Employers beware that the Commonwealth of Massachusetts treats nearly all workers as employees through strict interpretation of the characteristics that qualify a worker as an independent contractor. Equally important is the fact that the State treats enforcement of the independent contractor laws as priority, and both civil and criminal penalties can be levied against businesses, in addition to injunctions and other orders for compliance. Massachusetts targets employers who fail to properly classify workers as independent contractors. The State is well aware that businesses often improperly classify employees as "independent contractors" in an effort to avoid paying for or providing benefits to the worker, and/or avoiding tax and other witholdings, as well as payment of unemployment and worker's compensation insurance premiums.
M.G.L. ch. 149 s. 148B, declares that all workers are to be considered employees, unless the circumstances and nature of that individual's employment meet all of the following criteria:
1. "The individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact." In other words, your business cannot retain management control or authority over the manner and means of the worker's performance of their duties and tasks. The worker must be free to perform any work at their own control, discretion, professional standards, and time frames.
2. "The service is performed outside the usual course of the business of the employer." If the worker performs work that relates to or provides support for the nature of your business, that individual is an employee. For example, a computer engineering firm cannot classify a software analyst as an independent contractor, however, it can hire an attorney or certified public accountant at another firm to perform those specific professional services. This is the strictest factor of the Massachusetts independent contractor statute, and most businesses fail to meet this criteria.
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." The worker must perform a service that is distinguishable and separate from the business, and that service is customarily provided in that worker's profession or business.
If your classification of workers fails to meet one of the above three criteria, then your worker must be classified and treated as an employee.
Failure to properly classify and treat workers as employees can result in a significant amount of liability for an employer. If you fail any of the above criteria, and then do not provide vacation, sick, and leave benefits; fail to pay tax and witholdings; fail to pay worker's and unemployment insurance premiums; and allow other benefits (such as Maternity Leave or Family Medical Leave Act (FMLA)), you will be subject to both civil and criminal liability. For example, an aggrieved employee who has been misclassified as an "independent contractor" may file a complaint with the Massachusetts Attorney General's Office, and then may be provided with a private right to initiate a civil action against your business. This lawsuit may enable an employee to recover lost wages, plus the monetary value of the lost benefits, plus treble damages and legal fees. If a business has misclassified employees in a widespread basis, it could be exposed to numerous claims involving substantial damages and penalties for failing to comply with Massachusetts independent contractor law. This scenario could potentially end in disaster for a business.