Properly Classifying Workers in Massachusetts
Massachusetts law (as well as Federal law) draws a distinction between “employees” of a business and “independent contractors” who perform work benefiting a business. A worker’s classification has a significant impact on the employer and the employee, including the way workers are paid, availability of benefits, the ability to collect unemployment and workers compensation payments. Massachusetts laws impose harsh penalties on businesses that improperly classify employees as independent contractors. Business organizations that improperly classify employees as independent contractors could be subject to tax penalties, civil lawsuits, and potential criminal penalties. The first step in avoiding such penalties is to better understand the distinction between employees and independent contractors.
Massachusetts General Law c. 149 § 148B sets forth three criteria that must be satisfied in order to properly classify a worker as an independent contractor (the “Three Prong Test”). Notably, all three of these criteria must be satisfied before a worker can be classified as an independent contractor, as opposed to an employee. The criteria applied under Massachusetts law as follows:
(1) the individual is free from control and direction in connection with the performance of the service;
(2) the service is performed outside the usual course of the business of the employer; and
(3) 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.
M.G.L. c. 149 § 148B.
When considering the first prong, courts examine the actual level of oversight and supervision an employer provides to the individual, as opposed to what is written in a worker’s job descriptions or employment contract. Therefore, even if a worker has signed a contract stating that she is an “independent contractor”, a court may disregard such language if there is actually significant supervision and control by the employer. To be free from an employer’s direction and control, a worker must be free to perform duties with little supervision, use his own methods and approach, and dictate the hours he will work on the job.
The second prong of the test requires the worker to perform service “outside the usual course of the employer’s business”. Notably, Massachusetts law does not define “usual course of business.” However, case law from Massachusetts indicates that “a worker whose services form a regular and continuing part of the employer’s business … should be found to be an employee and not an independent contractor.” American Zurich Ins. Co. v. Department of Industrial Accidents, 2006 WL 2205085 at 4. If the worker is performing services that are part of an independent, separate, and distinct business from that of the employer, the worker is more likely to be considered an independent contractor. Id.
The final prong of the test considers whether the worker is “customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed”. When considering this prong, courts have examined whether the worker is wearing the “hat of an employee of the employing company or is wearing the hat of his own independent enterprise.” Boston Bicycle Couriers, Inc. v. Deputy Dir. of the Div. of Employment & Training, 56 Mass. App. Ct. 473, 480 (2002). Generally, workers who maintain their own websites, obtain their business cards, provide their own tools and equipment, and produce their own marketing materials are more likely to be considered independent contractors.
The analysis of whether a worker is an employee or independent contractor is a fact-intensive one. Massachusetts courts have found the following workers to be employees, rather than independent contractors: Exotic dancers performing in adult entertainment facilities; drivers making deliveries on behalf of a home furniture delivery management service; and individual franchisees of a janitorial services company.
The Massachusetts Attorney General’s Office is one of the governmental entities responsible for enforcing this law. To assist business owners and workers, it published an advisory regarding its interpretation of the statute. A printable/downloadable copy of that publication can be found here.
If you have any questions regarding the above, or any other Massachusetts employment law or business law matter, please contact one of the employment or business attorneys at Doherty, Ciechanowski, Dugan & Cannon, P.C.