You Think You Are an “Independent Contractor,” But You Are NOT

In Massachusetts, it is nearly impossible to be correctly classified as an independent contractor. M.G.L.  c. 149, § 148B states that in order to be classified as an independent contractor (and not an employee) all three of the following must be established: 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; and 2) the service is performed outside the usual course of 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.

Particularly with regard to Prong Two, the test is almost impossible to meet.  By way of example, if you are working for a company that performs insert service here, we’ll call it “X”, and you spend your day performing “X”, then you are not an independent contractor.  Even if you sign a contract that states, “I hereby agree that I’m an independent contractor,” you’re still an employee in the eyes of Massachusetts law.  Even if you agree to the situation, you still may be entitled to damages as a result of the misclassification.

Even if you were paid more money as an independent contractor, you are still entitled to damages as a result of the misclassification. The SJC in Somers v. Converged Access, Inc., 454 Mass. 582 (2009) held that “‘damages incurred’ for having been misclassified as an independent contractor rather than an employee equals the value of wages and benefits the individual should have received as an employee, but did not”. It went further also stating that the employer could not defeat a claim under the wage act by claiming they didn’t know they were violating the statute and had they known they would simply hire the independent contractor as an employee and pay him a lower weekly wage.  The established fact that an independent contractor is paid more than she would have if correctly classified will have no bearing on the measure of damages.

Judge Gants noted that it’s the employer, not the employee who enjoys a windfall associated with misclassifying workers; Judge Gants wrote, “the “windfall” that employers enjoy from the misclassification of employees as independent contractors: the avoidance of holiday, vacation, and overtime pay; Social Security and Medicare contributions; unemployment insurance contributions; workers’ compensation premiums; and income tax withholding obligations. See 26 U.S.C. § 3102 (2006) (Federal tax withholding); G. L. c. 62B, § 2 (State tax withholding); G. L. c. 151A, § 14 (employee unemployment insurance); G. L. c. 152, § 25A (workers’ compensation insurance); 830 Code Mass. Regs. § 62B.2.1(4)(a)(1) (2005) (employer’s payroll tax obligations). Misclassification not only hurts the individual employee; it also imposes significant financial burdens on the Federal government and the Commonwealth in lost tax and insurance revenues. Moreover, it gives an employer who misclassifies employees as independent contractors an unfair competitive advantage over employers who correctly classify their employees and bear the concomitant financial burden.”