February Session, 2012
Senate, March 29, 2012
The Committee on Transportation reported through SEN. MAYNARD of the 18th Dist., Chairperson of the Committee on the part of the Senate, that the bill ought to pass.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. Subdivision (5) of subsection (a) of section 31-222 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):
(5) No provision of this chapter, except section 31-254, shall apply to any of the following types of service or employment, except when voluntarily assumed, as provided in section 31-223:
(A) Service performed by an individual in the employ of his son, daughter or spouse, and service performed by a child under the age of eighteen in the employ of his father or mother;
(B) Service performed in the employ of the United States government, any other state, any town or city of any other state, or any political subdivision or instrumentality of any of them; except that, to the extent that the Congress of the United States permits states to require any instrumentalities of the United States to make contributions to an unemployment fund under a state unemployment compensation law, all of the provisions of this chapter shall be applicable to such instrumentalities and to services performed for such instrumentalities; provided, if this state is not certified for any year by the Secretary of Labor under Section 3304 of the Federal Internal Revenue Code, the contributions required of such instrumentalities with respect to such year shall be refunded by the administrator from the fund in the same manner and within the same period as is provided in sections 31-268, 31-269, 31-270 and 31-271 with respect to contributions erroneously collected;
(C) Service with respect to which unemployment compensation is payable under an unemployment compensation plan established by an Act of Congress, provided the administrator is authorized to enter into agreements with the proper agencies under such Act of Congress, to provide reciprocal treatment to individuals who have, after acquiring potential rights to benefits under this chapter, acquired rights to unemployment compensation under such Act of Congress, or who have, after acquiring potential rights to unemployment compensation under such Act of Congress, acquired rights to benefits under this chapter, and provided further, in computing benefits the administrator shall disregard all wages paid by employers who fall within the definition of "employer" in Section 1(a) of the Federal Railroad Unemployment Insurance Act;
(D) Service performed in this state or elsewhere with respect to which contributions are required and paid under an unemployment compensation law of any other state;
(E) Service not in the course of the employer's trade or business performed in any calendar quarter by an employee, unless the cash remuneration paid for such service is fifty dollars or more and such service is performed by an individual who is regularly employed by such employer to perform such service. For purposes of this subparagraph, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if (i) on each of some twenty-four days during such quarter such individual performs for such employer for some portion of the day service not in the course of the employer's trade or business; or (ii) such individual was so employed by such employer in the performance of such service during the preceding calendar quarter;
(F) Service performed in any calendar quarter in the employ of any organization exempt from income tax under Section 501(a) of the Internal Revenue Code or under Section 521 of said code excluding any organization described in Section 401(a) of said code, if the remuneration for such service is less than fifty dollars;
(G) Service performed in the employ of a school, college, or university if such service is performed (i) by a student who is enrolled and is regularly attending classes at such school, college or university, or (ii) by the spouse of such a student, if such spouse is advised at the time such spouse commences to perform such service, that (I) the employment of such spouse to perform such service is provided under a program to provide financial assistance to such student by such school, college or university, and (II) such employment will not be covered by any program of unemployment insurance;
(H) Service performed as a student nurse in the employ of a hospital or a nurses' training school chartered pursuant to state law by an individual who is enrolled and is regularly attending classes in such nurses' training school, and service performed as an intern in the employ of a hospital by an individual who has completed a four years' course in a medical school chartered or approved pursuant to state law;
(I) Service performed by an individual under the age of eighteen in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution;
(J) Service performed by an individual who is enrolled, at a nonprofit or public educational institution which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on, as a student in a full-time program, taken for credit at such institution, which combines academic instruction with work experience, if such service is an integral part of such program, and such institution has so certified to the employer, except that this subparagraph shall not apply to service performed in a program established for or on behalf of an employer or group of employers;
(K) Service performed by an individual as an insurance agent, other than an industrial life insurance agent, and service performed by an individual as a real estate salesperson, if all such service is performed for remuneration solely by way of commission;
(L) Service performed in the employ of a hospital, if such service is performed by a patient of the hospital, as defined in subsection (h) of this section;
(M) Service performed by an individual in the employ of any town, city or other political subdivision, provided such service is performed in lieu of payment of any delinquent tax payable to such town, city or other political subdivision;
(N) Service performed by an individual as an outside sales representative of a for-profit travel agency if substantially all of such service is performed outside of any travel agency premises, and all such service is performed for remuneration solely by way of commission. For purposes of this subparagraph, an "outside sales representative" means an individual whose services to a for-profit travel agency are performed under such travel agency's Airlines Reporting Corporation accreditation, or the International Airlines Travel Agent Network endorsement; [and]
(O) Service performed by the operator of an escort motor vehicle, for an oversize vehicle, overweight vehicle or a vehicle with a load traveling upon any Connecticut highway pursuant to a permit required by section 14-270, and the regulations adopted pursuant to said section, provided the following conditions are met:
(i) The service is provided by an individual operator who is engaged in the business or trade of providing such escort motor vehicle;
(ii) The operator is, and has been, free from control and direction by any other business or other person in connection with the actual performance of such services;
(iii) The operator owns his or her own vehicle, and statutorily required equipment, and exclusively employs this equipment in providing such services; and
(iv) The operator is treated as an independent contractor for all purposes, including, but not limited to, federal and state taxation, workers' compensation, choice of hours worked and choice to accept referrals from multiple entities without consequence; and
(P) Service performed in intrastate or interstate commerce by the operator of a motor carrier operating or causing to be operated on any highway in this state any qualified motor vehicle, as defined in section 12-478, provided the following conditions are met:
(i) The operator owns the motor vehicle or holds it under a bona fide lease arrangement, provided any lease arrangement, loan or loan guarantee is not with the contracting entity, with the exception of a lease arrangement with the contracting entity for the use of a substitute motor vehicle to perform services in the event that the operator's primary motor vehicle is being serviced or repaired;
(ii) The operator is responsible for substantially all of the principal operating costs of the motor vehicle, including, but not limited to, maintenance, fuel, repairs, supplies, vehicle insurance and personal expenses, provided the operator may be paid by the contracting entity for operating costs directly related to services rendered by the operator, including, but not limited to, tolls, permits, communication charges and loading fees;
(iii) The operator is responsible for supplying the necessary services to operate the motor vehicle;
(iv) The operator's compensation is based on factors related to the work performed, including, but not limited to, mileage-based rates, a percentage of any schedule of rates, or by the hours or time expended in relation to actual performance of the contracted-for services;
(v) The operator substantially controls the means and manner of performing services, which shall be evidenced by doing so in conformance with all state and federal requirements and specifications of the shipper; and
(vi) The operating agreement includes provisions that meet the conditions in clauses (i) to (v), inclusive, of this subparagraph; that the operator acknowledges the operator's status as an independent contractor and not an employee of the contracting entity; and that such operating agreement shall be presented to the Labor Department upon request.
This act shall take effect as follows and shall amend the following sections:
The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.
OFA Fiscal Note
FY 13 $
FY 14 $
UCF - Revenue Loss
Note: UCF=Unemployment Compensation Fund
The bill results in a net revenue loss of $1.4 million. It classifies truck drivers who meet certain conditions as independent contractors, not employees, for the purpose of unemployment compensation laws. As a result, these drivers cannot receive unemployment compensation benefits, and the companies who employ them do not have to pay unemployment compensation taxes on the drivers' pay.
The Unemployment Compensation Fund will realize a loss of $5 million in revenue associated with companies not paying unemployment compensation taxes. However, this revenue loss is partially offset by a savings of $3.6 million associated with a reduction in unemployment compensation benefits paid to former employees who would no longer be eligible to receive benefits under this bill. This results in a net revenue loss to the Unemployment Compensation Fund of $1.4 million.
The Out Years
OLR Bill Analysis
This bill makes truck drivers who meet certain conditions independent contractors, rather than employees, for purposes of unemployment compensation law. As independent contractors they are not eligible for unemployment compensation benefits, and the entities that hire them (“contracting entity”) are not responsible for paying unemployment taxes on the drivers' pay.
EFFECTIVE DATE: Upon passage
CRITERIA FOR INDEPENDENT CONTRACTOR DRIVERS
The bill exempts a truck driver (“owner-operator”) from the unemployment compensation law's definition of employee if he or she drives, or causes to be driven, certain large trucks (“qualified motor vehicle”) (see BACKGROUND) in either intrastate or interstate commerce and:
1. owns or leases the vehicle, provided the lease, loan, or loan guarantee is not with the contracting entity (unless the lease is for a substitute motor vehicle when the operator's primary vehicle is being serviced or repaired);
2. is responsible for substantially all of the vehicle's principal operating costs, including maintenance, fuel, repairs, supplies, insurance, and personal expenses, provided the contracting entity may pay the operator for operating costs directly related to services the owner-operator renders, including tolls, permits, communication charges, and loading fees;
3. is responsible for supplying the necessary services to operate the vehicle;
4. the operator's compensation is based on work performed, including mileage-based rates, a percentage of any rate schedule, or the hours or time spent actually performing the contracted-for services;
5. the operator substantially controls the means and manner of performing services, and does so according to federal and state requirements and the shipper's specifications;
6. the operating agreement includes provisions meeting the above conditions and must be presented to the state labor department on request; and
7. the operator acknowledges his or her status as an independent contractor and not an employee of the contracting entity.
By law (CGS § 31-222 (a)(1)(B)(ii)), to be considered an independent contractor a person must:
1. be free from control and direction in connection with the performance of the service, both under his or her contract of hire and in fact;
2. perform the service either outside the employer's usual course of business or outside of all the employer's places of business; and
3. be customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the service performed.
Qualified Motor Vehicle
By law, a qualified motor vehicle is one used, designed, or maintained to carry people or property that (1) has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds; or (2) has at least three axles, regardless of weight; or (3) is used in combination, and the combined gross vehicle weight or registered gross vehicle weight exceeds 26,000 pounds. But it does not include a recreational vehicle that an individual uses exclusively for personal pleasure and not for any trade or business (CGS § 12-478 (4)).