State’s Highest Court Holds Independent Contractor Statute Can Apply to Workers Outside Massachusetts

In a decision that might be said to foist an employer upon its own petard, Massachusetts’ Supreme Judicial Court ruled today that the state’s rigid independent contractor statute can be applied to workers who never set foot in the Commonwealth and performed all their duties as delivery drivers in another state. The somewhat surprising but unanimous SJC ruling concluded that, because the employer defendant was based in Massachusetts and required its out-of-state delivery drivers to sign independent contractor agreements that required all disputes to be settled in Massachusetts and under Massachusetts law, it is reasonable to apply this state’s employment laws to work that was performed exclusively in New York.

The ruling could have substantial financial implications for Massachusetts companies that employ independent contractors in other states. Under Mass. Gen. L. ch. 149, s. 148B, almost all workers must be classified as employees and not contractors. While many states and the Internal Revenue Service prefer that workers be employees and not contractors, the Massachusetts’ independent contractor statute may be the toughest in the nation. It requires, among other things, that any worker who performs duties in the “usual course” of a company’s business is an employee. Written or oral agreements that expressly provide otherwise are not enforceable in Massachusetts. If a worker is misclassified as a contractor, he/she can assert substantial rights under related Massachusetts wage laws. Those rights can include minimum wages, overtime pay, cost reimbursements, tax deductions and contributions, insurance coverage, and other benefits. Employers who misclassify workers in Massachusetts and fail to pay such benefits may be subject to huge damage awards to individual workers or classes of workers. Under the Massachusetts Wage Act and the state’s overtime law, damages are automatically tripled and legal fee reimbursement is mandatory.

Today’s SJC ruling is Taylor v. Eastern Connection Operating, Inc. In its wake, all employers who either now employ or are considering employing contractors to work outside Massachusetts should review and reconsider their policies and reevaluate any written agreements they may now utilize. It may be possible to avoid a fate similar to that which now apparently awaits the Taylor defendant. It faces a class action suit that was once dismissed but is now revived. If it is unable to find grounds to escape the reach of Massachusetts’ independent contractor and wage laws, an ultimate damage award against it could be huge.