The one tough part about being a corporate attorney in Massachusetts is explaining to your clients, time and time again, that their independent contractors are not independent contractors.
I usually get bewildered looks and frustrated responses. I understand: you do not want to have to pay the 7.5% tax for your worker, so isn’t it just easier to have them pay the 15% total tax? No, not in Massachusetts.
In Massachusetts, an Independent Contractor must truly meet a 3-prong test. All the prongs. Not just some of the prongs some of the time, all the prongs some of the time, or some of the prongs all of the time. ALL OF THE PRONGS THEM ALL OF THE TIME.
1. Freedom from Control: your independent contractor must be free from control and direction in connection with performance of the service.
“Can’t we just put that in our contract and we are fine?” No. This prong must be met both under contract and in fact. This test relies on the actual reality of the job, nit just merely the amount of control found in the job description.
2. Service Outside the Usual Course of the Employer’s Business. Oh this is the doozy. Basically, it is illegal to classify a worker as an independent contractor who does the normal and usual activities of the business.
What the #@$!???
Your part time law clerk: Employee.
The person who cleans your office: Independent Contractor.
3. Independent Trade, Occupation, Profession or Business: the worker needs to be in an independent trade, occupation, profession or business of the same nature as that involved in the service provided.
Ex: the person who cleans your office belongs to a cleaning company and that is his/her trade/occupation/business.
If the worker needs to depend on a single employer for the continuation of services, the court will most likely find the worker to be an employee.
Misclassification of workers leaves a severity of problems for employers under Massachusetts law, such as stiff civil penalties and possible criminal penalties imposed by the Attorney General. Moreover, under the Massachusetts Wage Act, employers misclassifying workers as independent contractors are liable to their misclassified employees for triple damages and attorney’s fees.
And do not think your disgruntled former over-taxed workers won’t go after you.