Did you know?
All employers in Colorado must report new hires to the State Directory of New Hires within 20 days of the date of hire. This applies to newly hired employees, rehired employees and, in some cases, even independent contractors.
Reporting your new hires is just one of many items that should be on the hiring checklist for all employers in Colorado, per the state’s Department of Labor and Employment.
Here are a couple others:
- Ensure proper worker classification: i.e., correctly classify the worker as either an employee or an independent contractor. Unlike employees, independent contractors do not receive coverage under an employer’s workers’ compensation or unemployment policies, nor does an employer pay payroll taxes for an independent contractor.
- Verify employment eligibility status: Employers must be able to submit documentation, on request, to the Colorado Department of Labor and Employment that proves compliance with employment verification requirements.
As a result, employers often misclassify employees to save money; what many don’t realize, however, is that state and federal labor departments have stepped up enforcement of proper worker classification and the IRS has developed a detailed test to uncover instances where employers have misclassified their workers.
In Colorado, all that is required for employment eligibility is the federal I-9 form. Employees must complete and sign section 1 of this form no later than their first day of work, and employers must complete section 2 of the I-9 form and examine the employee’s identification and employment authorization within three days of the employee’s first day of work.
The penalties for not complying with these requirements can be costly, for example:
If an investigation into a report of misclassified workers reveals that an employer has misclassified employees as independent contractors, the employer will be required to pay back unemployment insurance premiums owed with interest. And that’s not all.
If the investigation finds the workers were misclassified willfully, the employer may be fined up to $5,000 per misclassified employee for the first misclassification and up to $25,000 per misclassified employee for a second or subsequent misclassification. Additional penalties may also apply for second or subsequent misclassifications.
Similarly, steep fines may apply to those not in compliance with I-9 laws.
If you think you may have violated a Department of Labor law or if you’re facing an audit, the attorneys at Robinson & Henry can help you determine your next steps. Start today by calling us at 303-688-0944 to schedule an assessment.