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Colorado Legislature Officially in Session & U.S. Department of Labor Issues Independent Contractor Rule

    January 18, 2024
    By Michael Santo, COSHRM Legislative Director and Managing Attorney at Bechtel & Santo

    On January 9, the Colorado Legislature officially opened its 120-day session. And for those of you in an office pool regarding how long it would take the Colorado Legislature to propose the first employment-law/HR Bill, the correct answer was one (1) day, when three bills regarding human-resources issues were proposed on January 10. Congratulations to those of you that correctly guessed it would take one day. 

    One of the Bills proposed was House Bill 24-1008, which was entitled Concerning Measures to Expand General Contractor Accountability for Wage Claims Involving Contractors in the Construction Industry. As this Bill is currently proposed, this Bill would create sweeping changes for how employees in the construction industry can assert wage claims. For example, this Bill:

    • Requires that a subcontractor that receives a written demand for payment of wages forward a copy of the written demand for payment to the general contractor within 3 business days after receipt. If the subcontractor fails to forward the demand for payment, the subcontractor can be subjected to a fine of $2,000.00, which the subcontractor shall pay to the general contractor, in addition to any amounts owed. 
    • Specifies that a general contractor and a subcontractor that is a direct employer of an employee are jointly and severally liable for all debts owed based on a wage claim or investigation that are incurred by the subcontractor acting under, by, or for the general contractor. 
    • Allows a general contractor to require the following information from each subcontractor acting under, by, or for the general contractor: (i) pay data; (ii) contact information; and (iii) an affidavit attesting to whether the subcontractor has participated in a civil or administrative proceeding within the last 5 years and, if so, the outcome of the proceeding.

    Now, while this Bill identifies that a general contractor may be liable for its subcontractor’s wage violations (i.e., bullet point #2), it also identifies that the subcontractor must indemnify (i.e., the subcontractor must pay for the general contractor’s damages) the general contractor unless the wage violation is due to the general contractor’s lack of payment(s) to the subcontractor. In essence, this Bill identifies that if the general contractor isn’t paying a subcontractor who fails to make payroll, the general contractor may be on the hook for the subcontractor’s employees’ claims of the subcontractor’s failure to pay wages. So, this is certainly an interesting bill to follow this term to see how it develops. 

    The other two Bills proposed on the first day included a Bill that would require Hospitals to establish a workplace violence prevention committee to document and review workplace violence issues (HB24-1066) and a bill that would require the Colorado Department of Labor to create and make available to employers suicide prevention education posters and notices, which Colorado employers would need to start posting in 2025 (HB24-1015). 

    Of course, these three bills will hardly be the last HR/employment-law bills we see in what’s anticipated to be a very busy year in the Colorado Legislatures. Stay tuned. 

    U.S. Department of Labor Issues Independent Contractor Rule

    Additionally, on January 9, 2024, the United States Department of Labor published a final rule defining what it considers to be an “independent contractor” of a business (i.e., not an employee of a business).  In this rule, which becomes effective March 11, 2024, the DOL adopted a six-factor “economic reality” test for making the determination as to whether a worker can be treated as an independent contractor or whether the organization must treat the worker as an employee. In essence, these six factors will be used to determine whether a worker or group of workers depends on the business for employment or whether the worker or group of workers is operating an independent business. Those six factors are: 

    • the worker’s opportunity to realize a profit or suffer a loss in performing the work. In essence, hourly workers don’t have the opportunity for either because they get paid the same amount for every hour.  But, for example, a contractor that bids on a job has the chance to make a profit by completing the job for less cost(s) than expected or the contractor can suffer a loss by expending more time and costs than anticipated. 
    • investments by the worker and potential employer. For example, most employers pay for their employees’ tools and equipment, whereas independent contractors come to the contract with their own tools and equipment. 
    • the degree of permanence of the relationship. In short, the longer the relationship lasts, the more it will look like an employee relationship, instead of a contractor relationship. 
    • the nature and degree of the potential employer’s control over the work. Does the organization set the schedule for the worker(s)? Does the organization discipline the worker(s)? Is the worker prevented from working for other companies in the same industry during the course of the work? If the answers to these questions are “yes,” the worker will look more like an employment relationship, instead of a contractor relationship. 
    • the extent to which the work is “integral” to the potential employer’s business. In essence, does the work do what the business does? For example, is an electrical company contracting with an electrician? Is a painting company contracting with a painter? If so, that will be considered to favor the determination that the relationship is that of an employee because the worker is performing what is integral to that business. 
    • the worker’s skill or initiative. The more specialized the skill, the more likely that the worker will be determined to be an independent contractor. 

    Of course, Colorado organizations need to keep in mind that in addition to meeting these requirements, Colorado has its own set of independent contractor rules that must be met. And while the two are somewhat similar, they are certainly far from identical. So, with a little more than 10 weeks before this rule becomes effective, Colorado organizations contracting with independent contractors, consultants, or anyone that the company isn’t treating as an employee, should endeavor to re-analyze those relationships under this new rule and if you have not already done so review these relationships under Colorado’s independent contractor rules as well.

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