Colorado’s workers’ compensation law is governed by the Colorado Workers’ Compensation Act. The purposes of the act are to protect employees who suffer injuries arising out of their employment and to give injured workers a reliable source of compensation. Compensation is available if an employee is injured when performing services that arise out of and in the course of his/her employment regardless of who is at fault for such injury. Although employers have to pay an injured employee under the act even when they are not at fault, the associated benefit is that the employer is immune from any civil lawsuit by the injured worker for damages arising from the work injury.
The term “employer” is broad under the act. All private and public employers with one or more full or part time employees in Colorado, with limited exceptions, must provide workers’ compensation coverage for their employees.
Some occupations and/or individuals are exempted from coverage, including, but not limited to:
- certain casual maintenance or repair work performed for a business for less than $2,000 per calendar year
- certain domestic work, maintenance or repair work for a private homeowner that is not done full time
- licensed real estate agents and brokers working on commission
- independent contractors who perform specific for-hire transportation jobs
- drivers under a lease agreement with a common or contract carrier
- any person who volunteers time or services for a ski area operator
- persons who provide host home services as part of residential services and supports
- federal employees (covered under federal laws)
- railroad employees (covered under federal laws)
- a corporate officer of a corporation or a member of a limited liability company may elect to reject the requirement to carry workers’ compensation insurance. To reject coverage, written notice must be provided on a form available from the Division of Workers’ Compensation.
Covered employees versus independent contractors
Any individual who performs services for pay for another is an employee unless the individual is an independent contractor or qualifies under a specific exemption. Independent contractors are free from control and direction in the performance of the service and such individual is customarily engaged in an independent trade, occupation, profession, or business related to the service performed. To prove independence, several factors are relevant, including that the person for whom services are performed does not:
- require the individual to work exclusively for him or her; however, the individual may choose to work exclusively for the person for a period of time as specified in a document
- establish a quality standard for the individual’s work, oversee the work, or instruct the individual about how to perform the work; however, the person may provide plans regarding the work
- pay the individual a salary or at an hourly rate instead of at a fixed or contract rate
- terminate the work of the individual during the contract unless the individual violates or breaches the contract
- provide more than minimal training for the individual
- provide tools or benefits to the individual; except that materials and equipment may be supplied
- dictate the time of performance; except that a completion schedule and a range of negotiated and mutually agreeable work hours may be established
- pay the individual personally instead of making checks payable to the trade or business name of the individual
- combine his or her business operations in any way with the business operations of the individual instead of maintaining all such operations separately and distinctly.
It is not necessary to satisfy each of these nine factors to demonstrate that an individual is an independent contractor.
The parties may also prove independence through a written document, such as a contract.
Most illegal employment relationships are still subject to workers’ compensation coverage. Accordingly, minors employed unlawfully are subject to the same protections as other employees. Likewise, undocumented workers are entitled to workers’ compensation benefits to the same extent as other employees.
An employer is considered a “statutory employer” under the act for the purpose of the exclusive remedies provisions if the work contracted out is part of the employer’s “regular business” as defined by its total business operation. In making this determination, one should consider the elements of routineness, regularity, and the importance of the contracted service to the regular business of the employer. Where an employer loans the service of any of its employees to any third person, the employer is liable for any compensation for injuries or death of the loaned employee.
Consequences for not being covered for workers' compensation
The Division of Workers’ Compensation investigates all information received or discovered about employers who may be uninsured for workers’ compensation. An employer who fails to secure, keep, or renew workers’ compensation coverage for its employees can be subject to a fine for each violation and/or an order to cease and desist its business operations until insurance is obtained. If an employee is injured or killed when its employer has failed to secure, keep, or renew workers’ compensation coverage, the employee may nonetheless claim the compensation and benefits, which will be increased by 50%.
In Colorado, there are three ways in which an employer may obtain workers’ compensation coverage:
- commercial insurance
- individual self-funding
- self-funding through a group and/or pool.
The employer and employees are subject to the same laws and rules of procedure under each method.
Insurance may be purchased from one of more than 300 private insurance companies authorized to conduct business in Colorado. This type of insurance often has cost advantages over prevailing insurance rates. Changes in the laws and the market may result in fluctuations in the types of plans that are offered and in the availability of coverage from year-to-year.
The act allows employers, meeting strict financial and loss control standards, to self-insure. Self-insurance must be authorized by special permit through the Division of Workers’ Compensation. Under this type of insurance, workers’ compensation obligations are paid directly from the earnings and assets of the employer. This type of insurance is only available to employers that regularly employ 300 or more employees in Colorado, or are a division or subsidiary of a parent company that has a minimum of $100,000,000 in assets.
Self-funding through groups or pools
Colorado law allows group pooling by public sector employers and for trade or professional associations. The Division of Insurance in the Department of Regulatory Agencies administers this program.
An injury or death caused by an injury or occupational disease arising out of and in the course of the employee’s employment that is not self-inflicted is compensable under the act. Employees are required to report an injury to their employer within four days (increasing to 10 days as of August 9, 2022) of the date the injury occurred.
Disability or death caused by a heart attack is only compensable if it is shown by competent evidence that the heart attack was most likely caused by an unusual exertion arising out of and within the course of employment.
If an employee who has been hired or is regularly employed in Colorado is injured in an accident or an occupational disease arising out of and in the course of employment outside of Colorado, the employee, or the employee’s dependents in case of death, will be entitled to compensation according to the act. This rule only applies to injuries received by the employee within six months after leaving Colorado, unless the employer files notice that the employer has chosen to extend this coverage.
A claim of mental impairment must be proven by evidence supported by the testimony of a licensed physician or psychologist. A mental impairment means a recognized, permanent disability arising from an accidental injury arising out of and in the course of employment when the accidental injury involves no physical injury and consists of a psychologically traumatic event and must have arisen primarily from the claimant's then occupation and place of employment in order to be compensable. Mental impairment includes a disability arising from an accidental physical injury that leads to a recognized permanent psychological disability. The mental or emotional stress must have been caused solely by hazards to which the employee would not have been equally exposed outside the employment. A mental impairment includes a disability arising from an accidental physical injury that leads to a recognized permanent psychological disability. Coverage may also be available to an employee who suffers a “psychologically traumatic event" meaning an event that is generally outside of a worker's usual experience and would evoke significant symptoms of distress in a worker in similar circumstances. A psychologically traumatic event also includes an event that is within a worker's usual experience only when the worker is diagnosed with post-traumatic stress disorder by a licensed psychiatrist or psychologist after the worker experienced exposure to a specific set of potential events. However, a mental impairment that results from a disciplinary action, work evaluation, job transfer, layoff, demotion, promotion, termination, retirement or similar action taken in good faith by the employer in not compensable.
What to do when an injury occurs
When an employee is injured on the job, the employer should ensure that he/she is promptly provided with medical attention. The employer should also investigate the incident and complete required forms and reporting.
When a worker is injured on the job, ensure that the employee is promptly furnished medical treatment. The employer or insurance company has the right to select the physician that employees must use for treatment of work-related injuries. However, in emergencies, treatment should be sought by the closest medical facility. By using a designated physician, the employer will have an immediate source of treatment for the injured employee and claims may be managed consistently.
Investigate accidents and report injuries
All accidents should be investigated to ensure that the pertinent facts are gathered and available if the insurance company has any questions regarding the claim. An employer must notify the insurance company of an injury within 10 days, no matter how minor the injury by filing an Employer’s First Report of Injury form. If there is uncertainty as to whether an injury is work related, this should be documented and filed with the first report form. Failure of the employer to file this report in a timely manner may result in penalties against the employer. Notice of a fatality, or an accident in which three or more employees are injured, should be given immediately. The notice is not an admission that an employer agrees with the facts of the incident, rather, it is a statement that an employee is making a claim.
Under Colorado law, an injured employee must notify the employer in writing within four working days of an injury. If the employee does not do so, and the employer posted the proper notice, the employee still may receive benefits, but the employer will be excused from not reporting timely.
For purposes of the Employer’s First Report of Injury form, the employer will have to provide information about the injured employee’s wages. There is a section related to the average weekly wage (AWW), which is used to determine compensation benefits for the employee. The insurance company can help with questions regarding the AWW and can provide an AWW worksheet to help calculate this average. Wages are defined in the act as the rate, including overtime, at which an employee is paid when he/she is injured. Wages include fringe benefits of group health insurance, board, rent, housing or lodging, and gratuities reported to the Internal Revenue Service (IRS). No per diem payment shall be considered as wages unless it is also considered wages for federal income tax purposes. The fringe benefits are only computed into the wage replacement when the employer no longer pays the fringe benefit during any time the employee is receiving temporary disability benefits.
When the employee returns to work or is terminated, the employer must provide the insurance company with another report – the Supplemental Report of Accident. The insurer can provide this form.
The employer should see if the claim is one that should be recorded in its OSHA log (see Safety and health).
Investigating workers’ compensation claims from remote workers
Many employers are allowing employees to work remotely indefinitely and/or implementing a hybrid work schedule. When investigating an alleged remote work injury, the employer should evaluate it like any other claim.
Here are some investigative tips:
Obtain a detailed written statement from the employee that explains what the employee was doing at the time of the injury, and when and where it happened.
Have the employee take photos of the injury and the injury site when possible.
Determine if the injury occurred in the course and scope of employment. For example, was the employee on the clock and/or performing job-related duties at the time of the alleged injury or did it occur outside of normal working hours? The alleged injury must also arise out of their employment. In other words, did the activity performed at the time of the injury provide some benefit to the employer?
Requiring employees to create a dedicated work area at home and establish clear working hours and break times will help to reduce potential liability for accidents occurring any time of the day or night. Employers can also install task monitoring software to record the employee’s computer activities, which can help to identify when the computer was being used or when it was idle. These cases can be complicated and are usually very fact-specific. Employers should work with their third-party administrator (TPA) and/or defense counsel to determine if a remote work injury is compensable.
Benefits employees are entitled to
This section will briefly discuss the different types of benefits to which injured workers are entitled.
Workers’ compensation insurance pays for all reasonable and necessary medical expenses provided by the designated doctor or a doctor who is authorized to provide care. If the designated doctor refers the injured employee to another doctor for reasonable and necessary treatment, that treatment will also be covered. Injured employees will also be reimbursed for all reasonable and necessary supplies, prescriptions, and mileage to and from medical appointments.
Temporary disability benefits
Compensation benefits kick in when an injured employee misses more than three shifts, or three days of work. Wage replacement is calculated from the fourth day or shift the employee is unable to work, unless the employee is still off work more than two weeks in which case they are paid for the first three days/shifts.
There are two types of temporary disability benefits:
- temporary total disability (TTD)
- temporary partial disability (TPD)
TTD benefits stop when any of the following occur:
- an employee returns to regular or modified work
- a written release to return to work is provided by an authorized doctor
- a written release to return to modified work is given, the employer makes a written offer of such work, and the employee begins or refuses to begin such work
- the authorized doctor determines that the employee has reached maximum medical improvement. In other words, the employee’s injury or disease has become stable and no further medical treatment will improve it.
TTD benefits will be two-thirds of the employee’s AWW on the date of the injury up to the legal maximum. AWW includes gross wages or salary, commissions, overtime, tips and per diem payments reported to the IRS, reasonable board, value of rent, housing and lodging, and the employee's costs of continuing the employer’s group health insurance plan. To the extent the employer continues to pay any benefits, however, the value of such benefits is not included in the computation of the AWW.
TPD benefits are available when an employee cannot return to full time regular work but returns to a modified duty with reduced wages or reduced hours. TPD benefits will be two-thirds the difference between the employee’s AWW at the time of the injury and the part time earnings, not to exceed a certain maximum. TPD benefits continue until any of the following occur:
- the employee returns to work at the pre-injury wages
- the employee is given a written release by the authorized doctor to return to modified work, the employer makes a written offer for such work, and the employee begins this work or refuses to begin this work
- the authorized doctor determines that the employee has reached MMI. If the employee disagrees with the MMI, he/she may request an independent medical examination.
The authorized treating doctor may make a determination that an employee is unable to fully recover from his/her injury and therefore has a permanent impairment. The doctor will also determine if any functional impairment resulted from the injury. If there is an impairment, the doctor will assign an impairment rating. If the insurance company agrees with the impairment rating, it will file a “Final Admission of Liability,” and the employee will receive weekly benefits for a certain length of time depending on the date of injury and the amount of money owed according to law. If the employee disagrees with the impairment rating, he/she may request an independent medical examination. The Final Admission of Liability is a final statement from the insurer about what has already been paid and what is still owed. The injured employee has an opportunity to object to the Final Admission of Liability. In this objection, the employee can also request an independent medical examination if he/she disagrees with the date of MMI or the whole person impairment determination.
There are three types of permanent impairments:
- Scheduled impairment - loss of function affecting the toes, feet, legs, fingers, hands, arms, teeth, or deafness.
- Whole person impairment - loss of function affecting other body parts, including the spine, lungs and brain.
- Permanent total disability - inability to earn any wages.
Lump sum payments are available for permanent impairments. Additionally, the injured employee and the employer or the insurance company may settle such claims.
If an employee is fatally injured on the job, his/her surviving dependents are eligible for weekly payments and up to $7,000 for funeral expenses. The weekly benefits are calculated in the same way as TTD benefits (two-thirds of the employee's AWW on the date of the injury up to the legal maximum) and are also subject to a minimum weekly rate. If the deceased worker was married, payments are made for the lifetime of the dependent spouse, or until the spouse remarries. Upon remarriage, the dependent children, if any, receive the spouse’s benefits. If there is no spouse and are no dependent children, other relatives may be eligible for partial benefits. If the deceased is under 21 years old and has no dependents, the deceased’s parents are eligible for a payment. All death benefits are reduced by 50% of the death benefits received through social security.
Lump sum payments are also available in lieu of weekly payments for death benefits.
Resolution of disputes
If an employee disagrees with a decision of the insurance company, the employee can work with the insurance adjuster or the employer in an attempt to resolve any problem. If this does not work, the employee may request a formal hearing on any disputed issue. Before requesting a hearing, or while waiting for a hearing, the employee can also request a prehearing conference or a settlement conference. If the dispute is not resolved in the prehearing conference or the settlement conference, then the employee has the right to go to a formal hearing. Resolution options include:
- A prehearing conference is an informal hearing conducted by an administrative law judge (ALJ) upon request of a party. This conference provides the parties with an opportunity to meet and discuss issues in the case before a judge. The judge may also order the parties to exchange information.
- A settlement conference before an ALJ can also be held if all parties agree. The ALJ will facilitate discussion and possible resolution of the issues. This conference is confidential.
- Mediation services are also available. Mediation is an informal process where an employee of the Division of Workers’ Compensation will attempt to help the parties reach a resolution.
- The parties may also arbitrate the issues before an ALJ.
A hearing is a formal legal proceeding where an ALJ decides what benefits, if any, must be paid, and decides any other issues. The parties can present evidence, including documents and testimony, at the hearing.
To request a hearing, an employee must file an “Application for Hearing” with the Office of Administrative Courts and send a copy to the insurance company. The employee can request this form by calling the Adjudication Docket at:
- (303) 866-2000 in Denver, Colorado
- (970) 248-7340 in Grand Junction, Colorado
Following the hearing, the ALJ will make a decision based on the facts and law. The ALJ will issue an order that contains Findings of Fact and Conclusions of Law. Information about how to appeal this order will be included with the order. The appeal procedures must be strictly complied with.
The Americans with Disabilities Act (ADA) prohibits an employer from inquiring about the existence, nature, or severity of an applicant’s disability in the pre-employment process, including workers’ compensation history. A prospective employer may, however, inquire about the applicant’s ability to perform specific job functions under the ADA. Once a conditional job offer is made, the employer may ask disability-related questions and require medical examinations as long as this is done for all entering employees in that job category. Issues related to the ADA are discussed more thoroughly in Disabilities and reasonable accommodations.
In Colorado, since employees are granted the specific right to apply for and receive workers’ compensation benefits, an employer cannot retaliate against any employee who exercises this right. Such retaliation violates Colorado’s public policy, which provides the basis for a common law claim by the employee to recover damages.
Saving money on workers' compensation premiums
Insurance companies establish premium rates in their underwriting process. In this process, they use information established by the National Council on Compensation Insurance (NCCI). Insurers classify employers by the type of business in which the employer engages. This classification assignment affects premiums. The loss experience of the individual employer also affects the premium. If an employer does not agree with the classification assignment or experience modification factor assigned by the insurer, the employer may file an appeal with the state.
The Colorado Department of Labor and Employment, Division of Workers’ Compensation issues an Employer’s Guide that is published at its website in which it recommends the following related to selecting workers’ compensation insurance:
- Start shopping two to three months before the current policy expires. Insurers generally take a month or more to evaluate a business’s loss history and return a quote.
- Solicit quotes from several insurers that represent the range of rates in the total market. An agent may be consulted to get a representative sample.
- Make sure employees are properly classified by the underwriter.
- Ask the agent about the quality and timeliness of service provided by a prospective insurer before switching to a new insurer. Check with other employers in the community about their experiences with their insurers.
- Discuss with the agent, broker, or insurer what alternative plans may be available (i.e., self-funding, deductible options, premium credits, etc.).
- Be aware that past loss experience will have a direct correlation to future premiums.
- Address any questions regarding insurance practices of individual insurance companies to the Department of Regulatory Agencies, Division of Insurance.
The following posters must be posted for employers to comply with workers’ compensation laws:
Worker’s Compensation Act Poster, Form #WC49-A - This poster must be displayed on the workplace premises and provides information on possible workers’ compensation entitlements and insurance coverage.
Notice to Employer of Injury Poster, Form #WC50 - This poster must be displayed on the workplace premises and provides notice to the employee of the requirement to report all work-related injuries to the employer. In addition, notice is provided that benefits may be reduced if the injury results from use of a controlled substance.
This poster must be a minimum of:
Posters can be obtained online at: