Claim Appeals Office of the State of Colorado DD No.
Announced July 27, 2017 Polsinelli PC, Bennett L. Cohen,
Denver, Colorado, for Petitioner
Cynthia H. Coffman, Attorney General, Evan P. Brennan,
Assistant Attorney General, Denver, Colorado, for Respondents
Appearance for Respondent Division of Unemployment Insurance
1 The Internet has changed how we work in many ways. For
example, it provides opportunities for consumers seeking
services to find businesses offering them. One way businesses
provide such services fits a standard employer-employee
model: Businesses use the Internet to recruit workers; the
businesses and the workers have a standard employer-employee
relationship; and the workers provide services to consumers.
2 There are other models that do not fit the standard
employer-employee model. Some businesses may not want to have
employees, and some workers may not want to be employees. But
businesses may have a large enough Internet presence that
they can provide certain advantages those independent workers
cannot match. The Internet provides a convenient forum for
businesses to introduce workers to consumers. As the
"middle man, " the business takes a fee to make the
introduction, but the workers and the consumers work out most
of the details of the business relationship between them. In
such circumstances, workers may often be independent
contractors instead of employees.
3 Courts in Colorado have historically looked at a variety of
different circumstances when determining whether workers are
employees of a business or independent contractors. But some
of the circumstances that point to workers being independent
contractors have lost some of their descriptive force in the
Internet Age. Two examples are that independent contractors
tend to have their own business cards and their own offices.
While these examples still ring true in many cases, the
Internet has, for some workers, made business cards and
offices obsolete. Workers can solicit business online, and
they can work from anywhere - a home, a coffee shop, a hotel
room, an airplane, a car - they can connect their laptops to
4 How, then, in the Internet Age, can we differentiate
between employees and independent contractors? We apply, as
we always have, a test that the legislature has established.
We describe it below. But, in applying this test, we must
also recognize how the Internet has changed and continues to
change the business world.
5 We are asked in this appeal to decide whether several
workers are the employees of a business or whether they are
independent contractors. The business, Varsity Tutors LLC,
recruits tutors to teach students. Varsity claims that the
tutors fall on the independent contractor side of the line.
The Division of Unemployment Insurance Employer Services
― Integrity/Employer Audits for the Colorado Department
of Labor and Employment, which we shall call the
"Division, " thinks that the tutors fall on the
other side of the line, so they were Varsity's employees.
6 The difference between independent contractors and
employees was the crux of this appeal. If the tutors were
employees, then Varsity was obligated to pay unemployment
taxes on any wages that it paid the tutors. But, if the
tutors were independent contractors, then Varsity did not
have to make such payments. See generally Colorado
Employment Security Act, §§ 8-70-101 to 8-82-105,
C.R.S. 2016. (We refer to this act by its initials,
7 The dispute between Varsity and the Division found its way
first to a hearing officer and then to a panel of the
Industrial Claim Appeals Office. The hearing officer and the
panel decided that twenty-two tutors who performed services
for Varsity in 2013 were in "covered employment" -
meaning that they were Varsity's employees - for
CESA's purposes. As a result, the hearing officer and the
panel agreed with the Division, and they ordered Varsity to
pay delinquent unemployment insurance taxes.
8 Varsity appeals the panel's final order. We reverse
because we conclude that the tutors were independent
contractors, not Varsity's employees.
9 (In reaching this conclusion, our analysis does not address
the question whether the tutors were independent contractors
under federal law for purposes of either Varsity's or the
tutors' federal income tax liability.)
10 Varsity provided an online platform that connected tutors
with students. To facilitate the process, Varsity entered
into contracts with individual tutors, who, in turn,
advertised their services on its website to students who were
members of the general public. The process went as follows:
Students who were interested in working with particular
tutors contacted Varsity. Varsity then put the tutors and the
students together by providing contact information. Students
and tutors then contacted one another to arrange tutoring
11 Varsity and the tutors agreed to an hourly rate that
Varsity would pay them for providing tutoring services.
Varsity generally charged students about twice that much.
12 In 2014, the Division audited Varsity's books for
calendar year 2013 to determine the nature of the employment
relationship between Varsity and the tutors. The Division
decided that at least twenty-two tutors were Varsity's
employees. So the Division issued a liability determination
that required Varsity to pay $133.73 in unemployment taxes on
the amounts that it had paid the tutors.
13 Varsity asked for an evidentiary hearing before a hearing
officer. The hearing officer found that the written
agreements between Varsity and the tutors did not create a
rebuttable presumption of an independent contractor
relationship. Accordingly, Varsity then had to assume the
burden of proving that the tutors were independent
contractors for CESA's purposes. See §
8-70-115(1)(b), C.R.S. 2016.
14 Although the hearing officer found that the tutors were
not subject to Varsity's direction and control in the
performance of their services, he also decided that Varsity
had not proved that the tutors were customarily engaged in an
independent trade, occupation, or profession related to the
services performed. He therefore concluded that the tutors
were in covered employment during calendar year 2013 for
15 Varsity appealed. The panel affirmed the hearing
officer's decision. It noted that, because the agreements
between Varsity and the tutors did not satisfy the
requirements of section 8-70-115(2), Varsity had the burden
to prove that the tutors were customarily engaged in
independent businesses. Consequently, because Varsity had not
provided significant evidence that the twenty-two tutors had
been involved in ongoing businesses, the panel decided that
the hearing officer had not erred when he had found that the
tutors were Varsity's employees for CESA's purposes.
Standard of Review
16 "The determination of an employment relationship is a
question of fact . . . ." John W. Tripp &
Assocs. v. Indus. Claim Appeals Office, 739 P.2d 245,
246 (Colo.App. 1987). Whether a business has met its burden
of proving that a worker was an independent contractor is
also a question of fact. Visible Voices, Inc. v. Indus.
Claim Appeals Office, 2014 COA 63, ¶ 11.
17 "[W]e will not disturb the agency's factual
findings if they are supported by substantial evidence."
Id.; see also § 8-74-107(4), C.R.S.
2016. "Substantial evidence" is evidence that is
"probative, credible, and competent, of a character
which would warrant a reasonable belief in the existence of
facts supporting a particular finding, without regard to the
existence of contradictory testimony or contrary
inferences." Allen Co. v. Indus. Comm'n,
735 P.2d 889, 890-91 (Colo.App. 1986) (quoting Rathburn