On March 7, 2016, the Connecticut Supreme Court released its much-anticipated (and long-awaited) decision in Standard Oil v. Administrator, Unemployment Compensation – one of the most significant employment law decisions in years.
The Supreme Court ruled in favor of Standard Oil of Connecticut, Inc.’s challenge to the determination by the Administrator of the Connecticut Unemployment Compensation Act that Standard Oil had misclassified installer and technicians as independent contractors instead of employees. This decision results in a victory not only for Standard Oil, but for other businesses that use independent contractors to visit and service customers’ sites.
The decision addresses the first two prongs of the ABC test—the test in Connecticut, and in other states, to determine whether a worker is an employee or an independent contractor.
As to the first prong, the Supreme Court found that Standard Oil had satisfied its burden of showing that the installers/technicians were free from its control and direction under part A of the ABC test, Connecticut General Statutes § 31-222(a)(1)(B)(ii)(I).
More importantly, and as an issue of first impression, the Supreme Court interpreted whether “places of business” under part B of the ABC test, Connecticut General Statutes § 31-222(a)(1)(B)(ii)(II), extended to the homesof Standard Oil’s customers. The Court 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’s employees and without its supervision. Rather, the homes of Standard Oil’s customers, unlike its business offices, warehouses, and other facilities, were under thehomeowners’ control. Accordingly, the homes of Standard Oil’s customers were not “places of business” under part B of the ABC test.
In rejecting a broad interpretation of “places of business,” the Supreme Court acknowledged the practical implications of such an interpretation—namely, that it would effectively convert every Connecticut household into a place of business for any company that performs services at a customer’s home, thereby profoundly limiting an employer’s ability to subcontract work.
Standard Oil is a family-owned Connecticut-based company providing home heating oil delivery and service and alarm system monitoring and service to customers in Connecticut. It employs more than 250 individuals who provide home heating oil delivery service and sell heating and cooling equipment to customers’ homes; they provide “on call” repair and emergency service 24 hours a day, seven days a week. It also engaged installers (to install heating oil and alarm systems) and technicians (to repair and service heating systems at times of peak demand), as independent contractors instead of employees.
In 2008, the Administrator of the Unemployment Compensation Act, audited Standard Oil’s payroll to determine whether it paid the correct amount of unemployment compensation taxes on its workforce. It accused Standard Oil of misclassifying the installers and technicians as independent contractors instead of employees. The Administrator reclassified them as employees, and assessed taxes and interest.
Standard Oil stood firm on its conviction that it properly classified its workforce and challenged the Administrator’s claims. It argued that it was exempt from unemployment compensation taxes on payments to the installers/technicians, and was prepared to prove, through various witness testimony and documentary evidence, that the installers/technicians were bona fide independent contractors.
Many witnesses testified and voluminous exhibits were introduced into evidence. The findings of fact suggested that Standard Oil prevailed in its burden of proof that the installers/technicians were not employees. However, the conclusion reached by the hearing referee said otherwise. Standard Oil appealed to the Board of Review. Again, it received a ruling in favor of the Administrator. It then appealed to the Superior Court. The decision there was no better. Then, during the pendency of its appeal to the Appellate Court, the Connecticut Supreme Court, on its own, transferred the case to itself.
Now, more than six years since the commencement of the audit, the Connecticut Supreme Court vindicated Standard Oil, ruling that it was right all along. The Supreme Court's opinion can be found on its website here.