Outfitters or hunting operation managers that hire or contract with guides to take clients on hunts should know the difference between those who are true independent contractors or employees. While the move in recent years has been to prefer contracting with independent contractors, the regulations surrounding what kinds of workers are considered actual employees may mean that most of those who are hired as independent contractors are actually employees. To create a presumption that your guides are independent contractors, make sure your employment contract meets the requirements of the Colorado Department of Labor.
Outfitters who hire guides and misclassify them as independent contractors could face fines and back taxes on unpaid employment taxes. Under the laws of the Department of Labor, for each incident of misclassification of an employee the employer is fined $5,000.00. Additional fines for each subsequent incident amount to $25,000.00. On top of fines from the Department of Labor, the IRS and state will require the employer to pay any applicable taxes on the employee for the entire time of misclassification.
So how do I draft a contract that ensures my guides are independent contractors? Colorado has a two part system, in addition to a “totality of the circumstances” test that will be applied in determining whether any hired worker is an employee. First, it is presumed in Colorado that an individual is an employee until it is proved otherwise. However, the burden can be shifted to the DOL by use of a written contract that meets all the requirements provided by law. These requirements are:
- The company does not require the individual to work exclusively for the person for whom services are performed; except that the individual may choose to work exclusively for the said person for a finite period of time specified in the document;
- The company does not establish a quality standard for the individual; except that such person can provide plans and specifications regarding the work but cannot oversee the actual work or instruct the individual as to how the work will be performed;
- The company does not pay a salary or hourly rate but rather a fixed or contract rate;
- The company cannot terminate the work during the contract period unless the individual violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
- The company does not provide anything more than minimal training for the individual;
- The company does not provide tools or benefits to the individual; except that materials and equipment may be supplied;
- The company does not dictate the time of performance; except that a completion schedule and a range of mutually agreeable work hours may be established;
- The company does not pay the individual personally but rather makes checks payable to the trade or business name of the individual; and
- The company does not combine their business operations in any way with the individual’s business, but instead maintains such operations as separate and distinct.
Additionally, the contract must contain a bold faced or larger size font disclosure that “the independent contractor is not entitled to unemployment insurance benefits unless unemployment compensation coverage is provided by the independent contractor or some other entity, and that the independent contractor is obligated to pay federal and state income tax on any moneys paid pursuant to the contract relationship.”
While the contract will not be the end all determination of whether the individual guide is an employee or not, the contract is a starting point that every outfitter should take care to draft correctly. Colorado Hunting Attorney Nathaniel Gilbert has experience drafting outfitter and guide contracts for clients and employment, and brings a wide range of hunting knowledge and experience to the table when helping your business. Whether you’re just starting your outfitting, fishing, or hunting business or looking to revamp your existing employment contracts, consult with Attorney Nathaniel Gilbert on how best to protect your livelihood.