By Ronald Miller, J.D.
The judgment of a trial court that installer/technicians were employees under the ABC test set forth in the Connecticut Unemployment Compensation Act was reversed by a divided Connecticut Supreme Court. As an initial matter, the state high court concluded that Standard Oil satisfied its burden of showing the installers/technicians were free from its control and direction under part A of the ABC test. Further, it 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 employees and without its supervision. Chief Justice Rogers, joined by Justices Palmer and McDonald filed a separate dissenting opinion (Standard Oil of Connecticut, Inc. v. Administrator, Unemployment Compensation Act
, March 7, 2016, officially released March 15, 2016, Zarella, P.).
Standard Oil is in the business of delivering home heating oil, and also provides alarm systems to residential customers. It used the services of individuals to service and install heating and air conditioner systems or install security systems (installer/technicians). In June 2008, the Connecticut Department of Labor conducted an audit of the company. It determined that the installer/technicians were misclassified as independent contractors rather than employees. It further indicated that Standard Oil owed $41,501.38 in unemployment contribution taxes.
The CDOL determination was upheld following an administrative hearing by an appeals referee. Standard Oil appealed to the Employment Security Board of Review, which denied in part the company’s motion to correct findings of fact made by the appeals referee and concluded that the workers at issue were employees under the test set forth in Section 31-222 (a) (1) (B) (ii) (the ABC test) for determining whether the installers/technicians were independent contractors, and also determined that Standard Oil had failed to demonstrate the installers/technicians were independent contractors. A trial court rejected Standard Oil’s appeal of the board’s findings and upheld the board’s determination that Standard Oil had failed to satisfy parts A and B of the ABC test. This appeal followed.
On appeal, Standard Oil claimed the trial court applied the wrong legal standard in reviewing its motion to correct the findings of fact. It also claimed the trial court improperly concluded that the installer/technicians were its employees under Section 31-222 (a) (1) (B) (ii) of the Unemployment Compensation Act because they were subject to Standard Oil’s control and direction in the performance of their services and they performed their services at the company’s places of business.
Under Section 31-222 (a) (1) (B) (ii), service performed by an individual is deemed to be employment irrespective of whether the common law relationship of master and servant exists, unless it is shown to the satisfaction of the administrator that (I) such individual has been and will continue to be free from control and direction in connection with the performance of such service, both under his contract for the performance of service and in fact; and (II) such service is performed either outside the usual course of the business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed; and (III) such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. A party claiming an exception to the rule that the service is employment must show that all three prongs of the test have been satisfied.
Control of employer.
Here, the Connecticut high court concluded that the trial court improperly determined that the installers/technicians were Standard Oil’s employees under the first two prongs of the ABC test. The court first began by examining Standard Oil’s claim that the installers/technicians were free from its control and direction under part A of the ABC test. Although Standard Oil did not permit installers/technicians to subcontract work, encouraged them to wear apparel bearing its name, paid them a set piece rate, they could only install equipment provided by the company, and it retained the right to terminate them, certain factors indicated that the company did not exercise control and direction over the installers/technicians. For instance, they signed independent contractor agreements; they were free to accept or reject assignments; they could determine the days on which they would work; they were not supervised; they were licensed and certified; they could hire employees to assist them; they could realize a profit or loss; and they provided their own tools, transportation and insurance.
Thus, the court determined that the board’s modified findings of fact did not reasonably support its conclusion that Standard Oil had the right to control the means and methods of the work performed by the installers/technicians. It did not own or operate the tools, machinery, or heavy duty vehicles required for installation of heating systems, tank removal, or home alarm installation. Rather, it contracted with licensed and certified installers/technicians to perform such services in accordance with state law, and who routinely performed such services for their own businesses or through self-employment. Further, the contracts between the parties provided that the installers/technicians exercised independent judgment and control in the execution of any work they performed for Standard Oil. Moreover, consistent with that contract, Standard Oil did not supervise or inspect the work of the installers/technicians.
In addition, the installers/technicians were free to accept or reject any assignment offered to them without adverse consequences. They could hire employees to assist them. On matters of training and attire, Standard Oil did not provide them with an employee handbook and did not pay for their training or require any specific training relating to its products. Installers were encouraged, but not required, to display Standard Oil’s name on their clothing and utility vehicles. The installers/technicians received compensation on the basis of a set rate per piece of work, could realize a profit or loss from the services rendered, and paid for their own transportation. Accordingly, the state high court concluded that Standard Oil satisfied its burden of showing that the installers/technicians were free from its control and direction under part A of the ABC test.
Places of business.
Standard Oil next contended that the trial court improperly interpreted the term ‘‘places of business’’ under part B of the ABC test. The state high court agreed, concluding that the meaning of ‘‘places of business’’ should not be extended to the homes in which the installers/technicians worked. Rather, the court concluded that the homes of Standard Oil’s customers, unlike its business offices, warehouses, and other facilities were under the homeowner’s control. Regardless of whether Standard Oil ‘‘conducted an integral part of its business in customers’ homes,’’ it was the homeowners who (1) determined when access to their homes was convenient, (2) brought the installers/technicians to locations inside their homes and elsewhere on their property where equipment was to be installed, and (3) identified problems with the installation process or with the newly installed equipment during the warranty period. Accordingly, the homes of customers were not “places of business” under part B of the ABC test.
Chief Justice Palmer dissented from the majority’s view arguing that its interpretation of the test set forth in Sec. 31-222 (a) (1) (B) (ii) effectively rewrites that test and fails to give one part of it the full significance that clearly is required. Specifically, he disagreed with the majority’s determination that the trial court and board of review improperly concluded that Standard Oil was required to make contributions to the unemployment insurance fund because it failed to prove all three parts of the ABC test as is necessary for a putative employer to be exempt from such contributions. In the dissent’s view, Standard Oil clearly failed to prove either subpart of part B of that test. Because the failure to prove any part of the ABC test is dispositive, the dissent did not reach the question of whether the Standard Oil also failed to prove part A of the test.