C.R.S.
Section 8-72-114
Employee misclassification
- investigations
- enforcement
- advisory opinions
- rules
- employee misclassification advisory opinion fund
- statewide study
- report
- definitions
- legislative declaration
(1)
The general assembly hereby finds and declares that:(a)
Misclassification of employees as independent contractors in violation of the “Colorado Employment Security Act” and, in particular, the provisions of article 70 of this title defining the employment relationship, may pose a significant problem in this state and leads to underpayment of employment taxes and premiums that employers are obligated to pay the state for covered employment;(b)
Businesses that misclassify employees gain an unfair competitive advantage over businesses that properly classify employees and pay appropriate taxes and premiums to the state;(c)
When employees are misclassified, the protections available to properly classified employees against economic insecurity are unavailable to those misclassified employees, and the stream of revenue that should be paid to the state to provide protections to misclassified employees is not available.(2)
As used in this section:(a)
“Act” means the “Colorado Employment Security Act”.(b)
“Complainant” means the person who files a complaint with the division pursuant to this section.(c)
“Director” means the director of the division.(d)
Repealed.(e)
“Executive director” means the executive director of the department of labor and employment.(f)
“Misclassification of employees” means erroneously classifying a person as an independent contractor, free from control and direction of the employer in the performance of service for the employer, when the employer cannot show an exception, pursuant to section 8-70-103 (11), to the general rule that service being performed for the employer is presumed to be employment for purposes of the act.(g)
“Respondent” means the person against whom a complaint is filed pursuant to this section.(3)
Intentionally left blank —Ed.(a)
The division shall be responsible for accepting and investigating complaints regarding misclassification of employees and enforcing the requirements of the act regarding classification of employees and payment of premiums.(b)
Any person may file a written complaint with the division alleging that a person engaged in employment is being misclassified by an employer as an independent contractor. The complainant shall specify in the complaint the facts showing that the person classified as an independent contractor is engaged in employment, as defined in article 70 of this title.(c)
The director may investigate a complaint filed pursuant to this subsection (3) and shall focus on the investigation of the most egregious complaints or those complaints alleging intentional acts of misclassification of employees undertaken in order to gain a competitive advantage or to avoid the payment of premiums.(d)
No later than thirty days after receipt of a complaint, the director shall determine whether or not an investigation is warranted. If the director determines that an investigation is warranted, the director shall notify the complainant and respondent that an investigation will be conducted and shall conduct the investigation in accordance with the act and the rules adopted pursuant to the act. The complainant and respondent shall cooperate and provide information as necessary to facilitate the investigation.(e)
Intentionally left blank —Ed.(I)
Upon conclusion of an investigation, the director shall issue a written order either dismissing the complaint or finding that the employer has engaged in the misclassification of employees and has failed to pay appropriate premiums for covered employment as defined in article 70 of this title.(II)
If the director finds that an employer has engaged in the misclassification of employees, the director shall order the employer to pay back premiums owed and interest.(III)
Upon a finding that the employer, with willful disregard of the law, misclassified employees, the director may:(A)
Impose a fine of up to five thousand dollars per misclassified employee for the first misclassification with willful disregard, and for a second or subsequent misclassification with willful disregard, a fine of up to twenty-five thousand dollars per misclassified employee; and(B)
Upon a second or subsequent misclassification with willful disregard, issue an order prohibiting the employer from contracting with, or receiving any funds for the performance of contracts from, the state for up to two years after the date of the director’s order. Upon the issuance of such order, the director shall notify state departments and agencies as necessary to ensure enforcement of the order.(IV)
Fines received by the division pursuant to subsection (3)(e)(III) of this section or by the department of law pursuant to subsection (9) of this section shall be transferred to the department of labor and employment and credited to the unemployment revenue fund created in section 8-77-106.(f)
The director shall provide a copy of the written order to the respondent. Those portions of the written order that are not confidential under the act shall be a public record.(g)
An employer shall have the right to appeal the director’s order in accordance with section 8-76-113.(4)
Intentionally left blank —Ed.(a)
An employer may request a written advisory opinion from the director concerning whether the employer should classify the individual as an employee for purposes of complying with the act. The employer shall provide the director with information necessary for the director to issue an advisory opinion.(b)
Upon receipt of a request and pertinent information from an employer, the director shall issue an advisory opinion to the employer, indicating whether the employer should classify the individual as an employee in order to comply with the act. An opinion issued pursuant to this subsection (4) is only advisory, based on the information provided by the employer and the director’s understanding of the circumstances at the time issued, and is not binding on the division, the employer, or any other state or local governmental entity.(c)
The director shall promulgate rules in accordance with article 4 of title 24, C.R.S., establishing the process for issuing an advisory opinion and the fees to be charged the requesting employer to cover the director’s and division’s costs in providing the advisory opinion. Any fees charged pursuant to this subsection (4) for the costs associated with issuing an advisory opinion shall be deposited in the employee misclassification advisory opinion fund, which fund is hereby created. Moneys in the employee misclassification advisory opinion fund shall be subject to annual appropriation by the general assembly for the purposes of this subsection (4). Interest derived from the deposit and investment of moneys in the fund shall be credited to the fund. At the end of any fiscal year, all unexpended and unencumbered moneys in the fund shall remain in the fund and shall not be credited or transferred to the general fund or any other fund.(5)
The director, by all means reasonable and within budgetary constraints, shall publicize the complaint process established in this section and its availability to those who have discovered misclassification of employees. The director shall develop and make available free of charge to employers a notice explaining the rights of employees to be properly classified and the availability of a complaint process pursuant to this section. Employers shall post the notice conspicuously in the workplace or otherwise where it can be seen as employees come or go to their places of work.(6)
to (8) Repealed.(9)
Intentionally left blank —Ed.(a)
Subject to the approval of the executive director, the director may enter into an interagency agreement with the department of law for assistance in enforcing this section. The director is authorized to transfer to the department of law from the unemployment revenue fund created in section 8-77-106 such money as is necessary to pay for reasonable costs associated with enforcement actions by the department of law.(b)
Regardless of whether the director has entered into an interagency agreement with the department of law pursuant to subsection (9)(a) of this section, at least once every twelve months, beginning January 1, 2024, the director shall share with the worker and employee protection unit in the department of law created in section 24-31-1302 any orders issued pursuant to this section finding that any employers have engaged in the misclassification of employees.
Source:
Section 8-72-114 — Employee misclassification - investigations - enforcement - advisory opinions - rules - employee misclassification advisory opinion fund - statewide study - report - definitions - legislative declaration, https://leg.colorado.gov/sites/default/files/images/olls/crs2023-title-08.pdf (accessed Oct. 20, 2023).
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