By Aaron J. Goodlock, Orten Cavanagh Holmes & Hunt, LLC
Employment law issues can seem daunting to community associations, which are typically governed by volunteer boards of directors. This is due, in large part, to the myriad of complex state and federal employment laws, administrative regulations, labor standards, tax codes, and case law governing employers and employees. And although most associations don’t directly employ staff, having employees can be advantageous depending on the community’s particular needs. For example, many condominium and resort communities employ onsite managers, operations and housekeeping staff, and maintenance personnel.
The following is a brief overview of key employment law concepts and considerations in the context of community associations.
Classification of employees and independent contractors. A fundamental concept with respect to employment is understanding the distinction between association employees versus independent contractors.
Colorado employment laws define “employee” as any person, including a migratory laborer, performing labor or services for the benefit of an employer. Relevant factors in determining whether a person is an employee generally include (1) the degree of control the employer may or does exercise over the person, and (2) the degree to which the person performs work that is the primary work of the employer. Individuals who are primarily free from control and direction in the performance of the service, and who are customarily engaged in an independent trade, occupation, profession, or business related to the service are not considered employees.
If an individual meets the criteria for an “employee,” the Association has an obligation to comply with applicable employment laws.
Misclassification of workers as independent contractors instead of employees creates risk, including civil and statutory penalties (i.e., fines) for violation of state and federal employment laws, in addition to liability for unpaid employment taxes. In Colorado, if an employer willfully misclassifies an employee, the employer may be fined between $5,000 and $25,000 per employee.
To avoid these risks, if the worker meets the criteria of an employee, the association should classify the individual as an employee and pay applicable employment taxes and premiums, etc. If the worker is not considered an employee (i.e., if they are engaged as an independent contractor), the association should ensure that specific language to this effect is included in the written contract between the Association and the worker.
Employee payroll and employment taxes. Employers are obligated to withhold employment and payroll taxes (e.g., income tax, social security tax, Medicare tax, unemployment tax). Failure to properly remit employment taxes could subject the association to additional tax liability, fines and other penalties from state and federal tax authorities.
For federal employment and tax purposes, it’s important to note that Colorado law and the IRS have different criteria for defining employees and independent contractors. Associations should review IRS Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, to determine if workers should be treated as employees or independent contractors for federal tax purposes.
Workers Compensation. Most associations carry workers compensation insurance to protect against liability even if the association doesn’t have employees. Under the Colorado Workers’ Compensation Act, associations are required to carry workers compensation insurance covering association employees. Workers compensation insurance provides coverage for employee job-related injuries and substantially protects the association for additional tort liability.
Wage and Labor Laws, Employment Practices. Associations with employees must comply with applicable minimum wage laws, overtime pay requirements, mandatory meal and rest period regulations, employer record-keeping and posting requirements, and Colorado’s employment discrimination laws.
With limited exceptions, the Colorado Wage Act (“CWA”) requires employers to pay employees overtime at one and a half times the regular rate of pay for any work in excess of: 40 hours per week; 12 hours per day; or 12 consecutive hours, regardless of the start and end time of the workday.
The CWA also requires employers to provide minimum meal breaks and rest periods based upon the length of the employee’s work shift.
The Colorado Anti-Discrimination Act (“CADA”) encompasses a broad range of employment-related practices that most employers are strictly obligated to comply with. CADA prohibits discrimination in the workplace based on protected class, which includes disability, race, creed, sex, sexual orientation, gender identity, gender expression, religion, age, national origin, ancestry, and pregnancy. In that vein, CADA also prohibits: (1) refusing to hire employees; (2) discharging employees; (3) refusing to promote employees; (4) demoting employees; (5) harassing employees; (6) discriminating in compensation; and (7) discriminating in the terms, conditions and privileges of employment, based on or because of an employee’s protected class or in retaliation for engaging in protected activity. CADA also requires employers to provide reasonable accommodations to employees with disabilities.
Other Employment Issues - Vicarious liability. Associations can be vicariously liable for an employee’s negligent acts. If an employee causes damage or injuries to another person and the damage or injury occurred while the employee was acting within their scope of employment, the association may be vicariously liable for any damages or injuries sustained. In addition to maintaining appropriate liability insurance, associations can mitigate the risk of liability by exercising reasonable care to prevent negligent or careless behavior. Adopting and implementing policies and employee handbooks, providing training, and ensuring reasonable employee oversight will help to mitigate this risk.
Understanding the distinction between employees and independent contractors is important, especially when analyzing how employment issues can impact an association’s relationship with workers and services providers. Additionally, because the landscape of employment law is continuously changing, consulting an attorney or other employment specialist can be helpful to proactively mitigate and manage employment-related risks.
Aaron J. Goodlock is an attorney at Orten Cavanagh Holmes & Hunt, LLC. He provides general counsel and transactional services to community associations throughout Colorado and serves on the Colorado Legislative Action Committee for CAI.
