Independent Contractor or Employee in Massachusetts? The 3-Part Test

Many Massachusetts businesses assume that paying someone on a 1099 makes them an independent contractor. It doesn’t. Massachusetts has one of the strictest tests in the country, and a worker you call a contractor may be your employee under the law, with real consequences for wages, overtime and penalties.

The starting point: everyone is presumed an employee

Under G.L. c. 149, § 148B, for purposes of the Massachusetts wage and hour laws, an individual performing any service is considered an employee unless the business proves all three parts of what’s known as the “ABC test.” The burden is on the business, and failing any one part means the worker is an employee. Not withholding taxes, or not paying workers’ compensation premiums, doesn’t count toward contractor status.

The three-part test

Part 1: Free from control and direction

The worker must be free from your control and direction in performing the service, both under the contract and in fact. Courts look at the reality, not just the paperwork. Factors that point toward control include:

• You tell the worker how, when and where to do the work
• You train the worker or require your methods
• You set fixed hours or a schedule
• You supply the tools, equipment and workspace
• The worker can’t hire helpers, or you direct them
• The worker works only for you, on an ongoing basis
• You can end the relationship at any time without liability

A contractor can still be told what result you want and when you need it. It’s control over the means and methods that points toward employment.

Part 2: Outside the usual course of your business

The service must be performed outside the usual course of your business. This is often the hardest part to meet. The Attorney General’s 2008 advisory on the statute says it will consider whether the service is necessary to the business or merely incidental. Examples from that guidance:

• A drywall company that hires someone to install drywall: likely an employee, because installing drywall is the company’s business.
• A motor vehicle appraisal company that hires someone to appraise vehicles: likely an employee.
• An accounting firm that hires someone to move office furniture: likely an independent contractor, because moving furniture isn’t what the firm does.

Part 3: An independently established business

The worker must be customarily engaged in an independently established trade, occupation, profession or business of the same nature as the work being done. As the Appeals Court put it in Boston Bicycle Couriers, Inc. v. Deputy Director of the Division of Employment & Training, 56 Mass. App. Ct. 473 (2002), the question is whether the worker is “wearing the hat of an employee of the employing company, or is wearing the hat of his own independent enterprise.” Signs of a real independent business include its own entity, insurance, licenses, marketing and other clients, and the ability to keep operating if your relationship ended.

Why misclassification is costly

A business that misclassifies a worker and, as a result, fails to follow the wage laws faces the remedies in § 27C, which can include civil citations, criminal penalties and debarment from public contracts. Under § 150, the worker can also sue for lost wages and benefits, with mandatory triple damages and attorney’s fees. Corporate presidents, treasurers and officers or agents who manage the company can be held liable personally. Unpaid overtime, earned sick time and other benefits can add up quickly over several years.

The test above governs the Massachusetts wage and hour laws. Federal tax law, unemployment insurance and workers’ compensation each use their own standards, so a worker can be classified differently for different purposes.

A real-world example: the one-time painter

Suppose you hire a friend of your office manager to paint your offices. She’s an out-of-work accountant who has painted a few fences, and your manager tells her which rooms to paint, how to paint them and how fast to work. On those facts she probably fails Part 1, because you controlled how she worked, and Part 3, because she doesn’t have an independent painting business. Hiring an established painting company that controls its own crew and methods is a very different situation.

How to vet a contractor before work begins

1. Check the work. Is it outside what your business does for its customers? If it’s core to your business, expect an employee.
2. Check the business. Ask for the contractor’s entity, license, insurance certificate and marketing, and confirm they serve other clients.
3. Limit control to results. Agree on the deliverable, price and deadline, and let the contractor decide how to get there.
4. Put it in writing. A written independent contractor agreement helps, but only if day-to-day reality matches it.
5. Train your managers. A manager who directs a contractor like an employee can undo careful planning.

If you’re unsure how a worker should be classified, review the arrangement before a dispute starts. Call 978-273-8337 or contact our office.

About the Author

Richard Alan Gaudet, Esq. is a Massachusetts attorney at the Law Offices of Richard Alan Gaudet, LLC in Middleton, Massachusetts, who advises employers on hiring, worker classification and wage law compliance. His practice focuses on professional license defense, business law and litigation, family law, and landlord representation, serving clients across Northern, Eastern, and Central Massachusetts. Reach him at 978-273-8337 or rgaudet@gaudetlawoffice.com. Office: 35 Village Rd., Ste 100, Middleton, MA 01949.

ABOUT THIS ARTICLE

This article was prepared by a Massachusetts attorney and is provided solely for general informational and educational purposes directed to members of the general public. It does not constitute legal advice and does not create an attorney-client relationship. The law applicable to any particular situation depends on the specific facts and circumstances of that matter. Readers are encouraged to seek the advice of a licensed Massachusetts attorney before taking any action.