In the context of Unemployment Compensation Insurance in Vermont, the term “employee” is not defined. The Department of Labor (“The Department”) simply refers to an “employee” as an individual who is entitled to be covered for unemployment purposes. Therefore, the distinction between employee and independent contractor is unclear, and contractors need to be cautious of the distinction and its implications.
In Vermont, it is the nature of the relationship between an employer and an individual that determines if they are an “employee” or an “independent contractor” for purposes of Unemployment Compensation Insurance. Accordingly, The Department presumes that an employment relationship exists between an employer and an individual hired and requires unemployment insurance coverage unless and until the employer is able to demonstrate each and every criteria of the three part so-called “ABC Test.”
The “ABC Test” three-part factors must all be met for an individual to be deemed an independent contractor under Department analysis:
- A. The individual has been and will continue to be free from control or direction over the performance of their services, both under contract of service and in fact;
- B. Services performed are either outside the usual course of business for which the service is performed, or service is performed outside all places of business of the enterprise for which the service is performed; and,
- C. The individual is customarily engaged in an independently established trade, occupation, profession or business.
It is important to note that The Internal Revenue Service (IRS) uses a separate, less comprehensive test to determine if an individual is an employee or an independent contractor; and The Department follows Vermont law which uses the “ABC Test”. Therefore, It is likely that under Vermont law an individual may be considered an employee, whereas under the IRS test, the individual would be considered an individual contractor.
The experienced attorneys at Bergeron, Paradis & Fitzpatrick, LLP, can provide insight and direction into this complicated distinction, and represent your company’s interests if The Department of Labor is investigating your business for misclassified workers.