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Contractor vs. employee: what is the difference for work comp claims?

On Behalf of | Mar 14, 2014 | Workers' Compensation |

In a simpler world, there were employers and there were workers – and not a whole lot of other statuses. Think “Downton Abbey” and its rather rigid upstairs / downstairs dichotomy.

Modern society, however, has brought with it a much more complicated organizational structure. One aspect of that society is to distinguish between “contractors” and “employees.”

In the context of workers’ compensation, employees are eligible to receive benefits for work injuries but contractors are not. But how do you tell a contractor from an employee?

In this post, we will address that question in the context of Colorado law. Our discussion will be general in nature and is not intended as legal advice.

Keep in mind, first of all, that the difference between an employee and contractor is something the common law has long struggled to articulate.

As a result, workers’ compensation is only one area of the law where the distinction between contractors and employees is important. The distinction is also important in other contexts, including.
• Wage-and-hour law
• Payroll taxes
• Unemployment insurance

In the wage-and-hour context, the federal Fair Labor Standards Act (FLSA) applies nationally to set standards on overtime, rest and meal breaks and so on for employees. At the state level, there are also protections for employees under the Colorado Wage Claim Act.

The distinction between contractor and employee is also important in tax law. The IRS has performed many classification audits in recent years, trying to catch employers misclassifying employees as contractors to avoid payroll taxes.

Similarly, in the context of unemployment insurance, employers must pay unemployment insurance taxes on employees, but not on contractors.

In all of these areas – wage-and-hour law, payroll taxes and unemployment insurance – the distinction between a contractor and an employee can be a tricky one.

In the Colorado workers’ comp context, however, the legislature has focused the distinction between employees and independent contractors on a few key questions. These questions do not merely restate old common law factors to be considered.

• Is the worker free from control and direction, both in performing the work and in the underlying contract?
• Is this a type of work that is customarily performed independently?
• Is there a signed, written document specifying an intention to create contractor status?

In short, the difference between a contractor and an employee is often not easy to state. But the distinction remains a crucial one for workers’ compensation claims.

Westlaw, West’s Colorado Practice, Section 19:26, “Independent Contractors”


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