Employment relationship

State-specific laws

What state-specific laws govern the employment relationship?

Labor and employment laws are generally set forth in Title 21.     

Who do these cover, including categories of workers?

Generally, Vermont law applies broadly, placing the burden on employers to prove that there is no employment relationship. The test is different for different statutes.

The Fair Employment Practices Act applies to any employer “which has one or more individuals performing services for it within this State”.


Are there state-specific rules regarding employee/contractor misclassification?

Yes. For wage payment purposes, Vermont uses the ABC test.

For workers’ compensation, Vermont uses the right to control test and the nature of the business test. The Department of Labor provides a detailed summary.  

For workers’ compensation, the Department of Labor and the Department of Financial Regulation have recently clarified the status of independent contractors. An individual or business will be considered an independent contractor if all of the following elements are satisfied:

  • •the individual or business is duly registered in Vermont as a corporation or limited liability company (LLC);
  • •the contract is with the corporation or LLC; and 
  • •the entity has:

o four or fewer members, managers or executive officers;

o no employees; and

o the requisite Form 29 exclusions have been approved for each member, manager, or executive officer.

For unemployment, Vermont uses the ABC test. The Department of Labor provides a detailed summary.

In a recent unemployment case, the Supreme Court concluded that a single member LLC is not an individual and therefore not an employee for purposes of unemployment law (In Re Bourbeau Custom Homes, Inc, 2017 Vt. 51 (2017)).


Must an employment contract be in writing?

There is no specific requirement for written offer letters or employment contracts. General contract principles, including the statute of frauds, apply to employee contracts. Handbooks, employer policies, and supervisor or manager statements may also create implied contracts.   

Are any terms implied into employment contracts?

It is likely that the implied covenant of good faith and fair dealing will apply to a written employment contract, especially if it contains a specific term of employment.  

Are mandatory arbitration agreements enforceable?

No, Vermont prohibits mandatory arbitration of sexual harassment claims. For other types of claim, there is no clear answer to this question. Vermont does have an arbitration law (12 V.S.A. Section 5651) which permits mandatory arbitration; however, it carves out civil rights and constitutional claims and requires detailed disclosure and acknowledgment. The law has been challenged successfully on pre-emption grounds outside the context of employment law.   

How can employers make changes to existing employment agreements?

Changes to employment agreements are subject to standard contact law principles, including mutual agreement and consideration.

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