SENATE 3rd Reading Unamended May 4, 2015 SENATE Amended 2nd Reading May 1, 2015First Regular Session Seventieth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 15-0902.01 Jery Payne x2157 SENATE BILL 15-269 SENATE SPONSORSHIP Roberts, HOUSE SPONSORSHIP Brown, Senate Committees House Committees Judiciary A BILL FOR AN ACT Concerning the determination of whether an individual is an independent contractor for purposes of coverage under the state unemployment insurance program. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) Currently, the Colorado Employment Security Act (unemployment insurance) lists factors to be considered in determining whether an individual is an employee or an independent contractor. The bill establishes a bright-line test to make this determination, including: Repealing the test of whether the individual is customarily engaged in an independent trade; Setting a numerical standard of 6 factors out of 11 to show an independent contractor relationship; Adding a factor of whether the individual has executed a contract that says the individual is an independent contractor; Adding a factor of whether the individual is required to perform the services at a place of business; Clarifying the relationship between the factors and compliance with state or federal law; and Repealing the rebuttable presumption that an independent contractor relationship exists if the parties have executed a contract with certain disclosures. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 8-70-115, amend (1) (b), (1) (c), (1) (d), and (3); and repeal (2) as follows: 8-70-115. Employment - "Federal Unemployment Tax Act". (1) (b) Notwithstanding any other provision of this subsection (1) and notwithstanding the provisions of section 8-80-101, service performed by an individual for another shall be deemed to be is employment if it meets a definition of employment under this article, irrespective of whether the common-law relationship of master and servant exists, unless and until it is shown to the satisfaction of the division that such individual is free from control and direction in the performance of the service both under his contract for the performance of service and in fact; and such individual is customarily engaged in an independent trade, occupation, profession, or business related to the service performed. For purposes of this section, the degree of control exercised by the person for whom the service is performed over the performance of the service or over the individual performing the service, if exercised pursuant to the requirements of any state or federal statute or regulation, shall not be considered at least six factors listed in paragraph (c) of this subsection (1) favor a finding that the individual is an independent contractor. Compliance with state or federal statutes or regulations by the individual or by the person for whom services are performed is not evidence of control or employment: If a factor listed in paragraph (c) of this subsection (1) would favor a finding that a person is an independent contractor except for compliance with state or federal statutes or regulations, then the factor is deemed to favor a finding that the individual is an independent contractor. (c) To evidence that such individual is engaged in an independent trade, occupation, profession, or business and is free from control and direction in the performance of the service, the individual and the person for whom services are performed may either show by a preponderance of the evidence that the conditions set forth in paragraph (b) of this subsection (1) have been satisfied, or they may demonstrate in a written document, signed by both parties, that the person for whom services are performed does not: A person may demonstrate a de facto independent contractor relationship if the person establishes by a preponderance of the evidence that at least six factors listed in subparagraphs (I) to (XI) of this paragraph (c) favor a finding that an individual is an independent contractor. The following factors favor a finding that an individual is an independent contractor: (I) The person for whom services are performed does not require the individual to work exclusively for the person for whom services are performed; except that the individual may choose to work exclusively for the said person for a finite period of time specified in the document; (II) The person for whom services are performed does not establish a quality standard for the individual; except that such the person can may provide plans and specifications regarding the work but cannot does not oversee the actual work or instruct the individual as to how the work will be performed; (III) The person for whom services are performed does not pay a salary or hourly rate; but rather a fixed or contract rate; (IV) The person for whom services are performed does not have the right to terminate the work during the contract period without cause; unless the individual violates the terms of the contract or fails to produce a result that meets the specifications of the contract; (V) The person for whom services are performed does not provide more than minimal training for the individual; (VI) The person for whom services are performed does not provide tools or benefits to the individual; except that materials and equipment may be supplied; (VII) The person for whom services are performed does not dictate the time of performance; except that a completion schedule and a range of mutually agreeable work hours may be established; (VIII) Pay the individual personally but rather makes checks payable to the trade or business name of the individual The person for whom services are performed does not prohibit the individual from using assistants; and (IX) The person for whom services are performed does not combine his the individual's business operations in any way with the individual's business but instead maintains such operations as separate and distinct operations of the person for whom services are performed; (X) The individual and the person for whom services are performed have executed a contract identifying the individual as an independent contractor; and (XI) The person for whom services are performed does not require the individual to perform work on the premises of the person's place of business. (d) A document may satisfy the requirements of paragraph (c) of this subsection (1) if such document demonstrates, by a preponderance of the evidence, the existence of such factors listed in subparagraphs (I) to (IX) of paragraph (c) of this subsection (1) as are appropriate to the parties' situation. If a person fails to establish by a preponderance of the evidence that at least six of the factors listed in paragraph (c) of this subsection (1) favor a finding that an individual is an independent contractor, the individual is not an independent contractor. (2) Where the parties use a written document pursuant to paragraph (c) of subsection (1) of this section, such document may be the contract for performance of service or a separate document. Such document shall create a rebuttable presumption of an independent contractor relationship between the parties, where such document contains a disclosure, in type which is larger than the other provisions in the document or in bold-faced or underlined type, that the independent contractor is not entitled to unemployment insurance benefits unless unemployment compensation coverage is provided by the independent contractor or some other entity, and that the independent contractor is obligated to pay federal and state income tax on any moneys paid pursuant to the contract relationship. (3) Where the parties use a written document pursuant to paragraph (c) of subsection (1) of this section, and one of the parties is a professional whose license to practice a particular occupation under the laws of the state of Colorado requires such the professional to exercise a supervisory function with regard to an entire project, such the supervisory role shall does not affect such the professional's status as part of the independent contractor relationship. SECTION 2. Act subject to petition - effective date. This act takes effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 5, 2015, if adjournment sine die is on May 6, 2015); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2016 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.