Attorney at Law
A worker is not an employee when they are an independent contractor, free from direction and control and meets the applicable legal tests such as Connecticut’s ABC test. Independent contractors set their own way and time to accomplish the work and do not have taxes withheld, do not participate in employee benefit plans, are not covered by Workers’ Compensation or Unemployment Compensation, and are not protected by workplace discrimination or overtime laws.
The distinction between employees and independent contractors is one of the most commonly misunderstood issues in employment law — and the consequences of getting it wrong can be significant for both workers and the organizations that hire them.
What Is an Independent Contractor?
Independent contractors agree to provide a specific service for a set price, then complete the work on their own terms. They are, in essence, their own bosses. This model has grown considerably in recent years, often referred to as the “gig economy,” and it appeals to both workers seeking flexibility and businesses looking to streamline costs.
Key Differences from Employees
Unlike employees, independent contractors:
- Do not have taxes withheld from their pay
- Are not covered by Workers’ Compensation insurance
- Are not eligible for Unemployment Compensation benefits
- Do not participate in employee benefit plans
- Are not protected by workplace discrimination or retaliation laws
- Are not entitled to overtime pay
Worker Classification Isn’t a Choice — It’s a Legal Determination
A common misconception is that worker status can simply be negotiated between the parties. It cannot. The law defines whether a relationship is employment or independent contracting — and misclassifying a worker as a contractor when they legally qualify as an employee can carry serious consequences. Importantly, the reverse is never an issue: treating a contractor like an employee creates no legal liability.
How Courts Determine Contractor Status
Different laws apply different tests, but a central factor in most analyses is control — specifically, who controls how, when, and where the work is performed. A true independent contractor sets their own schedule and methods to accomplish an agreed task. An employee, by contrast, typically follows the employer’s direction on how the work is performed.
Connecticut’s ABC Test
Under Connecticut’s Unemployment Compensation law, worker classification is governed by the “ABC test.” All three criteria must be satisfied for a worker to qualify as an independent contractor:
- A. The individual must be free from direction and control in performing the service, both under their contract and in practice.
- B. The service must be performed either outside the employer’s usual course of business or outside all of the employer’s places of business.
- C. The individual must be customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the service performed.
n practice, this standard largely limits independent contractor status to people who operate their own businesses — not workers who perform the same tasks as a company’s regular employees.
The Risks of Misclassification
Employers who misclassify employees as independent contractors may face:
- Fines and interest on unpaid payroll taxes
- Liability for undelivered employee benefits
- Back pay for unpaid minimum wages and overtime
- Additional civil and regulatory penalties
If you’re unsure whether a worker in your organization is properly classified, speaking with an employment attorney can help you assess your exposure and avoid costly mistakes.