While a company might say it “refers out” workers as independent contractors, and doesn’t employ them, the “economic realities” test will have the last word.
The Colorado Supreme Court found that a “referral service” for house cleaners in fact employed the cleaners under the Colorado Employment Security Act. The company, Colorado Custom Maid, is therefore on the hook for paying unemployment taxes on the cleaners’ wages. Employment attorneys say the case is an example of how a company’s description of its business model only goes so far in determining whether a worker is an employee versus an independent contractor. It’s also a reminder to employers to have their independent contractor relationships spelled out in writing.
The Colorado Employment Security Act requires employers in Colorado to contribute to the state’s unemployment insurance fund by paying premiums on the compensation of their employees but not their independent contractors.