Vermont High Court: At-Home Knitters Are Employees, Not Contractors

May 7, 2007

At-home knitters who make children's clothing for a North Chittenden company are employees, not independent contractors, the Vermont Supreme Court has ruled, upholding a decision by the state Labor Board.

The decision, with one justice dissenting, means Fleece on Earth, a children's clothing company, is required to pay back taxes and unemployment insurance for the workers.

Fleece on Earth had contested the board's 2003 ruling that six knitters who work from their homes — on their own schedules, with their own equipment — were employees because they were controlled by the use of the company's patterns and material.

A lawyer for owner Bonnie Dutton told the Supreme Court in arguments heard last October in Rutland that the state misinterpreted a three-part test used to distinguish between employees and independent contractors. Dutton did not control the knitters' performance, attorney Erin Gallivan said.

But the Supreme Court said the services provided by the workers constitute employment, as definied in Vermont's unemployment compensation law.

"The Unemployment Compensation Act seeks to protect workers and envisions employment broadly,'' the court wrote. "The degree of control and direction over the production of a retailer's product is no different when the sweater is knitted at home at midnight than if it were produced between nine and five in a factory. That the product is knit, not crocheted, and how it is to be knit, is dictated by the pattern provided by FOE.''

Dutton, who could not be reached Friday, had said if she lost the appeal, she might look for other sources of labor.

Her lawyer said the decision was unfortunate for small businesses and for workers who want the flexibility of working on their own.