Legal Action Funded Case Wins Big in Vermont

A case that was awarded funding from NAHB’s Legal Action Fund received a favorable decision on June 23, providing an additional dose of much-needed clarity to Vermont employers.

At issue in this case (In re Bourbeau Homes, Inc.) was the proper classification of a limited liability company (LLC) whose single owner-member helped build — in addition to four other individuals who were also paid for services — homes sold by Swanton-based Bourbeau Custom Homes.

The Bourbeau decision follows a December 2016 Vermont Supreme Court decision favoring Burlington-based Great Northern Construction, a member of the Home Builders & Remodelers Association (HBRA) of  Northern Vermont.

Great Northern Construction successfully appealed a state Department of Labor determination that Great Northern had “misclassified” one of its employees as an independent contractor.  The central issue before the court was whether the worker, an expert in historic restoration, was an employee of Great Northern Construction under the statutory definition of “employment.”

In last week’s decision, the state contended that Bourbeau was required to pay a tax on wages paid to these workers to support the state unemployment fund.  Bourbeau challenged that classification, contending that it was not liable for unemployment taxes on monies paid to a single-member LLC because an LLC is not an “individual” under the unemployment tax statute and therefore not subject to the state’s test to determine whether a worker is an employee or independent contractor – often referred to as the “ABC” test.

Second, Bourbeau argued the state’s Employment Security Board erred in applying the ABC test with respect to the four other workers. Significantly, the Vermont Supreme Court agreed with Bourbeau and held that an LLC was not an “individual” for the purposes of assessing unemployment taxes.

The court then affirmed that the application of the ABC test to the remaining four individuals was proper and that they were employees for purposes of Vermont’s unemployment compensation system.

NAHB’s Legal Action Fund is available to members with litigation that involves common industry problems or issues of national significance.

For more information on the case, please contact David Jaffe at 800-368-5242 x8317. For more information on how to apply to the Legal Action Fund, please contact legalaffairs@nahb.org.

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