The Entrepreneurial Mind

I wrote a post a few months back about a case involving an attempt to tighten the independent contractor statutes that was coming before the Vermont Supreme Court. "I'm not in Vermont," you say? Well you should still pay attention because these things can take on a life of their own and can have an impact on all of us sooner or later (can you say "Kelo"?)

Next Tuesday, October 10, the Vermont Supreme Court will hear oral arguments for a case that will determine the fate of independent contractors in Vermont, who in the present case are individuals that knit patterns for a local apparel firm, Fleece on Earth.

Bonny Dutton, owner of Fleece on Earth in North Chittenden, Vermont, contracts with individuals throughout the state to knit patterns for her shop. Many of the knitters are retirees and all work on their own schedules, use their own tools, have no deadlines and do their knitting from whatever location they choose.

Dutton considers these knitters to be independent contractors. But the Vermont Employment Security Board has declared that these individuals are Dutton’s employees, and is demanding that Dutton pay back taxes and unemployment insurance for these workers.

The Vermont law governing independent contractors establishes a three-part "ABC" test for determining whether workers are truly independent contractors or employees. The law requires, A -- workers must be free from control or direction from the contractor; B -- the service provided by an independent contractor must be outside the usual course of business; and C -- the worker is generally engaged in some sort of independent occupation.

The Vermont State Employment Board argues that because Dutton reserves the right to accept or decline products produced by the knitters, this demonstrates control or direction by Dutton, thereby violating part "A" of the test. The knitters, most of whom have never even been to Dutton's store, consider themselves to be independent workers and do not believe Dutton acts as an employer. This case would have wider consequences than simply knitters. For example, all of you techie folks out there who use independent contractors for web development might be at risk for violating the law under this interpretation.

"The 'ABC' test adopted by Vermont is intended to clarify who is and who is not an independent contractor. It was not intended to eliminate the status of these workers all together. Dutton does not control or direct the knitters’ work; she simply says she will accept garments that meet certain requirements. As a contractor she has the right to decide what products she will pay for," said Karen Harned, executive director of NFIB's Legal Foundation. "Accepting the board's argument would essentially eliminate the status of independent contractors in Vermont. Who contracts out for something but doesn't specify what the end product should be?"

And if the court rules against Fleece on Earth, the case could become precedent for other decisions down the line. Stay tuned....