Employee or Independent Contractor?
Massachusetts’ law has a significantly narrower definition of “independent contractor” than what is used by the federal government. Under laws enacted in 2004 and the Attorney General’s interpretative guidance, a work arrangement cannot be an independent contractor relationship unless each of the following three factors applies:
- The individual must be free from “control and direction” in performing his or her job. A written contract detailing the individual’s independence from management direction or control is expressly required. Furthermore, the individual must actually accomplish his job with independence and autonomy.
- The individual’s job/service must be performed “outside the usual course of business of the employer.” In other words, whenever the individual performs the same type of business as the employer, he will be considered an employee and not an independent contractor.
- The individual must routinely work in an “independently established trade, occupation, profession or business.” The services provided by the individual to the employer must be “similar in nature” to the “independently established trade, occupation, profession or business” of the individual.
If an individual meets all three of these criteria, then a written contract must be executed to memorialize the independent contractor arrangement.
The “Independent Contractor Law” authorizes the Attorney General to issue civil citations for violations, including assessing fines of up to $25,000, and to pursue criminal prosecution leading to fines of up to $50,000, imprisonment and debarment from working on public projects for up to five (5) years. Notably, an individual may also institute an independent civil action against the employer which may entitle the individual to treble damages and attorneys' fees. Potential civil and criminal liability extends to the employer’s president, treasurer and any officer or agent functioning in a management capacity.
The Massachusetts Attorney General has advised that the Independent Contractor Law excludes far more individuals from independent contractor status than do federal regulations and prior Massachusetts law. Mount Holyoke managers may find that independent contractors who were properly classified as independent contractors must now be re-classified as employees. Re-classifying individuals will require careful, written communication with the affected individuals.
All departments considering hiring individuals as independent contractors should analyze whether such individuals actually satisfy the three-factor test outlined above. Significantly, a written contract is an absolute requirement, although its existence will not insulate the College from mis-classifying an employee as an independent contractor.
If hiring an individual does not meet the three-factor test outlined above, you should contact Human Resources to investigate hiring the individual as a “casual, part-time or short-term non-benefited employee.