The Colorado Supreme Court announced two long-awaited decisions today on the classification of independent contractors in Colorado.
In ICAO v. Softrock Geological Services, Inc. (Colo. 2014), the court noted that Colorado law sets out two factors that must be satisfied to classify a worker as an independent contractor. First, the worker must be free from the company’s control and direction. Second, the worker must be “customarily engaged in an independent trade, occupation, profession, or business related to the service performed.” The Softrock case discussed only the second factor.
The court held that determining whether a worker is engaged in an independent trade or business requires an analysis of the “totality of the circumstances that evaluates the dynamics of the relationship between the putative employee and the employer.” The court explained that reviewing agencies and courts should consider the nine specific factors set out in the statute as well as any other circumstances that are relevant to each particular working relationship. In explaining this totality-of-the-circumstances test, the court expressly rejected the argument that a worker can be properly classified as an independent contractor only if the worker “actually provided services for someone other than the employer.” The court said that this single-factor test would result “an unpredictable hindsight review” that the legislature did not intend.
The second case, Western Logistics, Inc. v. ICAO (Colo. 2014), reiterates that there is no single factor under Colorado law that determines whether a worker is engaged in an independent trade or business as part of an independent contractor classification analysis. Specifically, whether the worker performs similar services for other organizations does not determine whether a worker is an independent contractor. The court explained that the totality of the circumstances demonstrates whether a worker is properly classified as an independent contractor.
The court’s decisions are limited in both cases. The Court only announced the totality-of-the-circumstances test today in relation to the way in which companies, reviewing agencies, and courts must address the second element of the independent contractor analysis. The court did not find in either case that the workers at issue were properly classified as independent contractors. The court sent both cases back down to the administrative agency level for further hearings to address the court’s test. We will continue to watch the Softrock and Western Logistics cases to see how reviewing agencies apply the “totality of the circumstances” test announced today.