Joe Guerra, president of the Soccer Club of Guilford, a nonprofit youth soccer organization, has been fighting the DOL for several years on this issue. “I have employees,” Guerra said, “and I don’t mind paying payroll taxes for them. But these are not employees.”
At issue is what is known as the ABC test that Connecticut uses to determine whether or not someone is considered an independent contractor. The test consists of questions the company or organization must answer and the answers are then reviewed by the DOL to make a determination.
The ABC test, which has been adopted by 22 states, is different from what is known as the federal “common law” test used by the IRS. Part A essentially mirrors the common law definition of independent contractor: “The worker must be free from direction and control in the performance of the service, both under the contract of hire and in fact.”
Although Guerra and the Soccer Club of Guilford had no problem passing part A of the ABC test – which is the standard used by the IRS – parts B and C were more difficult. “They said I didn’t pass C and then wouldn’t tell me why,” Guerra said.
Parts B and C of the test allow a broader interpretation of who qualifies as an employee rather than a contractor. Section B questions whether or not the worker’s services are performed outside the usual course of the employer’s business or outside of the employer’s business.
Section C says a worker “must be ‘customarily engaged’ in an ‘independently established’ trade, occupation, profession or business of the same nature as the service being provided.”
Rep. Vincent Candelora, R-North Branford, said this would amount to a “philosophical change” in the way the ABC test is conducted and could have far-reaching implications for businesses in the state.
Guerra was able to successfully argue that referees, which are assigned to games through the Connecticut Referee Program, are not employees. The club has no say in who CT Referee assigns or how they officiate the game. Multiple different referees may oversee games during a season for a particular sports organization.
Guerra was not successful, however, in convincing the DOL that clinicians are not employees. The club will occasionally put on clinics for the kids in which a coach from another town or state, or even a professional player, will come to Guilford to teach the young athletes for a day.
The clinicians sometimes require assistants, usually local high school athletes, to help with coaching the kids. According to DOL, not only would the clinician then be an employee of the organization, so would the assistants, and the organization would have to add their names to the payroll and pay taxes for them, including unemployment.
Adding an assistant to the payroll can cost the Soccer Club of Guilford $75 to pay just $10 to help during a training clinic. Guerra said it will mean less opportunity for young players to earn “a few bucks” and get involved in the coaching and training process.
The Connecticut DOL claimed that professional women’s soccer goalie and Connecticut native, Jami Kranich, of the Boston Breakers, was an employee of the Soccer Club of Guilford because she put on a training clinic for the kids. “I’m sure she would be surprised to hear that,” Guerra said.
This determination has resulted in the club doing fewer clinics or having to charge higher fees to comply with the DOL rulings.
Candelora and Rep. Sean Scanlon, D-Guilford, gathered overwhelming bipartisan support for HB 5261 during the 2016 legislative session, which would have allowed sports leagues to continue operating as they always had.
According to the Office of Legislative Research analysis of the bill “no employer-employee relationship is deemed to exist between certain operators of organized athletic activities and certain individuals employed as coaches or referees of those organized athletic activities, except such operators and individuals can mutually agree, in writing, to enter into an employer-employee relationship.”
The bill was passed in both the house and the senate but was vetoed by Gov. Dannel Malloy. The Office of Fiscal Analysis said the bill would cost the state $3 million per year in lost revenue. The analysis assumes that there are “an average of five coaches or referees are employed at each of the 2,865 active employers in sports- and recreation-related fields in the state, and that each earns at or above the $15,000 taxable wage base for the state unemployment tax.” The OFA did not cite any relevant sources in making these assumptions.
While the vetoed bill would have fixed the problem of regulatory overreach for sports leagues, it would have had no impact on other employers in the state who face similar problems.
Guerra continues to try to fight the Department of Labor’s ruling. Unfortunately, he said, appeals to the DOL’s rulings are brought before a referee in the DOL rather than another agency or independent referee. At this point, he hopes that the matter might be resolved during the next legislative session.