Fees & Services
Worker Misclassification
Worker classification analysis under Connecticut and federal standards.
Classification Standards
Employment classification determines whether a worker is an employee or an independent contractor. That determination controls whether the worker is entitled to minimum wage, overtime, unemployment compensation, workers' compensation, paid sick leave, and other statutory protections, and whether the business owes payroll taxes, benefits contributions, and other employer obligations on that worker's behalf.
Connecticut does not apply a single uniform test. The applicable standard depends on the statute at issue.
For unemployment compensation purposes, Connecticut applies the ABC test under CGS § 31-222(a)(1)(B)(ii). A worker is presumed to be an employee unless the employer establishes all three of the following: that the worker is free from the employer's direction and control in fact and under the contract; that the work is performed outside the usual course of the employer's business or outside all of the employer's places of business; and that the worker is customarily engaged in an independently established trade or business of the same nature. All three parts must be satisfied. Failing any one means the worker is an employee for unemployment purposes.
For federal tax purposes, the IRS applies a 20-factor common law test examining behavioral control, financial control, and the type of relationship between the parties. The factors examine issues including who controls how the work is performed, whether the worker provides services to multiple clients, how the worker is paid, and whether the relationship is permanent. See IRS Rev. Rul. 87-41.
Misclassification is enforced by the Connecticut Department of Labor, the IRS, and the Department of Labor's Wage and Hour Division.
Connecticut ABC Test: All Three Parts Required
For unemployment compensation purposes, a worker is presumed to be an employee unless the employer establishes all three ABC test factors under CGS § 31-222(a)(1)(B)(ii). Failing any one means the worker is an employee for unemployment purposes. The employer bears the burden of proof on each element.
Why Classification Disputes Matter
When classification is disputed, exposure is concrete on both sides: back taxes and lost benefits for workers; back wages, penalties, and tax liability for employers.
For employees, misclassification results in loss of wages, employment benefits, unemployment insurance contributions, paid leave entitlements, and state law protections. Misclassified workers are also required to pay the full self-employment tax on their earnings (15.3%, covering both the employee and employer shares of Social Security and Medicare) rather than splitting FICA with an employer.
For employers, a misclassification finding can result in liability for all of the above plus the worker's share of taxes that should have been withheld, with additional penalties for failure to correct the misclassification promptly after receiving notice. Under Connecticut law, employers who fail to properly classify employees may be subject to civil penalties of up to $300 per day per violation, back wages, and interest under CGS § 31-69a. Federal exposure includes back FICA taxes, failure-to-deposit penalties, and interest under 26 U.S.C. § 3102 and § 3111. The longer a misclassification continues unaddressed after the employer receives notice, the larger the penalty exposure.
For Employers
If your business uses independent contractors, I can assess whether your classification is defensible under the applicable Connecticut and federal standards and advise on the steps necessary to reduce your exposure. A misclassification finding does not require bad intent; it requires only that the worker does not satisfy the applicable test.
For Employees
If you are paid as a contractor but treated like an employee, classification affects minimum wage, overtime, unemployment, sick leave, workers' compensation, and payroll taxes. Misclassified workers also pay the full self-employment tax instead of splitting FICA with an employer.
I review your role against the Connecticut ABC test and federal standards, advise on whether reclassification is viable, and draft demands for back wages and benefits denied during the misclassified period. I do not take every matter; if the arrangement satisfies the applicable test, I say so.
Scope of Service
- Classification analysis for specific worker relationships under Connecticut and federal standards
- Review of independent contractor agreements
- Advising employers on restructuring arrangements to reduce misclassification risk
- Advising employees on reclassification demands and retroactive damages
- Response to Connecticut DOL and IRS classification inquiries