Connecticut Independent Contractor Rules
- By Your mom
- •
- 05 Jul, 2012
Overview
The misclassification of employees as independent contractors has garnered a great deal
of regulatory interest in Connecticut. The Connecticut Department of Labor (“CTDOL”) has
recently taken a more aggressive approach toward misclassifications by visiting worksites and
conducting audits, without waiting for a complaint to be filed.
The CTDOL also signed an agreement on September 19, 2011 with the U.S. Department
of Labor, including its Wage and Hour Division, Occupational Safety and Health
Administration, and Employee Benefits Security Administration (collectively “DOL”) permitting
the two departments to work more closely together, cross-report violations, and coordinate
enforcement efforts.
Given the penalties involved, employers are strongly encouraged to make sure any person
treated as an independent contractor meets all the various federal and state tests used in making
such determinations.
ABC Test Used by the Connecticut Department of Labor
The CTDOL has jurisdiction over Connecticut’s wage and hour, and unemployment
compensation statutes. Employees are covered by these statutes while independent contractors
are not. Therefore, the first step in any investigation often requires the CTDOL to determine if a
worker is an “employee.” In doing so, the CTDOL uses the ABC Test. Conn. Gen. Stat. § 31-
222(a)(1)(B)(ii). See also, Tianti, v. Comm. Of Labor Rel., 231 Conn. 690 (1995) (ABC test
applies to wage statutes); and Latimer v. Admin., Unemployment Compensation Act, 216 Conn.
237 (1990) (ABC test applies to unemployment compensation claims). For a worker to be
considered an independent contractor, the worker must satisfy all three parts of the test; A, B and
C. See Connecticut ABC Test Analysis.
Under part A of the test, the worker must be free from direction and control in the
performance of the service, both under the contract of hire and in fact. This is essentially the
Darden common law right to control test, which is discussed more fully below. To measure
compliance with part A, the CTDOL relies on the same 20 factor analysis used by the IRS. See
the Federal section for more information on the IRS 20 factor test. These 20 factors are designed
as guides, and the degree of importance of each factor varies depending on the specific situation.
In some situations, certain factors may be irrelevant. Further guidance provided by CTDOL
states that part A will not be met if the person hiring the worker retains the right to exercise
direction and control, even if the right is not used.
In addition, to meeting part A, part B of the test states that an employer claiming the
worker is an independent contractor must prove EITHER the worker’s services are performed
outside the usual course of the employer’s business, OR outside all of the employer’s places of
business.
Finally, the employer must prove under part C of the test, that the worker is customarily
engaged in an independently established trade, occupation, profession or business of the same
nature as the service being provided. An individual who forms a business in response to an offer
of work as an independent contractor will not be considered to be customarily engaged or
independently established under Part C. According to additional guidance from the CTDOL,
factors that tend to favor independent contractor status under part C include, a business license,
business liability insurance, letterhead and cards, advertisements, client references, state sales tax
registration, and a federal ID number.
In essence, the ABC test combines the Darden common law right to control test,
measured by the IRS 20 factor test, with two additional elements, parts B and C, and is therefore
a more difficult test to pass. By passing the ABC test, the worker should automatically pass both
the Darden right to control test and the IRS 20 factor test; however, since different agencies will
assess compliance it is possible they may come to different conclusions with regard to passage of
each test.
Right to Control Test Used by the Connecticut Workers’ Compensation Commission
The Connecticut Workers Compensation Commission uses a right to control test when
determining worker status under the Connecticut Workers’ Compensation Act. Hanson v.
Transportation General, Inc., 245 Conn. 613 (1998). While similar to the Darden common law
right to control test discussed below, the criteria is stated somewhat differently. Specifically,
“[o]ne is an employee of another when he renders a service for the other and when what he
agrees to do, or is directed to do, is subject to the will of the other in the mode and manner in
which the service is to be done and in the means to be employed in its accomplishment as well as
in the result to be attained.” Kaliszewski v. Weathermaster Alsco Corp., 148 Conn. 624, 629
(1961). An independent contractor, on the other hand, “is one who, exercising an independent
employment, contracts to do a piece of work according to his own methods and without being
subject to the control of his employer, except as to the result of his work.” Chute v. Mobil
Shipping & Transp. Co., 32 Conn. App. 16 (1993). The key factor in establishing employee
status is thus the employer’s right to control how and when the employee’s work is done. Carrier
v. Voisine, 2093 CRB-3-94-7 (decided Jan. 11, 1996).
IRS Twenty Factor Test Used by the Connecticut Department of Revenue Services
The Connecticut Department of Revenue Services, which oversees state tax matters,
including withholding issues, relies on the IRS 20 factor test in determining employment status.
Specifically, “the provisions of the Internal Revenue Code and its applicable regulations with
respect to the meaning of terms such as ‘employer,’ ‘employee,’ ‘payroll period,’ and ‘wages,’
have the same meaning for Connecticut income tax purposes, except as otherwise specifically
provided in Part IX, or where such federal definitions are clearly inconsistent with and
inapplicable to the provisions of such Part.” Conn. Agencies Regs. § 12-701(b)-1(12).
Darden Common Law Right to Control Test Used for Federal Discrimination Laws
The Second Circuit Court of Appeals, which has jurisdiction in Connecticut, has stated
that the Darden common law right to control test shall be used to determine whether a worker is
an independent contractor or employee for purposes of federal discrimination law. Frankel v.
Bally, Inc., 987 F.2d 86 (2d Cir. 1993). Employees are covered by those laws. Independent
contractors are not.
In reaching its decision, the Second Circuit relied on the U.S. Supreme Court’s decision
in Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), which found the common
law right to control test governed the definition of “employee” in ERISA cases. Finding the
statutory language in ERISA similar to that in Title VII and ADEA, the Second Circuit held the
right to control test applies equally to those discrimination laws.
The test outlined in Darden states, “[i]n determining whether a hired party is an
employee under the general common law of agency, we consider the hiring party’s right to
control the manner and means by which the product is accomplished. Among the other factors
relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the
location of the work; the duration of the relationship between the parties; whether the hiring
party has the right to assign additional projects to the hired party; the extent of the hired party’s
discretion over when and how long to work; the method of payment; the hired party’s role in
hiring and paying assistants; whether the work is part of the regular business of the hiring party;
whether the hiring party is in business; the provision of employee benefits; and the tax treatment
of the hired party.”
Darden Common Law Right to Control Test Likely Used for State Discrimination Laws
The Connecticut Fair Employment Practices Act (“CFEPA”) defines “employee” as “any
person employed by an employer, but shall not include any individual employed by such
individual's parents, spouse or child, or in the domestic service of any person,” Conn. Gen. Stat.
§46a-51(9).
At the present time, there are no cases that provide guidance on which test to use to
determine employment status under CFEPA. In other instances, when left to interpret
ambiguous terms, like “employee,” without state judicial guidance, Connecticut courts have
generally followed the Second Circuit’s lead. Craine v. Trinity College, 259 Conn. 625, 637 n.6
(2002). Therefore, Connecticut employers should use the Darden common law right to control
test discussed above in determining employment status under CFEPA, until more definitive
direction is available.
The misclassification of employees as independent contractors has garnered a great deal
of regulatory interest in Connecticut. The Connecticut Department of Labor (“CTDOL”) has
recently taken a more aggressive approach toward misclassifications by visiting worksites and
conducting audits, without waiting for a complaint to be filed.
The CTDOL also signed an agreement on September 19, 2011 with the U.S. Department
of Labor, including its Wage and Hour Division, Occupational Safety and Health
Administration, and Employee Benefits Security Administration (collectively “DOL”) permitting
the two departments to work more closely together, cross-report violations, and coordinate
enforcement efforts.
Given the penalties involved, employers are strongly encouraged to make sure any person
treated as an independent contractor meets all the various federal and state tests used in making
such determinations.
ABC Test Used by the Connecticut Department of Labor
The CTDOL has jurisdiction over Connecticut’s wage and hour, and unemployment
compensation statutes. Employees are covered by these statutes while independent contractors
are not. Therefore, the first step in any investigation often requires the CTDOL to determine if a
worker is an “employee.” In doing so, the CTDOL uses the ABC Test. Conn. Gen. Stat. § 31-
222(a)(1)(B)(ii). See also, Tianti, v. Comm. Of Labor Rel., 231 Conn. 690 (1995) (ABC test
applies to wage statutes); and Latimer v. Admin., Unemployment Compensation Act, 216 Conn.
237 (1990) (ABC test applies to unemployment compensation claims). For a worker to be
considered an independent contractor, the worker must satisfy all three parts of the test; A, B and
C. See Connecticut ABC Test Analysis.
Under part A of the test, the worker must be free from direction and control in the
performance of the service, both under the contract of hire and in fact. This is essentially the
Darden common law right to control test, which is discussed more fully below. To measure
compliance with part A, the CTDOL relies on the same 20 factor analysis used by the IRS. See
the Federal section for more information on the IRS 20 factor test. These 20 factors are designed
as guides, and the degree of importance of each factor varies depending on the specific situation.
In some situations, certain factors may be irrelevant. Further guidance provided by CTDOL
states that part A will not be met if the person hiring the worker retains the right to exercise
direction and control, even if the right is not used.
In addition, to meeting part A, part B of the test states that an employer claiming the
worker is an independent contractor must prove EITHER the worker’s services are performed
outside the usual course of the employer’s business, OR outside all of the employer’s places of
business.
Finally, the employer must prove under part C of the test, that the worker is customarily
engaged in an independently established trade, occupation, profession or business of the same
nature as the service being provided. An individual who forms a business in response to an offer
of work as an independent contractor will not be considered to be customarily engaged or
independently established under Part C. According to additional guidance from the CTDOL,
factors that tend to favor independent contractor status under part C include, a business license,
business liability insurance, letterhead and cards, advertisements, client references, state sales tax
registration, and a federal ID number.
In essence, the ABC test combines the Darden common law right to control test,
measured by the IRS 20 factor test, with two additional elements, parts B and C, and is therefore
a more difficult test to pass. By passing the ABC test, the worker should automatically pass both
the Darden right to control test and the IRS 20 factor test; however, since different agencies will
assess compliance it is possible they may come to different conclusions with regard to passage of
each test.
Right to Control Test Used by the Connecticut Workers’ Compensation Commission
The Connecticut Workers Compensation Commission uses a right to control test when
determining worker status under the Connecticut Workers’ Compensation Act. Hanson v.
Transportation General, Inc., 245 Conn. 613 (1998). While similar to the Darden common law
right to control test discussed below, the criteria is stated somewhat differently. Specifically,
“[o]ne is an employee of another when he renders a service for the other and when what he
agrees to do, or is directed to do, is subject to the will of the other in the mode and manner in
which the service is to be done and in the means to be employed in its accomplishment as well as
in the result to be attained.” Kaliszewski v. Weathermaster Alsco Corp., 148 Conn. 624, 629
(1961). An independent contractor, on the other hand, “is one who, exercising an independent
employment, contracts to do a piece of work according to his own methods and without being
subject to the control of his employer, except as to the result of his work.” Chute v. Mobil
Shipping & Transp. Co., 32 Conn. App. 16 (1993). The key factor in establishing employee
status is thus the employer’s right to control how and when the employee’s work is done. Carrier
v. Voisine, 2093 CRB-3-94-7 (decided Jan. 11, 1996).
IRS Twenty Factor Test Used by the Connecticut Department of Revenue Services
The Connecticut Department of Revenue Services, which oversees state tax matters,
including withholding issues, relies on the IRS 20 factor test in determining employment status.
Specifically, “the provisions of the Internal Revenue Code and its applicable regulations with
respect to the meaning of terms such as ‘employer,’ ‘employee,’ ‘payroll period,’ and ‘wages,’
have the same meaning for Connecticut income tax purposes, except as otherwise specifically
provided in Part IX, or where such federal definitions are clearly inconsistent with and
inapplicable to the provisions of such Part.” Conn. Agencies Regs. § 12-701(b)-1(12).
Darden Common Law Right to Control Test Used for Federal Discrimination Laws
The Second Circuit Court of Appeals, which has jurisdiction in Connecticut, has stated
that the Darden common law right to control test shall be used to determine whether a worker is
an independent contractor or employee for purposes of federal discrimination law. Frankel v.
Bally, Inc., 987 F.2d 86 (2d Cir. 1993). Employees are covered by those laws. Independent
contractors are not.
In reaching its decision, the Second Circuit relied on the U.S. Supreme Court’s decision
in Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), which found the common
law right to control test governed the definition of “employee” in ERISA cases. Finding the
statutory language in ERISA similar to that in Title VII and ADEA, the Second Circuit held the
right to control test applies equally to those discrimination laws.
The test outlined in Darden states, “[i]n determining whether a hired party is an
employee under the general common law of agency, we consider the hiring party’s right to
control the manner and means by which the product is accomplished. Among the other factors
relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the
location of the work; the duration of the relationship between the parties; whether the hiring
party has the right to assign additional projects to the hired party; the extent of the hired party’s
discretion over when and how long to work; the method of payment; the hired party’s role in
hiring and paying assistants; whether the work is part of the regular business of the hiring party;
whether the hiring party is in business; the provision of employee benefits; and the tax treatment
of the hired party.”
Darden Common Law Right to Control Test Likely Used for State Discrimination Laws
The Connecticut Fair Employment Practices Act (“CFEPA”) defines “employee” as “any
person employed by an employer, but shall not include any individual employed by such
individual's parents, spouse or child, or in the domestic service of any person,” Conn. Gen. Stat.
§46a-51(9).
At the present time, there are no cases that provide guidance on which test to use to
determine employment status under CFEPA. In other instances, when left to interpret
ambiguous terms, like “employee,” without state judicial guidance, Connecticut courts have
generally followed the Second Circuit’s lead. Craine v. Trinity College, 259 Conn. 625, 637 n.6
(2002). Therefore, Connecticut employers should use the Darden common law right to control
test discussed above in determining employment status under CFEPA, until more definitive
direction is available.