Why is it important to know whether the person who works for you is an employee or an independent contractor? Because the answer determines if he or she must be covered by your workers’ compensation policy.
So how can you tell?
According to the Colorado Workers’ Compensation Act, anyone who performs work for you is an employee, unless he/she:
- Is free from control and direction in the performance of the service
- Is customarily engaged in an independent trade, occupation, profession or business related to the service provided
- Has no workers
To determine if the individual is an independent contractor
Questions to ask
- Is the individual free from your control or direction?
- Is the individual “engaged in an independent trade, occupation, profession or business”?
- Does the individual:
- Have a business name?
- Carry business insurance?
- Offer this service to any other business?
- Submit invoices?
- Supply the tools and vehicle?
- Work alone?
- Are the payments made to the business name?
- Is the individual paid by a contract rate?
If you answer YES to ALL the questions above, the individual most likely is an independent contractor, meaning you would not be required to cover him/her under your workers’ compensation policy.
You can also learn more about the difference between employees, independent contractors, and subcontractors, in two minutes or less with this video.
It’s a good idea to be certain. Discuss the facts with your agent, underwriter or auditor. You can submit the contracts held between you and the individual to your agent, underwriter or auditor to confirm independent contractor status.
Pinnacol’s independent contractor form, available in English and Spanish, provides documentation regarding a business relationship as defined in the Colorado Workers’ Compensation Act. Call 303.361.4000 or 800.873.7242 to request copies.