Companies that retain independent contractors in Massachusetts must familiarize
themselves with the state's stringent independent contractor statute
and the consequences of misclassification. Under Massachusetts law, a
person hired to perform any service is presumed to be an employee unless
the employer can prove that (a) the individual is free from the company's
control and direction in performing the service, (b) the service performed
is outside the usual course of the company's business, and (c) the
individual performing the service is customarily engaged in an independently
established trade, occupation, profession or business of the same nature
as the service performed for the company. Notably, it is the employer
who has the burden of proving each of these requirements and if one of
the requirements is not proven, the individual will be deemed to be an
employee. The Massachusetts independent contractor statute is one of the
strictest in the country.
In 2008, the Massachusetts Attorney General issued an
providing businesses with guidance on the statute and how it would be
interpreted and enforced.
Mass AG's Advisory
The advisory provides information on each of the three prongs listed above.
According to the Attorney General, in order to be free from direction
and control, the activities and duties should require minimal instruction,
the hours of service should be left to the worker to decide and the worker
should use his or her own approach and methods to complete the work. In
evaluating whether or not the second prong of the statute is met, the
Attorney General will consider whether the service being performed is
necessary to the business or merely incidental. In deciding whether or
not the service in question could be viewed as an independent trade or
business, the Attorney General points to court decisions that have considered
whether or not the worker is able to perform the service for anyone or
whether he or she is dependent on the single employer for his or her livelihood.
An employment contract or job description indicating that an individual
is free from supervisory direction or control is insufficient by itself
to classify an individual as an independent contractor under the Law.
And, an employer’s failure to withhold taxes, contribute to unemployment
compensation, or provide worker’s compensation is irrelevant for
the purposes of the misclassification analysis.
Misclassification could lead to consequences arising under other Massachusetts
labor and employment laws. Once deemed an employee, the individual may
be able to assert rights under the Massachusetts minimum wage and overtime
statutes, the payment of wages act, and the workers' compensation
law. Companies could also face liability for failing to withhold taxes
and make unemployment contributions if they incorrectly classify an employee
as an independent contractor. Employers could be subjected to criminal
penalties and civil penalties for misclassification of an employee as
an independent contractor, and individuals can seek mandatory treble damages
and attorneys fees for violation of the Massachusetts Payment of Wages Act.
An employer should consider having an audit or analysis of how its workers
are classified to ensure compliance with Massachusetts law.