose to perform work for only one entity for an extended period.  Still, as this case demonstrates, repeatedly retaining an invidual to perform services as a contractor over an extended period, without confirming that he or she is working for others, is risky.  As a result, it is best to ensure that individuals are, in fact, working for others or making their services available to others while performing services for your business.

Here are some additional tips to keep in mind when retaining a contractor:

1. Don't classify someone as a contractor just because that person asks to be a contractor.  The business bears the responsibility, and liability, for appropriately classifying its workers.

2. A signed contract is not enough.  A court or auditor will look beyond the contract to determine whether the individual meets the appropriate tests for contractor status.

3. Do not pay an individual; instead, ensure you are paying a tradename or business entity.  Payment to an individual is a red flag for auditors, even when the person is legitimately a contractor.

4. Avoid hiring former employees as contractors, unless you are certain they meet the test for contractor status.  Again, this is a red flag for auditors, as employees are sometimes reclassified as contractors even though their actual duties have not changed.

5. Get a business card, print out a website, or maintain some other evidence that the individual has a business and makes his or her services available to others.  This type of evidence can be very helpful in the event of an audit.

6.  Get your attorney involved early to ensure the person meets the appropriate tests.  Although a written agreement is not dispositive, it can help, and analyzing the issue before an audit is generally better than analyzing it for the first time during or after an audit has begun.

7. Do not treat the individual like an employee, i.e., do not have the person sign an employment contract, do not evaluate the individual with the same forms you use for employees, and if you give the person a business card, be sure it notes the individual is a contractor.

8. Do not retain someone as a contractor with the idea of hiring that person as an employee if he or she does well.  Most likely, that person will not fit the tests for contractor status.

9. Do not assume that individuals performing short-term projects or part-time work are automatically contractors.  Often times, they are part-time or short-term employees.

10. When in doubt, err on the side of employee status. 

Contractor misclassification is a big issue in Colorado and many other states.  Therefore, be cautious when retaining contractors, and be sure they meet the appropriate tests for contractor status.