Connecticut Employment Law Blog Insight on Labor & Employment Developments for Connecticut Businesses

The Real Battle over Independent Contractors and the ABC Test In Connecticut

Posted in Class Actions, Highlight, Human Resources (HR) Compliance, Laws and Regulations, Litigation, Manager & HR Pro’s Resource Center, Wage & Hour

Governor Malloy with current CTDOL Commissioner Sharon Palmer

You’ve no doubt heard lots about how the U.S. Department of Labor is cracking down on independent contractors.  I’ve recapped it before and my former colleague, Jonathan Orleans, has a new post regarding Uber & electricians.

But in my view, there is a larger, more important battle now being fought in Connecticut and you may not be aware of it.  I touched on it briefly in a post in July but it’s worth digging a little deeper.  Disappointingly, I have not seen anything written about this in the press (legal or mainstream).

A case recently transferred to the Connecticut Supreme Court docket threatens to cause lots of havoc to company usage of independent contractors in Connecticut. The Connecticut Department of Labor has taken an aggressive stance in the case which is leading to this big battle.

The case is Standard Oil of Connecticut v. Administrator, Unemployment Compensation Act and is awaiting oral argument.  You can download the state’s brief here and the employer’s brief here.  The employer’s reply brief is also here.

The employer (Standard Oil) argues in the case that it uses contractors (called “installers/technicians”) to install heating oil and alarm systems and repair and service heating systems at times of peak demand.  The state reclassified the installers/technicians as employees and assessed taxes and interest.  At issue is the application of the ABC Test which is used in Connecticut to determine if these people are employees or independent contractors.

As explained by the CTDOL:

The ABC Test applies three factors (A, B, and C) for determining a worker’s employment status. To be considered an “independent contractor,” an individual must meet all three of the following factors:
A. The individual must be free from direction and control (work independently) in connection with the performance of the service, both under his or her contract of hire and in fact;
B. The individual’s service must be performed either outside the usual course of business of the employer or outside all the employer’s places of business; and
C. The individual must be customarily engaged in an independently established trade, occupation, profession or business of the same nature as the service performed

In the Standard Oil case, the employer is challenging the findings on various elements of this test. One of them – Part B , the “places of business” — is potentially far-reaching, according to the briefs filed in the case.  The issue is whether the customers’ homes are “places of business”; if they are, then the consultant cannot be said to be performing services “outside” the employer’s places of business.  The employer argued that viewing customers’ homes as places of business “does nothing to further the Act’s purpose and its practical implications are damning to Connecticut industry….”

Indeed, the employer argues that “it will be impossible for [the employer]-or any Connecticut business–to ever utilize the services of an independent contractor.”

The employer also argues that other aspects of the test are also not met, including that they do not “control” these contractors.

Ultimately, the employer argues that the economic realities should take over:

In this day and age, people dream of running their own business. People want the freedom to set their own hours and to decide which work assignments to accept.  The installers and technicians at issue in this appeal have realized those dreams by owning and operating their own businesses…. Economic reality and common sense dictate that workers with such freedoms are not employees.

The State, not surprisingly, disagrees with this analysis.  In doing so, the state argues that the findings below are entitled to deference and that the act is to be “liberally construed as remedial legislation in favor of its beneficiaries”.  For example, as to Part B, the state says:

Here the agency factually found, as affirmed by the trial court, that the customers are recruited and billed by the Plaintiff and enter into contracts for the purchase and installation of the systems with the Plaintiff.  This ruling is consistent with Board precedent that the place of business is not only the office, but the individual job sites at which the employer contracts to provide service.

So, while the headlines may be all about the USDOL’s interpretations, the real battle in Connecticut is going on already in the courts. Oral argument is expected late this year with a decision occurring sometime in mid-2016.

Stay tuned.