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Employee or Independent Contractor Under Massachusetts Law? The Importance of Classifying Workers Correctly

Although the Massachusetts Independent Contractor Statute, M.G.L. c. 149, § 148B, is intended to protect workers by ensuring that they receive "the many benefits, both public and private, that employees enjoy," the fact that a worker may not want to be classified as an employee often does not matter when determining the worker's proper classification.

In Massachusetts there is a strong presumption that an individual performing any service is an employee rather than an independent contractor. To demonstrate that a worker is an independent contractor rather than an employee, the burden of proof is on the employer to establish that: (1) the worker is free from control and direction in performing the service, both under a contract and in fact;  (2) the service provided by the worker is outside the employer's usual course of business; and (3) the worker is customarily engaged in an independent trade, occupation, profession or business of the same type.

The second prong often causes confusion because it is far broader than most laypeople would expect.  A commonly used example to illustrate the second prong of the test above is the use of an accountant:  if a plumbing company hires an accountant to periodically balance its books and records, the accountant could be an independent contractor.  But if an accounting company temporarily hires accountants during tax season, then those accountants would be considered employees because they perform work within the accounting company's usual course of business.  

In situations where an employee is misclassified, employers face significant fines and can be required to pay taxes and other amounts that should have been withheld from the worker's paychecks.  Misclassification of employees can also cause an employer to unwittingly violate the Massachusetts Wage Act, M.G.L. c. 149, §148 et seq., which generally requires an employer to pay employees within six days of the end of the pay period during which wages were earned.  Indeed, even diligent payment of an independent contractor's invoices within two weeks would expose the employer to the prospect of treble damages under the Wage Act if the independent contractor should have been classified as an employee.  Misclassification can also magnify the problems that result if the relationship between the worker and employer deteriorates.

To avoid problems, employers should adopt practices to ensure proper classification of workers and seek legal counsel to help navigate some of the thornier issues that may arise.

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