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

May 17, 2013 By

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.

Filed Under: Employee - Employment Law, Employer - Employment Law, Independent Contractors, Massachusetts Employment Law, Massachusetts Wage Act, Wages and Commissions

When Can Employers Use Independent Contractors to Perform Work in Massachusetts?

March 29, 2013 By

The conservative answer to this question is “never.” Under Massachusetts law, the use of independent contractors is severely restricted. In a classic example of what many consider legislative overkill, the law assumes all workers are employees, not contractors, regardless what the parties may have agreed to, until and unless employers prove otherwise. The criteria for doing so are so restrictive, taken together, that virtually no business in Massachusetts can satisfy them. 

Under Mass. Gen. L. ch. 149, s. 148B, individuals who provide services to another are employees unless the recipient of those servies — that is, in normal circumstances, the supposed employer — prove the following:

1.  That the worker is free from control in the performance of the services, both under any contractual agreement and in practice;

2.  That the work being performed is something different from that normally performed by the recipient — that is, it is outside the usual course of its business dealings; and

3.  That the provider of the services is engaged in an independent business enterprise, something that is akin to true self-employment. [Read more...]

Filed Under: Employee - Employment Law, Employer - Employment Law, Independent Contractors, Legal Questions & Answers, Massachusetts Employment Law, Massachusetts Wage Act, Wages and Commissions

Massachusetts Enacts New Law to Protect Temporary Workers

August 17, 2012 By

Massachusetts’ latest employee rights law was signed by Governor Deval Patrick on August 6, 2012. The law, which was promoted by the Massachusetts Bar Association’s Workplace Safety Task Force, imposes formal requirements on staffing agencies to disclose information to the temporary workers they place on job sites. Its purpose, according the the MBA, is to protect vulnerable, low-wage workers from exploitation that can arise through failures to provide basic wage and other information to temporary workers. 

The new law is captioned as “An Act extablishing a temporary workers right to know.” It requires that staffing agencies provide to each employee placed on a new assignment notice of the name, address and phone number of staffing agency contacts; workers’ compensation insurance carrier  information; a job description, pay rate, and date of expected pay; and details regarding transportation to the worksite, among other things. The information must be provided prior to the end of a worker’s first pay period, and othe restrictions on staffing agency conduct apply. The new law does not apply to professional workers, secretaries or administrative assistants. Violators can be punished by substantial fines and may be subject to criminal prosecution.

Filed Under: Employee - Employment Law, Employer - Employment Law, Independent Contractors, Massachusetts Employment Law, Wages and Commissions

Lawmakers Consider Imposing New Sick Leave Requirements on Massachusetts Employers

April 23, 2012 By

Via a bill that is supported by Governor Deval Patrick and was recently reported favorably by a legislative committee, Massachusetts lawmakers are deciding whether to require employers to offer sick leave benefits to their workers. While most employers voluntarily permit workers to be out sick for reasonable periods, the benefit is not mandatory and employees can be fired for using it. The so-called Act Establishing Earned Paid Sick Time would set a new sick leave floor and, as the name suggests, require that most employees be paid during their absences. It would grant job protection to workers and expand the benefits they already must receive under Massachusetts law. [Read more...]

Filed Under: Articles, Employee - Employment Law, Employer - Employment Law, Independent Contractors, Massachusetts Employment Law, Massachusetts Wage Act, Wages and Commissions

Legislature Holds Hearing on Bills that would Rewrite Independent Contractor Law

November 4, 2011 By

A committee of the Massachusetts state legislature held a hearing on November 3, 2011 to take input on 4 pending bills that aim to revise the state’s independent contractor statute. The law has been under fire from some circles due to language that, read literally, essentially bans the use of contractors in Massachusetts. It’s not the first time opposition forces have pressed for rewriting of the law. A similar effort last year was unsuccessful.

The independent contractor law appears at Mass. Gen. L. ch. 149, s. 148B. It requires that all workers be classified as employees unless the employer demonstrates that 1.  the worker is free from control in the performance of daily duties; 2. the work performed is outside the usual course of the employer’s business; and 3. the worker is customarily engaged in an independent business. Its rewriting to this form in 2004 effectively banned the legal use of contractors, since almost no employer can meet the second prong of this three-part test and many cannot meet the other two. [Read more...]

Filed Under: Articles, Employee - Employment Law, Employer - Employment Law, Independent Contractors, Massachusetts Wage Act, Wages and Commissions

Enforcing Noncompetion Agreements against Independent Contractors may be Problematic for Employers

August 31, 2011 By

As if employers don’t have enough to worry about when they try to enforce noncompetition agrreements against their former employers, some are discovering that things get even trickier when they look to do so against workers who were arguably misclassified as independent contractors. In addition to the normal hurdles — including proving that a valid contract was formed and then breached by the employee, and establishing that a worker’s new job will substantially injure legitimate business interests — they may also face a formidable claim that the working relationship was itself illegal under Massachusetts law and, consequently, that their otherwise valid noncompetition agreements are void and of no effect.

This sort of situation is arising with increasing frequency in the real estate industry, for example, where agencies routinely classify their realtors as independent contractors despite the fact that, in all likelihood, they cannot pass muster under standards established by Mass. Gen. L. ch. 149, s. 148B. Many of these agencies also routinely required agents to sign non-competes. While it’s true that, to date, enforcement authorities have not focused attention on apparently illegal independent contractor deals like these, the approach by government does not impact the parties themselves. An improper independent contractor deal can still be raised as yet another substantial defense in a noncompetition enforcement action.

The problem for employers here is fundamental. Generally speaking, persons who violate provisions of law cannot later claim their benefits. Similarly, persons who violate contractual terms cannot later seek to enforce violations by other parties to them. In the employment setting, independent contractror arrangements that don’t comply with state law are void, and employees cannot be bound to honor them, even where they agreed to the terms in the first place. Employers, on the other hand, can be found liable for damages to the same employees who agreed to work as contractors. Where a noncompetition agreement is part of that sort of deal, an employee might argue persuasively that there is no valid basis to enforce it. Non-competes, after all, can withstand attack only when supported by a tangible benefit to the employee involved. Though hiring a worker and providing him/her a job is generally sufficient for this purpose, improperly classified workers might establish that, because the foundation of their work agreements are invalid, so too are the noncompetition clauses contained either within them or as part of some related document.

To be sure, this theory needs to be tested in the courts, and employers might in some cases argue for application of enforcement principles that apply to non-employment relationships. Standards there are in fact easier to meet in enforcement actions, but are unlikely to apply unless the employer can first establish the independent nature of the relationship to its former contractor. If that independent contractor was in fact an employee under law, that task may prove difficult or impossible.

Jack K. Merrill, Esq.

Filed Under: Articles, Employee - Employment Law, Employer - Employment Law, Independent Contractors, Massachusetts Employment Law, Non-competition Agreements

Workers’ Comp Insurance No Bar to Suit by Independent Contractors Hurt on the Job

June 23, 2011 By

The Supreme Judicial Court has added yet another reason for employers to properly classify their workers — the threat of a direct lawsuit by non-employees injured on the job, even if those workers first collect hefty workers’ compensation payouts. In a May 23, 2011 decision, the Court held that the state law barring injured employees from suing their employers does not apply to subcontracted workers. Two victims of a residential construction project explosion were permitted to first settle with the defendant’s workers’ compensation insurer, then sue the company that controlled the worksite where they were injured. [Read more...]

Filed Under: Articles, Employee - Employment Law, Employer - Employment Law, Independent Contractors, Massachusetts Employment Law, Massachusetts Wage Act

Misclassifying Workers Can Mean Big, Big Damages

September 23, 2009 By

Employers who misclassify their workers as independent contractors now have even more to worry about. In August, the state’s highest court made clear they could pay huge damages for this transgression of the law, even if they merely made an honest mistake.

In a majority opinion, the Massachusetts Supreme Judicial Court concluded that employers can’t defend an independent contractor classification lawsuit by claiming a worker would have made less money if he/she had been properly classified as an employee. Damages are not measured by the difference between what a worker received and what he would have received as an employee.  Instead,  under the independent contractor provisions of the state’s Wage Act, damages equal the value of “wages and benefits [a worker] should have received as an employee, but did not,” the court wrote. [Read more...]

Filed Under: Articles, Independent Contractors, Massachusetts Wage Act, Wages and Commissions

Massachusetts Attacks Independent Contractors

March 15, 2009 By

In 2004, Massachusetts changed its independent contractor law in a rather radical way. The amendment essentially banned the use of independent contractors in the Commonwealth, regardless whether workers and employers agreed that the arrangement made good business sense. The new law so narrowly defined who could and couldn’t be an independent contractor that most observers figured it represented a case of legislative over-drafting. How, after all, could the state have intended such a radical result when important segments of the business community had for so many years operated openly and productively under the independent contractor model?

Five years later, the anti-contractor law not only is unchanged but is being vigorously enforced under the leadership of Governor Deval Patrick. In 2008, he formed a joint task force to target violators of the independent contractor statute, calling them purveyors of an “underground economy” that underpays employees, reduces state tax revenues, and undermines safety laws. The task force’s mission statement takes an aggressive stand against what’s termed improper employee classification, which the Governor believes affects one in every seven Massachusetts workers. In its one year of existence, the task force has already launched hundreds of coordinated investigations and leveled numerous fines against Massachusetts employers. An anonymous tip line makes starting an [Read more...]

Filed Under: Articles, Independent Contractors, Massachusetts Employment Law