In December 2005, the Colorado Court of Appeals, in Speedy Messenger & Delivery Service v. Industrial Claim Appeals Office, upheld the finding of a hearing officer that the written contract used by Speedy did not create a rebuttable presumption of an independent contractor relationship because that document did not contain all the disclosures required by the statute. Specifically, the contract did not contain the disclosure that the drivers, as independent contractors, were not entitled to unemployment benefits. The Speedy Messenger case involved a claim under Colorado`s unemployment insurance statutes, which contains outlines of the specific steps an entity can take to create a rebuttable presumption of an independent contractor relationship. This rebuttable presumption shifts the burden from the entity to the worker or agency alleging the worker was an employee rather than an independent contractor. Unfortunately for Speedy, the court agreed with the hearing officer that Speedy`s contract was insufficient under the statute to create this rebuttable presumption.

Speedy next argued that the hearing officer should have considered three other documents to find that the proper disclosures had been made to the claimant. These three documents are identified in the case as: (1) an "Independent Contractor Application and Agreement"; (2) an "Independent Contractor Profile"; and (3) a "Non-Back Solicitation Agreement." In rejecting this argument the Court of Appeals stated:

"Two documents [the first two listed] do not qualify for consideration because they were not `signed by both parties` as required by 8-70-115(1)(c). The documents are forms provided by the National Independent Contractors Association (NICA). To receive work from Speedy as `independent contractors,` the couriers were required to join or affiliate with NICA. However, Speedy was not a party to the documents. The remaining document [the third one listed] does not contain the required disclosures nor does it establish any of the six statutory factors (out of nine listed in 8-70-115(1)(c)) the hearing officer determined to have been missing from the October 2003 contract."

The Court of Appeals in Colorado determined the steps set forth in the statute for an entity to create a rebuttable presumption of an independent contractor relationship were not optional. An entity wishing to invoke the rebuttable presumption that a worker(s) is an independent contractor must have a written contract with the worker(s), signed by both, that complies with the provisions of 8-70-115. If the rebuttable presumption is not established, the entity claiming the independent contractor status of a worker(s) bears the burden of proving the worker was (1) free from direction and control, and (2) was customarily engaged in an independent trade, occupation, profession, or business related to the service performed.

The Colorado Court of Appeals decision in the Speedy Messenger case reflects the view of a majority of courts in this country that an entity arguing the independent contractor status of a worker must comply with the provisions set forth in the statute. In the Speedy Messenger issue, one of the failures by Speedy was not having all the required statutory requirements contained in a contract signed by both Speedy and the drivers. However, even if a proper contract is in place, the analysis is not necessarily over.

The presumption mentioned by the court in Speedy Messenger is rebuttable. This means that, even if all the proper provisions and language are contained in the contract, the worker could still be deemed an employee of the entity, rather than an independent contractor, if the worker or agency can meet the burden of showing the relationship was not conducted in accordance with the terms of the contract. Therefore, not only must the contractual relationship between the entity and worker reflect a valid independent contractor relationship, the actual relationship between the worker and entity must comply with the contractual relationship.

The Superior Court of Pennsylvania recently emphasized the point that an independent contractor relationship must exist not only in contract but also in fact. In Urbano v. STAT Courier, Inc., the court reversed the lower court`s dismissal of a driver`s class action claim against STAT. The lower court dismissed the claim against STAT because the court found the driver had signed a contract stating he was an independent contractor, and the language of the contract contained all the requirements for a valid independent contractor relationship. The Pennsylvania Superior Court stated that while the terms of the contract are relevant when identifying whether an employee/employer relationship existed, the contract is just one criterion to be utilized. The driver in Urbano alleged in his claim that STAT directed and controlled the manner and method of the drivers` activities and performance during the workday. If this allegation is true, then the driver could not be found to be an independent contractor and must be deemed an employee of STAT. Therefore, the case was reinstated to permit the driver the opportunity to prove his allegation of direction and control by STAT.

The decision in Urbano should not surprise anyone. Having a contract and other documents in place stating a worker is an independent contractor are worthless if the entity treats the worker as an employee by exercising direction and control over the person’s work. Further, the liability for exercising direction and control over the services of the worker cannot be delegated to someone else. If an entity is found to have exercised direction and control over a worker, it, as the entity that was found to have exercised direction and control, will be liable as the employer for back taxes, unpaid unemployment taxes, unpaid workers` compensation premiums, and other employee related expenses associated with the worker. A worker identified as an independent contractor must also be treated as an independent contractor. An independent contractor relationship must exist both in contract and in practice.

Dennis P. Roccaforte
President
Contractor Management Services, LLC.

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