Independent Contractors and Coverage Exemptions

  Insurance Requirements Brochure

Independent Contractors

Workers are presumed to be employees unless proven otherwise. To prove that someone is an independent contractor and not an employee, the worker must:

• be free from direction and control in the performance of the work; and
• have an independent business doing that specific kind of work.

Paying someone with a 1099 does not make them a contractor. Our statute outlines the minimum criteria to consider when establishing a working relationship. 

If you have additional questions about independent contractors, contact Customer Service at 303-318-8700 or toll-free at 1-888-390-7936.  

Rejection of Coverage

Corporations and LLCs

If your business is a corporation or an LLC, corporate officers and members of LLCs are considered employees of the company. You must either obtain workers’ compensation coverage for yourself or complete a form indicating you wish to reject that coverage. 

To reject coverage, you must meet two criteria:

• You must own at least 10% of the company, and
• Be the president, vice-president, secretary, treasurer or chairman of the board for the corporation, or be a member of the LLC.

If your business already has workers’ compensation insurance and you would like to reject coverage, talk with your insurance agent or carrier to learn more about the forms your insurance company requires.

If your business does not have any other employees besides corporate officers or LLC members who meet the criteria and all want to reject coverage, you need to fill out our Rejection of Coverage by Corporate Officers or Members of a Limited Liability Company form (WC 43) and send it into the Division.  

Construction Industry  

If you have a construction company, even if your business is a sole proprietorship or a partnership, you must either have workers’ compensation insurance for yourself or reject that coverage. 

If your business already has workers’ compensation insurance and you would like to reject coverage, talk with your insurance agent or carrier to learn more about the forms your insurance company requires.

If your business does not have any other employees, you need to fill out our Rejection of Coverage By Partners and Sole Proprietors Performing Construction Work on Construction Sites form (WC 45) and send it to the Division.    

*However, if your business is a construction corporation or an LLC without other employees, you need to fill out our Rejection of Coverage by Corporate Officers or Members of a Limited Liability Company form (WC 43) and send it into the Division.

Other Exemptions

In certain circumstances, the following types of workers may be exempt from needing workers' compensation coverage.

• Domestic workers (including nannies and au pairs) who work less than 40 hours per week and less than five days a week. 
  • For example, a domestic worker who works three hours per day, five days a week would be considered an employee, requiring workers’ compensation coverage, even though the total hours are only 15 hours in the week.
• Real estate brokers/agents with a contract working solely on commission.
• Motor carriers that lease vehicles to or from drivers, under specific circumstances.
• Casual farm and ranch labor, or employers of casual maintenance around the employer’s place of business. Wages to these individuals cannot be more than $2,000 per year or else they are considered employees.
• Ski volunteers.

These are the most common exemptions, but there are others.  For more specific information about exemptions, please see our Employer Guide or contact Customer Service at 303-318-8700 or toll-free at 1-888-390-7936.

Fines for Failure to Insure

Workers’ compensation insurance is required for all employers operating in Colorado, with a few limited exceptions listed on our Independent Contractors and Coverage Exemptions page. If you do not have workers’ compensation insurance, you can be fined up to $500 for every day you are uninsured. Your business may also be shut down. If one of your employees is hurt while you are uninsured, you will have to pay for the claim yourself as well as an additional penalty totaling 25% of the injured worker’s benefits.