SJC Holds that Second Element of Independent Contractor Test is Preempted by Federal Law

The Massachusetts Supreme Judicial Court today weighed in on the hot topic whether and to what extent the state’s Independent Contractor Statute is exempted as applied to courier drivers and the companies they work for. Like a federal court that ruled on the same question last year, the SJC concluded that the second of the law’s three elements is preempted by the Federal Aviation Administration Authorization Act (FAAAA).

Legal battle over the applicability of Mass. Gen. L. ch. 149, §148B has raged for years, with courier companies seeking to avoid application of what’s referred to as Prong B of the statute – the requirement that all individuals who perform services within a company’s regular course of business be classified as employees. The companies rely on the FAAAA’s restriction against state laws that impact the prices, routes or services of covered businesses. Because Prong B is so broad, they contend, it effectively bars all uses of contractors to make deliveries. This, in turn, forces courier companies to eliminate services, increase costs, alter routes, and make other business changes.

Though two state judges had previously ruled that the entire Independent Contractor Statute was preempted by the FAAAA, the SJC rejected this approach. The law’s first and third elements thus remain intact. In order to avoid classifying their drivers as employees, courier companies must demonstrate that they do not control the performance of their work and that the drivers are customarily engaged in an independent business. There are currently several active cases on this topic, including two class action suits being handled by my office.