The United States Department of Labor today released new regulations that dramatically change the existing rules on when two businesses are “joint employers” under federal wage and hour laws.
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.”
But how do you make that determination?
Suppose a private bus company provides services all over Connecticut. It’s largest customer happens to be a very large private university in the…