Thursday, April 28, 2011

Status as “Franchisee” Not Relevant to Coverage Under Unemployment Compensation Law

This posting was written by Pete Reap, Editor of CCH Business Franchise Guide.

Whether a “franchise” agreement existed between a concrete artisan and a dealer under the Connecticut Franchises Act was irrelevant to the issue of whether the dealer was an “employee” of the artisan under the Connecticut Unemployment Compensation Act, according to a Connecticut appellate court.

A trial court decision—upholding a ruling by the Connecticut Employment Security Board of Review that the dealer had been the artisan’s employee—was affirmed.

The dispute began when the artisan terminated its agreement with the dealer and the dealer filed a claim for benefits under the Unemployment Compensation Act. The sole question before the Board of Review was whether the dealer was an employee for unemployment compensation purposes.

To answer that question, the Board applied the “ABC test” set out in the Unemployment Compensation Act. The test provides that individuals who perform services for others are presumed to be employees unless:

(A) The individuals have been and will continue to be free from control in connection with the performance of such services;

(B) Such services are performed either outside the usual course of the business or outside of all the places of the business; or

(C) The individuals are customarily engaged in an independent established trade, occupation, profession, or business of the same nature as that involved in the services performed.
In this case, the Board determined that the artisan failed to satisfy all three prongs.

The artisan argued on appeal that, had the Board applied the franchise statute to the facts, it would have found that (1) a franchise agreement existed between the parties and (2) the ABC test would have been inapplicable.

Specifically, the artisan contended that a finding that a franchise agreement existed between the parties exempted the relationship from the purview of the Unemployment Compensation Act.

The artisan neither cited, not did the court’s research reveal, any legal support for this argument, the court observed. There was nothing in the Act that elucidated the question of whether the existence of a franchise agreement precluded the application of the ABC test.

The Unemployment Compensation Act made no express exemption for franchises, and no such exemption could be implied, particularly when the legislature created numerous exemptions from coverage, the court decided. If the legislature had intended to create an exemption, it would have done so expressly.

The decision is Jason Robert’s, Inc. v. Administrator, Unemployment Compensation Act, CCH Business Franchise Guide ¶14,577.

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