A bill working its way through the General Assembly would prevent the state Department of Labor from unfairly penalizing youth athletics.
HB 5261 affirms that coaches and referees working or volunteering for municipalities and sports organizations are not entering into an employer-employee relationship--unless, of course, they agree to that relationship.
The bill is a response to a crackdown by DOL on independent contractor relationships.
DOL is focusing especially on municipalities and sports organizations (i.e. sports clubs and Little Leagues) for what they see is their failure to pay contributions to the state’s Unemployment Compensation Trust Fund for coaches and referees at sporting events.
According to DOL, these coaches and referees should be seen as employees, not as the independent contractors they really are.
But that view is clearly foul.
While many sports organizations pay referees, who often are local teenagers, to officiate games, these individuals clearly are independent contractors.
They’re free to accept or reject the opportunity to officiate any game, they’re free to work for multiple towns or event operators, and often the sports organization has no idea which referee will be showing up on a particular game day.
Historically, DOL has used an “ABC” test to determine whether there is an independent contractor relationship--a test that looks at various aspects of the business relationship and determines how much control is being exerted over the individual performing the work.
HB 5261 is a response to a crackdown by DOL on independent contractor relationships, especially sports clubs and Little Leagues.
For example, the state's Supreme Court recently found in the case Standard Oil v. Administrator, Unemployment Compensation, that the Labor Department was wrong to interpret, for a number of reasons, that certain independent contractors hired by Standard Oil to install oil furnaces in customers' homes were employees of Standard Oil.
For example, the labor department tried to argue that customers' homes were part of Standard Oil’s workplace.
Just like sports referees, these installers were free to reject assignments and free to accept work from a multitude of other entities.
Although the Labor Department is seeking to protect workers from being taken advantage of, as well as ensure the maximum number of employers is paying into the unemployment compensation fund, the consequences of such an inflexible test are severe.
Many legitimate businesses have been fined for failing to make unemployment contributions on behalf of individuals that have never been on their payroll.
At least HB 5261 will protect municipalities and sports organizations from the Labor Department’s crackdown.
Hopefully, HB 5261 will help begin the conversation about adding more flexibility to the ABC test to accommodate other types of legitimate independent contractor relationships.
It’s time for the Labor Department to adapt and update their ABC game plan to fit the realities of the modern economy.