The risk of liability for misclassifying employees as independent contractors has been high due to federal and state enforcement initiatives, information-sharing arrangements, and complex legal tests for determining whether a worker is an independent contractor. In most situations, government agencies (and the courts) tend to find that workers are employees. However, in a surprising reversal of the trend of annulling independent contractor relationships, the Connecticut Supreme Court, in the case of Standard Oil of Connecticut, Inc. v. Administrator, Unemployment Compensation Act (March 15, 2016), ruled that certain technicians who install and service heating, cooling, and security systems were independent contractors, not employees. As a result of this ruling, Standard Oil was not required to pay unemployment contribution taxes for those workers.
The statutory ABC test for determining independent contractors under the Connecticut Unemployment Compensation Act requires that an employer prove (A) that the worker “has been and will continue to be free from control and direction in connection with the performance of such service,” (B) that the worker’s service “is performed either outside the usual course of the business for which the service is performed or is performed outside all of the places of business of the enterprise,” and (C) that the worker “is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.”1 The issue in this case concerned ABC test parts (A) and (B), as there was no dispute that these technicians, when not performing services as independent contractors, were employees of independently established businesses performing the same services.
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