The Evolving Definition of “Employer”

With the advent of the internet and the fallout of the Great Recession, many businesses across industries have changed the nature of their workforce. As companies cut expenses, more and more work is being outsourced to independent contractors. This trend is starting to be felt in employment discrimination law where the definition of who an employer is and who an employee is adapts to the changing landscape. Two recent cases stand as bellwethers for where the law may be heading.

The first is a decision by the National Labor Relations Board released last week. The case involved Browning-Ferris Industries of California, a company that used the services of an outside firm for many of its staffing needs. Before this decision, Browning-Ferris would not have counted as a “joint-employer” under the NLRB’s definition because it did not exercise “direct control” over working conditions. In other words, because Browning-Ferris did not hire and assign workers tasks directly, it was immune from discrimination and harassment suits.

That all changed with the new decision.  Now a company will meet the requirements of a joint-employer if both the outsourcing company and the staffing company are: (1) both employers within the meaning of the common law and (2) they share control, directly or indirectly, of the essential terms and conditions of employment. Any company that does so now has to fully comply with all employment and labor laws in their dealings with workers.

The second case is Standard Oil of Connecticut, Inc. v. Administrator, Unemployment Compensation Act. This case was recently transferred to the Connecticut Supreme Court and involves the CT Department of Labor’s definition of independent contractor as applied to Standard Oil’s servicemen and women. DOL currently applies the “ABC Test” to determine whether a worker is an independent contractor or not. The test focuses on three factors: (1) whether the individual is free from direction and control in both fact and contract, (2) if the individual’s services are performed outside the usual course of business and outside the employer’s place of business, and (3) whether the individual is engaged in a customarily independent trade.

What are really at issue in the case are the first two prongs. The matter of how much control Standard Oil exercised over the technicians involves balancing various factors such as equipment ownership, remuneration, and control of work schedules, among other things. While important, the more interesting matter is going to be the second prong focused on the place of business. If the court decides that working in the field on site visits counts as being at an employer’s place of business, many workers now considered independent contractors could become reclassified as employees for the purposes of the CT DOL.

Unlike in California where the NLRB decision came out, Connecticut anti-discrimination law has a “threshold remuneration” test for the definition of an employee. This requires that an individual seeking classification as an employee demonstrate they receive significant benefits from the employer (monetary or otherwise) before courts can get to the question of control over them. As the legal landscape changes in other areas of employment and labor law however, it may not be long before independent contractors qualify as employees under Connecticut’s discrimination law.