Attorney at Law
When she’s an independent contractor. The distinction between the two types of workers is often mistaken with potential problems for the worker and the organization receiving services.
Independent contractors strike a deal to provide a service for a given price and do the job. They are their own bosses. The simplicity of this kind of relationship has appeal for many workers and service purchasers alike. The “gig economy” is a term for the many workers who operate on an independent contractor basis.
Unlike employees, independent contractors don’t have taxes withheld from the payments they receive for their work. They don’t participate in employee benefit plans. They aren’t covered by Workers’ Compensation insurance. They aren’t eligible for Unemployment Compensation benefits. They aren’t protected by laws prohibiting workplace discrimination or retaliation or other aspects of working life. They aren’t eligible for overtime pay.
The choice between employee and independent contractor status is not simply a matter of negotiation between the worker and the entity purchasing his services. The law defines contractor status. No one ever got in trouble for treating a contractor as an employee; but treating a contractor as an employee can bring a world of trouble.
There are many different legal tests for whether a relationship is employment, depending on the statute or other law being applied. A common and crucial factor deals with the control of the ways and means of accomplishing the work. A contractor is generally free to set the way and time to accomplish the agreed task; an employee typically must follow the employer’s instructions as to where, how, and when the work is to be performed.
Under Connecticut’s Unemployment Compensation law, a three-part inquiry known as the “ABC test” amalgamates multiple factors used in other legal contexts. All three parts of the ABC test must be met for a worker to qualify as an independent contractor:
“A. The individual must be free from direction and control (work independently) in connection with the performance of the service, both under his or her contract of hire and in fact;
B. The individual’s service must be performed either outside the usual course of business of the employer or outside all the employer’s places of business and;
C. The individual must be customarily engaged in an independently established trade, occupation, profession or business of the same nature as the service performed.”
This definition largely confines independent contractor status to people who operate their own businesses of which their work is the product. Their customers are not their employers. They are not extra help to perform work also performed by their customers’ employees.
Liability for mischaracterizing employees as contractors can include fines and interest on unpaid payroll taxes, undelivered employee benefit plan payments, unpaid minimum wages and overtime, and more