On Monday, Colorado Attorney General Phil Weiser revealed that Instawork, a staffing platform that operates through an app, has consented to pay $400,000 and revamp its labor practices. This decision follows a state investigation that uncovered the company’s misclassification of thousands of workers and its failure to pay necessary unemployment insurance premiums.
The settlement, which has been reached in collaboration with the Colorado Department of Labor and Employment (CDLE) and is awaiting court approval, marks the first enforcement action taken under the Colorado False Claims Act. This act was enacted in 2022 to combat fraud related to state programs.
Under the agreement, Instawork must stop offering “independent contractor” shifts in Colorado and classify all workers as employees. The $400,000 payment represents unpaid unemployment insurance premiums and double damages.
State Says Instawork Misled Regulators
Investigators determined that Instawork violated both the Colorado False Claims Act and the Colorado Employment Security Act by misclassifying workers and submitting inaccurate reports to the state. Instawork, which launched in Colorado in 2020, connects more than 69,000 Denver-area workers—called “pros”—with hourly jobs in warehousing, hospitality, and other industries.
Although Instawork labeled many shifts as “1099” contractor roles, officials said workers did not meet the legal standard for contractor status. According to CDLE, the company vetted workers, dictated performance requirements, set wages in coordination with business clients, and even deployed onsite supervisors known as “captains.”
“These workers lacked the autonomy and independence required of contractors,” said Philip Spesshardt, director of CDLE’s Unemployment Insurance Division. “Misclassification harms workers who play by the rules and gives bad actors an unfair advantage.”
Instawork created an affiliate, Advantage Workforce Solutions, in 2021 to offer W-2 shifts after some client companies raised concerns, but investigators said misclassification persisted. A CDLE audit covering 2022–2024 found the company owed more than $134,000 in unpaid premiums and had accumulated an additional $82,000 in underpayments since.
“Instawork misclassified employees, submitted incorrect reports to the state, and failed to pay what they owed,” Weiser said. “This settlement holds the company accountable and ensures workers are treated fairly moving forward.”
If approved by the court, the agreement could set a precedent for how Colorado regulates gig-based labor platforms that increasingly blur the line between employee and contractor status.
Read the full settlement (PDF).
