EMPLOYEE OR INDEPENDENT CONTRACTOR? The Wrong Classification Could Cost Your Massachusetts Company Plenty.

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 advisory 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.
Posted on Feb | 2015
Experienced Advocates | Effective Solutions