When you run a business that works with freelancers or contractors, the last thing you want or need is legal hassle.
What was once considered normal (verbal agreements with contractors) can now legally open the door for businesses to face repercussions in court over pay disputes, ownership of creative output, and even payment deadlines.
So, how do you avoid this headache?
Define Commissions in Writing
With the amendments that have been made to Colorado employment law in 2025, it is no longer wise to rely on verbal contracts when working with freelancers or contractors. So, even if you are taking on a contractor for one day a week, be sure to have it in writing! This will prevent sales commission disputes, legal issues with payment schedules, and even issues relating to the role that the contractor is expected to play.
Include Termination Clauses
When freelancers and contractors send out employment contracts to clients, they will often include a termination clause. A relatively inconspicuous paragraph, this will usually state that should a project or contract be terminated early, then the freelancer or contractor should receive up to six months of pay.
Of course, for companies that use commission-based workers, you can also add some clauses to your work contract. This will allow you to cancel or terminate the working relationship you have with your freelancers, without hitting any legal issues. It can be worth including a definition in your contracts, such as how much work is expected, what constitutes earned commissions, and, most importantly, when a commission-based worker can expect their pay. Keep it clear!
Review Regularly
When working with freelance staff or contractors, you will likely have them on a six-month rolling contract. So, their contract with your company will be up for review every six months, after which you can choose to renew it or not, based on need and their work.
However, you should still review their contracts regularly to make amendments as needed if more work is required, or to change the length of the contract term. You should also make sure that your legal team or HR department is up to date with the newest guidance from the Colorado Department of Labor and Employment (CDLE) to check that you comply with any new rules or regulations.
This, again, keeps everyone in the clear and ensures that your contracts are legal.
Seek Legal Advice
As these rules and regulations apply to businesses of all sizes in Colorado, it may be easier for some corporations to weave them into their legal contracts, as they will likely have a legal team on hand and able to make amendments quickly.
However, for small to medium-sized businesses, it is wise to ensure that any writings or termination clauses are drawn up by a legal team that specializes in employment law. So, it is best to seek the advice and services of a lawyer who will be able to offer your company the legal documentation that it needs to avoid commission-based disputes. This will keep you, your team, and any future commission-based staff in the clear about what is required and will (hopefully) reduce the chances of you going to court due to pay disputes.
