CO Employers Face Harsh Fines for Misclassifying Employees

June 9, 2009 ( - Colorado Governor Bill Ritter has signed into law a bill that would impose steep penalties for employers who misclassify employees as independent contractors.

Business Insurance reports that under the legislation, employers that misclassify employees as independent contractors will be liable for penalties of up to $5,000 per employee and up to $25,000 for subsequent violations. Text of H.B. 1310 explains that businesses that misclassify employees can gain an unfair competitive advantage over firms that properly classify employees and pay appropriate state taxes, the news report said.

The law could create problems for employers as it is not always clear when a person should be classified as a worker or contractor, said an employment attorney. “A lot of times employers have a difficult time determining whether someone really does fit into the status of an independent contractor,” said Mark Wiletsky, of counsel to law firm Holland & Hart L.L.P. in Boulder, Colorado, according to Business Insurance. “My worry is that employers are going to be held to a very high standard, even though the law in this area is gray at best.”