Massachusetts Independent Contractor (IC) Advisory: Client Control May Nullify Independent Contractor
Massachusetts business owners who wish to utilize independent contractors should be mindful of the amount of control exercised over these workers by clients of the business, as it is now clear that such control can be imparted to the employing unit for the purposes of determining IC status.
The Massachusetts independent contractor statute sets forth a tripartite test for examining whether an individual shall be classified as an “employee” or a “contractor.” The determination of “employee versus contractor” bears on several important matters, including (1) the employer’s responsibility for paying or providing certain employment benefits, (2) whether or not overtime must be paid to the workers in question, (3) whether withholding taxes must be taken from workers’ paychecks and (4) worker eligibility for unemployment benefits.
Businesses who utilize independent contractors in Massachusetts are likely familiar with the three factors examined in determining employment status, that is:
- The degree of freedom from control or direction of the employing enterprise afforded to the worker(s) in question;
- Whether the services in question are part of the employer’s usual course of business, and
- Whether the relationship between employer and worker compels the worker to provide services exclusively to that employer.
What many business owners may not be aware of is that, with respect to prong (a) above, “control or direction” may be inferred from instructions or policies provided to the worker by clients of the employing business unit, and not directly by the business itself.
Take, for example, a recent decision by the Massachusetts Appeals Court upholding the award of unemployment insurance benefits to a former driver at Subcontracting Concepts, Inc., (“SCI”) which operates a “temp agency” for professional courier companies, supplying additional drivers when necessary. SCI had hired the driver in question under the terms of an independent contractor agreement that explicitly stated: “No employer/employee relationship is created under this agreement or otherwise.” And, in reality, SCI exercised little formal control over the driver in question, beyond prohibiting him from traveling with “non-essential” personnel on board during deliveries and requiring that he utilize company insurance and report any accidents to SCI.
The difference-maker for the Appeals Court, however, was the degree of control and direction provided to the driver by SCI’s client, Ace Expediters. The SCI contract obligated the driver to perform his work through whatever means or methods Ace required; he was also required to follow Ace’s routes for delivery, wear a T-shirt bearing the Ace logo, and ensure that anyone working with him do the same. Based on these details, the Appeals Court concluded that SCI failed to meet its burden of establishing the driver in question as an independent contractor under the IC statute.
If you or your business have questions regarding employee classification, please contact us at (508) 381-0499.