Subtitle: 
Employers with one or more employees are required to have workers’ compensation insurance, which is distinct from unemployment insurance tax.
Important Tip Although Colorado employers are not required to obtain workers’ compensation insurance coverage for independent contractors, there is a presumption that a person hired to perform services for pay is an employee. Thus, when hiring someone, it is important to consider whether the individual is a bona fide independent contractor versus an employee for purposes of determining whether workers’ compensation insurance is required. This determination is fact specific, but generally speaking, if a person is essentially in business for herself and is hired to perform a job for which she owns tools and can decide how to complete the job, the person is probably not an employee.

Workers' compensation laws provide employees with medical benefits and financial compensation who are injured in the course and scope of their employment, regardless of fault.  Employers with one or more employees are required to obtain workers’ compensation insurance, even if the employees work part-time or are family members.  Failure to obtain insurance subjects an employer to stiff penalties, including a monetary fine and the possibility of the government shutting down your business.  If an employee is injured and the employer does not have workers’ compensation insurance, the employer is required to pay not only medical and compensation benefits, but also a 50% penalty on all compensation benefits.

There are several exemptions from workers’ compensation insurance, including:

-    Corporate officers/members of a limited liability company (LLC) who own at least 10% of the stock of that corporation or LLC and participate in the management of the company.
-    Members of a limited partnership, limited liability partnership, or limited liability limited partnership.
-    Members of a general partnership which has a registered trade name.
-    Sole proprietors who have a registered trade name.

However, employers eligible for an exemption must file a form with the Division of Workers’ Compensation in order to receive the exemption.  Until the form has been filed, the employer will remain subject to workers’ compensation insurance requirements.

Workers’ compensation insurance may be purchased from one of over two hundred private insurance companies in Colorado. Colorado provides the following tips when shopping for workers’ compensation insurance:

-    Start shopping 2-3 months before the current policy expires. Insurers generally take a month or more to evaluate a business loss history and return a quote.
-    Solicit quotes from several insurers that represent the range of rates in the total market. An agent may be consulted to get a representative sample.
-    Make sure employees are properly classified by the underwriter.
-    Ask the agent about the quality and timeliness of service provided by a prospective insurer before switching to a new insurer.
-    Check with other employers in the community about their experiences with their insurers.
-    Discuss with the agent, broker or insurer what alternative plans may be available (i.e., self-funding, deductible options, premium credits, etc.).
-    Be aware that past loss experience will have a direct correlation to future premiums.

 

Additional Information
Important Tip: 
Although Colorado employers are not required to obtain workers’ compensation insurance coverage for independent contractors, there is a presumption that a person hired to perform services for pay is an employee. Thus, when hiring someone, it is important to consider whether the individual is a bona fide independent contractor versus an employee for purposes of determining whether workers’ compensation insurance is required. This determination is fact specific, but generally speaking, if a person is essentially in business for herself and is hired to perform a job for which she owns tools and can decide how to complete the job, the person is probably not an employee.
Marketing copy: 
workers' compensation issues