Understanding Independent Contractors and Workers’ Compensation in Colorado

ON BEHALF OF THE LAW OFFICES OF W. DAN MAHONEY, P.C. | September 27, 2023

The traditional boundaries of employment are shifting in Colorado. With the rise of the gig economy, there has been a significant increase in the number of independent contractors. These individuals offer services to businesses but operate under a distinct employment arrangement compared to traditional employees.

Understanding where independent contractors stand vis-a-vis workers’ compensation is crucial for these self-employed individuals and the businesses that hire them. Today’s article explores this relationship and everything you need to know.

What are Independent Contractors?

Independent contractors are individuals or entities that offer their services to businesses without being categorized as traditional employees. The main difference between them and regular employees is their level of autonomy in determining how they carry out their work and organize their work schedules. Independent contractors are frequently sought after for their specialized skills. This makes them valuable resources for businesses seeking specific expertise without the obligation of hiring full-time staff.

What is Workers’ Compensation?

So, what exactly is workers’ compensation? This program serves as a lifeline for employees dealing with injuries or illnesses tied to their work. It is a specialized insurance system that offers financial assistance and medical benefits, allowing employees to focus on their recovery without the added stress of financial burdens. Workers’ compensation covers various expenses, including rehabilitation services, medical treatment costs, and a portion of the wages lost during recovery.

Workers’ compensation serves several crucial purposes:

• Medical care: It ensures that employees receive prompt medical attention and appropriate treatment for their work-related injuries or illnesses. This aids in a quicker and more effective recovery.
• Financial support: Workers’ compensation provides financial support by replacing a portion of lost wages during the recovery process. Consequently, it alleviates the financial strain on the injured employee.
• Legal protection: The system also protects employers by generally preventing employees from filing lawsuits against them for workplace injuries. As a result, businesses can maintain a more stable and predictable legal environment.
• Return to work: It encourages injured employees to return to work as soon as they can, promoting the continuity of employment and minimizing downtime for both workers and employers.

Independent Contractors and Workers’ Compensation

The classification of workers as employees or independent contractors is pivotal when it comes to workers’ compensation.

What sets independent contractors apart from employees in relation to workers’ compensation is their typically limited access to the benefits. Unlike employees, independent contractors often find themselves without workers’ compensation coverage provided by businesses. This means that if an independent contractor encounters a work-related injury or illness, they typically are not entitled to the same benefits offered to employees. As a result, independent contractors shoulder the responsibility for their own safety and must explore options for securing their insurance coverage.

Independent contractors often face unique risks due to their flexible work arrangements. While they enjoy greater autonomy, they are also responsible for their own safety and insurance. Common workplace hazards for independent contractors can result in physical, financial, and emotional losses. Understanding the basics of workers’ compensation is essential as they often find themselves in a different position regarding coverage.

Colorado-Specific Laws and Regulations

Colorado has unique laws and regulations governing workers’ compensation and the relationship between businesses and independent contractors. These laws are designed to safeguard the rights and well-being of workers while providing employers with a structured framework for managing workplace injuries and illnesses.

• Mandatory coverage: In Colorado, employers with one or more employees are generally required to provide workers’ compensation coverage. This includes coverage for employees injured on the job and those who develop occupational diseases as a result of their work.
• Choice of insurance provider: Employers have the flexibility to choose whether to secure workers’ compensation insurance through a private insurance carrier or to become self-insured. Self-insured employers must meet specific financial and operational criteria set by the state.
• Independent contractors: Determining the status of workers as employees or independent contractors is a vital legal consideration. Colorado’s Department of Labor and Employment follows a comprehensive test to establish this distinction, examining factors such as control, financial independence, and the nature of the working relationship.

The Bottom Line

At The Law Offices of W. Dan Mahoney, P.C., we recognize the importance of clarity and legal expertise in this field. Our dedicated experts are ready to guide you, answer your questions, and ensure that your rights and obligations as an independent contractor or employer are safeguarded. Contact us today to schedule a consultation, and let us help you comprehend the complex world of independent contracting and workers’ compensation in Colorado.

Category:

• Wrokers' Compensation