In a recently released decision (Standard Oil of Connecticut, Inc. v. Administrator, Unemployment Compensation Act), the Connecticut Supreme Court has provided clarification on the Connecticut Department of Labor’s ABC Test for determining independent contractor status. To be properly classified as an independent contractor under this test, a worker must meet all three of the following requirements:
- The worker must be free from direction and control in the performance of the service, both under the contract of hire and in fact; and
- The worker’s services must be performed either outside the usual course of the employer’s business or outside all of the employer’s place of business; and
- The worker must be customarily engaged in an independently established trade, occupation, profession or business of the same nature as the service being provided.
This case involved a dispute as to whether the installers/technicians Standard Oil used to install and service home heating and alarm systems for its residential customers were properly classified as independent contractors.
When this question was brought before the Connecticut Department of Labor (CTDOL), it determined these workers were improperly classified because (a) they performed work that was part of Standard Oil’s usual course of business and (b) they performed work at customers’ homes, which the CTDOL determined constituted Standard Oil’s places of business. As a result, these workers did not meet 2 of the 3 prongs of the ABC Test and were employees of the Company.
The Connecticut Supreme Court disagreed with this ruling and issued clarification on the factors that should be taken into consideration when evaluating prongs A and B of the ABC Test.
Clarification of Prong B – Defining Place of Business
Prong B of the ABC Test focuses on whether the worker’s services are performed either (a) outside the usual course of the employer’s business or (b) outside all of the employer’s place of business. In this case, the Court’s focus was on the question of whether a customer’s residence would be considered part of the “employer’s place of business” when the work is performed at the residence.
Prior to this decision, the term “place of business” was undefined in Connecticut’s Unemployment Compensation Act. In looking at the legislative history, the Court found that “the employer’s place of business” meant locations that were “in, on or around premises under such employer’s control” – like the employer’s business offices, warehouses and other facilities. In situations where the worker is working at a customer’s residence unaccompanied by company employees and without company supervision, the Court found that the worker would not be performing work at the employer’s place of business. Instead, because the customers (1) determine when the worker can access their homes, (2) bring the worker to the place(s) on their home/property where equipment was to be installed, and (3) identify problems, the customer is in control of the worksite.
Based on this interpretation of “place of business,” the Court determined that the workers did meet Prong B of the ABC Test.
Prong A — Free from Direction and Control
Analysis of Prong A of the ABC Test requires a weighing of several different factors to determine whether the workers were under the company’s control and direction. Here, while the Court agreed that there were several factors that indicated the company did exercise some control over the workers, those factors were outweighed by other factors, which demonstrated that the company did not have the right to control the means and methods of the work performed by the workers.
The factors that indicated the company exercised “some control” over the workers were:
- Workers were prohibited from subcontracting work;
- Workers were encouraged to wear apparel bearing the company name and display the logo on their vehicles;
- Workers were paid a set piece rate;
- Workers could only install equipment provided by the company; and
- The company retained the right to terminate the workers
However, the following factors indicated that the company did not exercise control and direction over the workers:
- The company did not own or operate the tools, machinery, or heavy duty vehicles required to perform the work. These were owned/provided by the workers;
- The company contracted with licensed and certified installers/technicians to perform the work and these workers routinely performed such services for their own businesses or through self-employment;
- The contracts between the company and the workers provided that the workers exercised independent judgment and control in the execution of any work they performed for the company;
- The company did not supervise or inspect the work performed by the workers, instead, the workers were monitored by the customers;
- The workers were free to accept or reject any assignment offered to them without adverse consequences;
- The company did not provide the workers with an employee handbook;
- The company did not pay for the workers’ training or require any specific training relating to its products;
- While the workers were encouraged to wear apparel bearing the company name and display the logo on their vehicles – this was not required;
- While the workers were paid a set piece rate, the workers submitted invoices to the company and they could realize a profit or loss from the services rendered;
- The workers paid for their own transportation.
Impact on Connecticut Employers
Employers should consider reevaluating the classification of their independent contractors in light of this decision. When doing this analysis, keep in mind that worker classification is an individualized determination based on the specific facts of each worker relationship. While this case may provide helpful guidance for employers in determining whether an independent contractor is properly classified, the individual circumstances of a specific worker relationship will govern.