Fleece on Earth, Ill Will to Independent Contractors?

May 9th, 2007 by

Fleece on Earth (FOE) makes clothing for babies and children. Pretty cute stuff, if you’re into knit caps with lobsters on them. This is a small, Vermont-based business, relying in part on knitters working from their homes. FOE provides the patterns and the yarn. The knitters work at their own pace, with their own tools, and are even free (to some extent) to make changes in the patterns. They are paid for each finished product. So are these home knitters employees of the company or independent contractors? Yes, it’s “independent contractor versus employee” – the issue that simply won’t go away.
The Vermont Department of Labor stumbled upon this situation when one of the knitters was laid off from an unrelated job (in respite care). In questioning her about her employment, they learned of her work for FOE. She was not seeking unemployment from FOE, but the state bureaucrats included FOE in their analysis. They found that the knitter, along with 3 fellow knitters and one sewer, were indeed employees of FOE. As a result, they sent a bill for unemployment insurance to the company. The company appealed and the case went all the way to the Vermont Supreme Court.
It’s interesting to note that this ruling has nothing to do with the wishes of the knitters themselves. They don’t want to be employees. They prefer being independent.
An amicus brief was filed on behalf of the employer by the National Foundation of Independent Businesses. NFIB argues that the knitters are truly independent. In their extensive brief, they cite among many other things the 1921 case of Kelley’s Dependents v. Hoosac Lumber:

If the employer may specify the result only, and the worker may adopt such means and methods as he (sic) chooses to accomplish that result, then the latter is not an employee, but an independent contractor.

A divided Vermont Supreme Court found that the knitters are indeed employees of the company. (Can FedEx be far behind?) Three justices in the majority ruled, with two additional justices dissenting. The split verdict probably indicates that there will be additional litigation in the Green Mountain state.
Repetitive Motion?
Having opened the door to unemployment insurance, the court has not specifically addressed the possibility of workers compensation coverage for the knitters. (Knitting, I hardly need add, is highly repetitive work.) Erin Gallivan, the company’s attorney, believes that workers comp is calculated under a different criterion. I’m not so sure. The Department of Labor has determined that the workers are employees. The knitters could (but most likely won’t) seek protections and benefits under Fair Labor Standards, workers compensation and discrimination laws. It will be very interesting to see what happens when the comp insurer completes its audit at the end of the policy year: my guess is that the auditor will add the 1099 forms for the knitters to the company payroll, thus retroactively increasing comp premiums.
These knitters are caught up in a very big and very broad net, one that seeks to eliminate long-standing practices for avoiding payment of insurance premiums on workers who really do not meet the criteria for independence. I am sympathetic to the argument that these knitters are really independent, but such disputes do not occur in a vaccuum. The solution for the bigger problem has overwhelmed these home-based workers in Vermont and it is likely to do the same for thousands of small artisans across the country. In the warp and weave of employment, you can probably make the case that most of us are employees at least part of the time.
We’ll keep you posted.