Legislative Developments in Colorado
In our last edition of Sherman & Howard's Labor & Employment Newsletter, we summarized a number of bills with labor and employment implications that were passed by the Colorado General Assembly and were either signed or vetoed by Governor Ritter. We also advised that, as of the time the last newsletter was issued, a number of bills passed by the legislature were still on the Governor's desk. Below are summaries of additional bills that passed the legislature and either were signed into law or vetoed by Governor Ritter, including one bill that could have great significance for any business using the services of an independent contractor.
HB 1310: Misclassifying employees as independent contractors
This bill has very serious implications for employers that use independent contractors or are considering the replacement of some or all of their workers with independent contractors.
HB 1310 creates a new office in the Colorado Division of Employment and Training to investigate allegations that employees have been misclassified as independent contractors. The Director of the Division has the power to investigate complaints, and if violations are found, order the payment of back taxes and interest.
An employer that willfully disregards the law also faces a first-time fine of $5,000 per misclassified employee, and a $25,000 fine per employee for each subsequent misclassification with willful disregard. Even more significantly for some employers, on a second or subsequent misclassification with willful disregard, an employer can be debarred from contracting with the State of Colorado for up to two years after the issuance of the order.
The new law also provides employers with a mechanism by which to seek a written, non-binding advisory opinion from the Department of Labor and Employment on the proper classification of a worker, for a fee. The Director has the power to adopt rules that may prioritize such requests.
The passage of this bill immediately increases the potential liabilities for employers that fail to correctly classify workers as employees or independent contractors by adding potential fines to the existing tax and withholding penalties that employers have always faced for misclassifying workers. Moreover, this bill directs the Department to conduct a statewide study on the extent of worker misclassifications and to report back to the legislature. One specific topic to be addressed is the amount of state revenue lost or not collected due to employee misclassifications, suggesting that - if the lost revenues are substantial - the legislature may support even more aggressive approach.
The Governor signed this bill into law June 4, 2009.
HB 1076: Remuneration and unemployment insurance benefits
This bill revised Colorado law so that all remuneration paid to a former employee due to separation from employment will be treated the same for purposes of determining when the individual can begin receiving unemployment benefits. Specifically, severance pay no longer will reduce an employee's overall benefit; it merely will postpone benefits for the number of weeks covered by the severance pay. The bill also eliminated the requirement that benefits be reduced when an employee receives Social Security benefits.
The bill was signed into law June 4, 2009.
SB 121: Tax exempt status of meals provided to employees
Senate Bill 121 eliminated the requirement that meals provided at no charge or at a reduced charge to employees of a business where prepared food and drink regularly is sold be included as part of the employees' wages in order for the employer to use the applicable tax exemption.
The bill was signed into law June 4, 2009.
SB 180: Firefighters collective bargaining
On June 4, 2009, Governor Ritter vetoed this bill, which would have brought about a significant change to labor law in Colorado. The bill would have given firefighters the right to unionize and collectively bargain, regardless of the wishes of the municipality or political subdivision they serve.
As originally written, the bill also included law enforcement officers. That provision did not survive the legislative debate. It is clear from the failure of the law enforcement provisions and the veto of this bill and other pro-union bills (including HB 1170, vetoed by the Governor, which would have provided unemployment compensation benefits for employees who are defensively locked out by an employer in response to a union-initiated labor dispute), that labor issues remain divisive in Colorado, even among Democrats, typically unions' strongest allies.
Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation.