A second division of the Colorado Court of Appeals has just rejected a stringent, single-factor test for determining whether a worker is an employee or independent contractor for purposes of receiving unemployment insurance benefits. On May 8, 2014, a division of the Court of Appeals issued a decision in an unemployment insurance tax liability case, rejecting longstanding case law holding that a worker is an employee, and thus entitled to unemployment insurance benefits, unless he “actually and customarily provides similar services to others while working for the putative employer.” Visible Voices, Inc. v. ICAO, 2014 COA 63.
For years, the Colorado Division of Employment and Training has rejected claims that workers are independent contractors, and thus ineligible for unemployment insurance benefits, based solely upon the fact that they do not provide similar services to others while working for the putative employer. It has not mattered whether the workers were directed or controlled by the putative employer, whether they maintained separate business entities, whether they set their own hours, whether they were trained by the putative employer, whether they were paid an hourly or fixed rate, whether they provided their own equipment, whether they had their own offices, or whether they advertised their own businesses. If they did not provide similar services to others while working for the putative employer, they were almost always deemed to be employees for purposes of receiving unemployment insurance benefits.
In rejecting this stringent, single-factor test, the Visible Voices court followed the 2012 lead of another division of the Colorado Court of Appeals in Softrock Geological Servs. v. ICAO, 2012 COA 97 (cert. granted Mar. 25, 2013). First breaking with the decades-old, single-factor assessment, the Softrock court held that the Division of Employment and Training must instead apply a multi-factor test to determine whether an individual “is customarily engaged in an independent trade, occupation, or business related to the service performed.” This multi-factor test considers factors set forth in Colorado statute.
While broadly adopting the Softrock court’s reasoning, the Visible Voices court went even further, holding that factors not listed in the Colorado statute may also be considered in assessing independent contractor status. The Visible Voices court further noted that some of the statutory factors might also not be relevant to a particular worker depending on the circumstances. In short, the Visible Voices court concluded that virtually any relevant circumstances may be considered when weighing independent contractor status, and rejected the argument that the multi-factor test is limited to just those factors specifically delineated in statute.
By choosing to consider multiple factors, the Visible Voices court expressly declined to follow Western Logistics, Inc. v. ICAO, 2012 COA 186 (cert. granted Mar. 25, 2013), in which yet another division of the Colorado Court of Appeals recently reaffirmed the decades-old cases effectively mandating a single-factor test. Unlike the Western Logistics court, the Visible Voices and Softrock courts have decided that no single factor is determinative of independent contractor status.
Two divisions of the Colorado Court of Appeals have now rejected the single-factor test that has long stymied putative employers’ attempts to prove that their workers are independent contractors for purposes of unemployment insurance benefits. However, the Colorado Supreme Court will have the last word on the proper test for determining independent contractor status as it is currently reviewing both the Softrock and Western Logistics cases. The Supreme Court heard oral arguments in both cases on March 6, 2014 (audio of the oral arguments may be accessed here), and a decision is expected in the coming months. Based on the oral arguments, a favorable ruling for putative employers seems possible. We will let you know the outcome as soon as the Supreme Court rules on this issue.