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When is a Worker an Independent Contractor?

March 13, 2018
A recent Massachusetts Appeals Court decision underscores the impact of the Massachusetts Independent Contractor (IC) law. 
The court case involved an employer who classified a delivery person as an IC. The delivery person challenged the company’s decision and the trial court and the Appeals Court both ruled that the person was instead an employee because the employer was unable to demonstrate that the IC met all three of the independent-contractor criteria. 
The Massachusetts independent contractor statute was signed into law by then-Governor Mitt Romney in 2004. The law, MGL Ch. 149 §148B, presumes that someone is an employee unless the employer can prove the following:
  • the individual is free from control and direction in connection with the performance of the service, both under his/her contract for the performance of service and in fact; and
  • the service is performed outside the usual course of the business of the employer; and
  • the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
The statute is designed to be a difficult hurdle to overcome. Many employers have run afoul of the law when they thought they had properly classified one or more people as IC’s. The challenge for many employers arises because they may be able to meet one or two of the prongs, but the statute requires the employer to overcome all of them.
The most recent case involving a newspaper publisher and its delivery people highlights one of the many problems for employers seeking to classify people as ICs. 
The employer claimed that its delivery people were independent contractors and that is was merely a wholesaler of the product.
The court disagreed, ruling that the employer was not merely a disinterested wholesaler but was actually an employer that dealt directly with potential customers in selling subscriptions that included the drivers’ delivery services; assigning delivery territories, accepting payments from subscribers, receiving delivery complaints and conveying those complaints to the drivers; and maintaining contractual disincentives to poor delivery service, as well as contractual incentives for expanding delivery service to new customers. 
The court ruled that there was no question that the employer was wrong to classify the drivers as ICs.
Any employer seeking to classify one or more people as independent contractors should read the law and the Attorney General’s guidance. The consequences of misclassification may be severe and include (1) unpaid wages, (2) unpaid overtime, (3) possible class action if the misclassification applies to more than one employee. All these damages will then be multiplied by three due to the state’s treble-damages statute. 
Please call the AIM Employer Hotline at 800-470-6277 if you have any questions about this or any other HR related matter.
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