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An independent platform, Tagg Education LLC, has filed a legal challenge against a new Colorado rule requiring it to consider substitute teachers as employees, urging a Colorado state court to prevent the policy from going into effect on July 1.

In a complaint filed Saturday against the Colorado Public Employees Retirement Association (PERA) in Denver District Court, Tagg Education argued that the new rule is already harming its business and violates the state Administrative Procedure Act, the Colorado Employment Security Act, and PERA's regulations.

"As the effective date of the rule grows nearer, and schools plan for the upcoming academic year and their annual budgets, Tagg reasonably foresees that the substitute rule will continue to cause increased harm to its business," Tagg stated in the complaint.

Tagg explained that each individual who engages with the company signs an independent contractor agreement and is paid by the schools they work at, without their wages being subject to PERA obligations as withholdings.

However, PERA announced at the end of June that it was implementing a new rule requiring all substitute teachers to be considered "employees of the PERA affiliated employer," a significant shift from previous policies that classified substitute teachers "depending on the particular facts of the case," according to Tagg.

Tagg claimed that certain schools would not renew their agreements with the platform, which helps them find substitute teachers, and that prospective clients lost interest in working with the company after the rule was announced.

Tagg argued that the rule violates the state Administrative Procedure Act because it is legislative in nature but did not follow the statutory rulemaking process. Additionally, Tagg contended that the rule conflicts with the Colorado Employment Security Act because it circumvents a test established by the state Supreme Court that considers the overall circumstances of the relationship between an individual and an entity to determine worker classification.

The rule also contradicts PERA's own statute, which requires individuals to become members as a condition of employment and states that independent contractors are not eligible for membership, Tagg continued.

David W. Illingworth II of Illingworth Law LLC, representing Tagg, declined to comment Monday. Representatives of PERA did not immediately respond to requests for comment.

Tagg Education is represented by David W. Illingworth II of Illingworth Law LLC. Counsel information for the Colorado Public Employees' Retirement Association was not available.

The case is Tagg Education LLC v. Colorado Public Employees' Retirement Association et al., case number 2024CV31662, in the 2nd Judicial District of Colorado.