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

Breaking: Conn. Supreme Court Clarifies ABC Test for Independent Contractors

Posted in Highlight, Human Resources (HR) Compliance, Litigation, Wage & Hour

justiceI’m back with news of a relatively big decision today from the Connecticut Supreme Court.

In the decision, the Court clarified an important question that the Connecticut Department of Labor had been pushing hard.  It will be welcome news for businesses in the state.

The issue was this: If an independent contractor (and his or her business) works ONLY with one company, can that person still be an independent contractor?

The Court said yes, that person CAN be. But it is important to note that it does that mean that the person will ALWAYS be an independent contractor. Instead, the court will continue to apply the ABC test — balancing several factors. (I’ve discussed the test in a prior post here.)

The case, Southwest Appraisal Group v. Administrator, Unemployment Compensation Act can be downloaded here.  Note that it will not be “officially released” until March 21, 2017.

The only issue in the case was whether the putative employee was “customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.”

How to make that determination? By looking at the “totality of the circumstances” which also include another series of tests.

Here, the court at least is helpful in setting up what those factors are.   According to the Court, “factors to consider in evaluating the totality of the circumstances under part
C include:

  1. the existence of state licensure or specialized skills;
  2. whether the putative employee holds himself or herself out as an independent business through the existence of business cards, printed invoices, or advertising;
  3. the existence of a place of business separate from that of the putative employer;
  4. the putative employee’s capital investment in the independent business, such as vehicles and equipment;
  5. whether the putative employee manages risk byandling his or her own liability insurance;
  6. whether services are performed under the individual’s own name as opposed to the putative employer;
  7. whether the putative employee employs or subcontracts others;
  8. whether the putative employee has a saleable business or going concern with the existence of an established clientele;
  9. whether the individual performs services for more than one entity;
  10. and whether the performance of services affects the goodwill of the putative employee rather than the employer.

The court does add some additional guidance here noting that, “We emphasize that particular caution is necessary in considering the relative size or success of the putative employee’s otherwise independent business in connection with the totality of the circumstances analysis under part C.”

This is a big decision for employers who also use independent contractors.  Businesses should again review their relationships with these independent contractors to try to satisfy as many of the factors outlined above.