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Connecticut Unemployment Law: Independent Contractors vs. Employees

Published:  March 23, 2017

It is common for employers to use independent contractors in the course of their business.  When an employer ends an independent contractor relationship, the independent contractor will occasionally file an unemployment claim alleging that they were actually an employee of the company and not an independent contractor.  To decide whether an individual is an independent contractor or employee, the State of Connecticut requires that the employer establish compliance with Connecticut General Statutes Section 31-222(a)(1)(B)(ii).  This statute is a three-part compliance assessment, and is more commonly known as the “ABC” test.  To ensure exemption from Connecticut’s unemployment tax and to be considered an independent contractor, all three parts of the “ABC” test must be met.  

Part A looks at the control which the employer exercises over the employee; essentially, the employee must be free from any direction or control from the employer during performance of the service in order to be deemed an independent contractor.

Part B states that to be considered an independent contractor, the worker’s services must be performed either: 1) Outside of the usual course of the employer’s business, or 2) Outside of each one of the employer’s places of business.

Part C looks at whether said worker is “customarily engaged” in an “independently established” trade, occupation, profession, or business of the same nature as the service which is being provided.

The Connecticut Supreme Court recently provided 10 additional factors to be used in analyzing whether an individual is an employee or independent contractor.  Those additional factors provide extra guidance when analyzing Part C.  Whether Part C is met is fully dependent on the totality of the circumstances.  A few examples of these 10 additional depending factors include: the existence of a place of business separate from that of the putative employer; whether the putative employee employs or subcontracts others; and whether the individual performs services for more than one entity.

It is up to the employers to prove each section of the three-part “ABC” test in order to establish that a person is truly an independent contractor rather than an employee for purposes of the unemployment tax statute.

If you have any questions about the “ABC” test or any of the Connecticut laws pertaining to independent contractors, please contact any of the attorneys at Royal, P.C.