Employee or Independent Contractor?

By Glenn A. Duhl, Esq. & Angelica M. Wilson, Esq.

employee_or_independent_contractor_nardonelimitedOn March 7, 2016, the Connecticut Supreme Court released its much-anticipated (and long-awaited) decision in Standard Oil v. Administrator, Unemployment Compensation — one of the most significant employment law decisions in years.

The Supreme Court ruled in favor of Standard Oil’s challenge to the determination by the Administrator of the Connecticut Unemployment Compensation Act that Standard Oil misclassified installers and technicians as independent contractors instead of employees. This decision results in a victory not only for Standard Oil, but also for other businesses that use independent contractors to visit and service customers’ sites.

The decision addresses the first two prongs of the ‘ABC test’ — the test in Connecticut, and in other states, to determine whether a worker is an employee or an independent contractor.

As to the first prong, the Supreme Court found that Standard Oil had satisfied its burden of showing that the installers/technicians were free from its control and direction under part A of the ABC test.

An issue of first impression, the Supreme Court interpreted whether “places of business” under part B of the ABC test, extended to the homes of Standard Oil’s customers. The Court concluded that the meaning of “places of business” should not be extended to the homes in which the installers/technicians worked, unaccompanied by Standard Oil’s employees and without its supervision. Rather, the homes of Standard Oil’s customers, unlike its business offices, warehouses and other facilities, were under the homeowners’ control. Accordingly, the homes of Standard Oil’s customers were not “places of business” under part B of the ABC test.

In rejecting a broad interpretation of “places of business,” the Supreme Court acknowledged the practical implications of such an interpretation — namely, that it would effectively convert every Connecticut household into a place of business for any company that performs services at a customer’s home, thereby profoundly limiting an employer’s ability to subcontract work.

Standard Oil provides home heating oil delivery and service and alarm system monitoring and service to customers. It employs many individuals who provide home heating oil delivery and sell HVAC equipment to customers’ homes; they provide repair and emergency service. It also engaged installers (to install heating oil and alarm systems) and technicians (to repair and service heating systems at times of peak demand) as independent contractors instead of employees.

In 2008, the Administrator of the Unemployment Compensation Act, audited Standard Oil’s payroll to determine whether it paid the correct amount of unemployment compensation taxes on its workforce. It accused Standard Oil of misclassifying the installers and technicians as independent contractors instead of employees. The Administrator reclassified them as employees, and assessed taxes and interest.

Standard Oil stood firm on its conviction that it properly classified its workforce and challenged the Administrator’s claims. It argued that it was exempt from unemployment compensation taxes on payments to the installers/technicians, and was prepared to prove, through various witness testimony and documentary evidence, that they were bona fide independent contractors.

The Unemployment Compensation appeals referee ruled against Standard Oil. Standard Oil appealed to the Board of Review. Again, it received a ruling in favor of the Administrator. It then appealed to the Superior Court. The decision there was no better. Then, during the appeal to the Appellate Court, the Connecticut Supreme Court, on its own, transferred the case to itself.

Now, more than six years since the commencement of the audit, the Connecticut Supreme Court vindicated Standard Oil, ruling that it was right all along.

The classification of employees versus independent contractors has far reaching ramifications affecting recordkeeping, insurance, wage payment laws and workplace injuries. The Connecticut Supreme Court’s recent pronouncement will certainly help in deciding upon a business model to use.

Glenn A. Duhl and Angelica M. Wilson are management-side employment and litigation lawyers at Siegel, O’Connor, O’Donnell & Beck, P.C. Please visit www.siegeloconnor.com for more information.

The information contained in this article is general in nature and offered for informational purposes only. It is not offered and should not be construed as legal advice.

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