1. Review and Analysis of the
Massachusetts Independent
Contractor Law
G.L. c. 149, § 148B
Presented by:
Attorney Michael S. Gove
Employers Association of the NorthEast
Finance & Business Roundtable
March 9, 2012

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DAVID A. SHRAIR
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JOHN W. DAVIS
MICHAEL S. GOVE
DAWN D. McDONALD
SUSAN A. MIELNIKOWSKI
THOMAS A. MIRANDA
RONA S. FINGOLD (of counsel)

5. The Benefits of
Independent Contractors
Why Use Independent Contractors?
Cost Savings
 Reduce costs associated with employee taxes.
 Reduce costs associated with unemployment or worker’s
compensation insurance programs.
 Reduce costs associated with employee benefit plans.
 Reduce costs associated with training new employees.
 Reduce costs associated with overhead required to
administer or supervise employees.

6. The Benefits of
Independent Contractors (cont.)
Why Use Independent Contractors?
Other Benefits
 Flexibility in designing, increasing, and decreasing your
workforce.
 Easier to avoid lawsuits based on laws designed to protect
employees in the workforce.
 Easier to resist the creation of labor unions.

7. Classification of a worker as an employee is presumed unless:
A. The individual is free from control and direction; and
B. The service being performed is outside the usual course of
the employer’s business; and
C. The individual regularly performs the type of service as an
independently established occupation.
The “ABC” Test

8. The burden of proof is on the employer.
All three parts of the ABC Test must be met.
The ABC Test does not take into account:
 A failure to withhold taxes.
 A failure to pay unemployment contributions.
 A failure to pay worker’s compensation premiums.
 Whether the employee has secured worker’s
compensation insurance as a sole proprietor.

9. The misclassification of employees:
‡ Deprives employees of protections and benefits of
• unemployment insurance.
• worker’s compensation.
• minimum wage laws.
• employer provided benefit programs.
‡ Deprives the Commonwealth of tax revenues.
• A 2004 study conducted by Harvard University estimated the
annual cost to be $152 million in lost income tax revenue, $91
million in lost worker’s compensation payments, and $35.1 million
in lost unemployment insurance taxes.

10. The misclassification of employees:
‡ Increases costs for the Commonwealth for health care and
worker’s compensation for uninsured workers.
‡ Creates a competitive disadvantage between companies that
misclassify employees and companies that comply with the
law.

11. Free from Control and Direction
• The worker must be free from control and
direction, both under the “contract for the
performance of service and in fact.”
• Does NOT require an independent contractor
be completely free from any outside forces.

12. Examples
Oliveira v. Advanced Delivery Systems, 27 Mass.L.Rptr. 402 (2010):
Even though the written contract between the parties stated a delivery
truck driver was to “determine the means of performance” of the job,
the court found there was some amount of control where the driver was
frequently contacted to monitor progress on deliveries and was required
to check in when delivery was complete for next assignment.
Amero v. Townsend Oil Co., 25 Mass.L.Rptr. 115 (2008):
An employer’s right to control a worker was clear when the employer
required that the worker paint the employer’s logo on the worker’s
vehicle, that the worker only deliver fuel oil to the employer’s
customers on days chosen by the employer, and when the worker had
no discretion in the price of the oil sold.

13. Factors of Common Law Test Applicable
 Before Section 148B was amended, the courts
utilized a twenty-part test as illustrated by a ruling
issued by the IRS to determine whether an
employer had the right “to control and direct” a
worker.
 Now, the same analysis is often used by courts
and some commentators in determining the first
part of the ABC Test.

14. Outside the Usual Course of
the Employer’s Business
• Does not include every aspect of an
employer’s business.
• The service being performed by the worker
can be incidental to the business of the
employer, but it cannot be necessary.
• Imagine the services being provided were
stopped: would the business continue to exist?

15. Examples
Monteiro v. PJD Entertainment, 29 Mass.L.Rptr. 203 (2011):
Court determined that a business that served alcohol and
provided a venue for exotic dancers was “in the business of
providing adult entertainment.”
Awuah v. Coverall North America, 707 F.Supp.2d 80 (2010):
Court determined that a franchising entity which held itself
out as the contracting party with clients, received a
percentage of all fees for services provided by the
franchisees, and provided training and uniforms to
franchisees, was in the same business as the franchisees.

16. Regular, Independent Performance of Service
• The worker must be contractually able to provide
services to anyone who wishes to utilize the
worker; and
• The worker must in fact be able to provide
services to anyone who wishes to utilize the
worker. The nature of the business cannot require
the worker to depend on a single employer.

17. Factors to be Considered
Boston Bicycle Couriers, Inc., 56 Mass. App. 473 (2002)
i. The worker is free to perform services to others
without interference from employer.
ii. The worker’s business was created and exists
separate from the relationship with the employer.
iii. The worker’s business is not dependent on
engagement by any particular employer.
iv. The worker’s business would survive without the
employer.

18. Examples
Boston Bicycle Couriers: Court determined that the couriers did not work for
other services, stopped delivering packages when their services were
terminated with the employer, that employer provided all equipment to
couriers, and that the contracts were with, and prices were set by, the
employer.
Athol Daily News, 439 Mass. 171 (2003): Court determined that paper delivery
workers were free to conduct other services or deliver other items to their
clients, that the workers purchased their own newspapers and resold them
to clients, and that the scope of the worker’s jobs were dependent on their
ability and initiative in gaining more clients.
- The delivery of newspapers in Athol illustrates the “incidental”
factor of part two of the ABC Test.

19. Violations of Section 148B requires two steps:
i. misclassification of an employee and
ii. violation of one of the following:
• Ch. 149 (wage and hour laws)
• Ch. 151, s. 1A, 1B, and 19 (minimum wage laws)
• Ch. 151, s. 1, 1A, 1B and 19 (overtime laws)
• Ch. 151, s. 15 (accurate records law)
• Ch. 62B (withholding of taxes)
• Ch. 152, s. 14 (worker’s compensation law)

20.  Criminal and civil penalties.
 Statute of limitations for criminal and civil will
vary depending on the claim.
Enforced by the Attorney General.
 “Willful” vs. “Unintentional” violations.
Willful includes a “reckless disregard” for
whether the conduct was prohibited.

21.  Willful Violations:
 First Violation: Fine up to $25,000 and/or
imprisonment for up to one year.
 Second Violation: Fine up to $50,000 and/or
imprisonment for up to two years.

22.  Unintentional Violations:
 First Violation: Fine up to $10,000 and/or
imprisonment up to six months.
 Second Violation: Fine up to $25,000 and/or
imprisonment up to one year.

23. Debarment: A prohibition against performing
any services on any public work.
 Willful violations of Section 148B result in a
mandatory five year debarment.
 Unintentional violations of Section 148B result in
a debarment period up to six months (for the first
offense) and up to three years (for any subsequent
offense).

24.  Civil Penalties
 Also enforced by the Attorney General
 Civil citations can be up to $25,000.
 Limited to $15,000 if no previous violations.
 Limited to $7,500 if no previous violations and
violation was unintentional.
 Automatic debarment for two years after three
civil citations.

25. Private Actions Against Employers
Other remedies at law or in equity are explicitly allowed by
Section 148B.
• Violation of the wage statute:
– G.L. c. 149, s. 150: Treble damages, plus attorneys’ fees and costs.
• Violation of the unemployment compensation statute:
– G.L. c. 151, s. 1B: Treble damages, plus attorneys’ fees and costs.
• Willful or knowing violations implicate Chapter 93A:
– Treble damages, plus attorneys’ fees and costs.

26.  Who’s Liable?
 “Any entity and the president and treasurer of a
corporation and any officer or agent having the
management of the corporation or entity.”
 Somers v. Converged Access, Inc., 454 Mass. 582 (2009)
Court determined the worker was an employee and found liability
for violations of wage laws and unemployment laws fell against
both Converged Access, Inc. as the employer, and also against Per
Suneby, the President and Chief Executive Officer.

27. Calculation of Damages For Private Actions
Somers v. Converged Access, Inc.
 Presume the payment to the worker for services as an
“independent contractor” are the worker’s base hourly rate.
 Damages equal wages and all benefits not paid.
 The employer cannot argue that it would have paid the
worker less if the worker had been properly classified as an
employee.

28. Incorporation by the Worker
• Incorporation of the worker will assist with, but not
guarantee, satisfying part three of the ABC Test.
• The Attorney General will look beyond the entity to
determine if:
i. the services of the entity are available to more than one
employer;
ii. the services provided by the entity are identical to the services
provided by the employer; and
iii. the entity was created at the request or requirement of the
employer.

29. Incorporation by the Worker (cont.)
• Even if the worker is incorporated, the
Attorney General may find the worker:
i. is subject to the employer’s control and direction
(a violation of Part One of the ABC Test), or
ii. is performing services within the usual course of
business of the employer (a violation of Part Two
of the ABC Test).

30. Using Leased Workers
• Temporary Placement Agencies
– Responsible for payment of wages, unemployment and worker’s
compensation premiums, and withholding requirements.
• Be Careful! Courts may find “joint employer” status.
– Company A possesses “sufficient control over the work of the
employees” of Company B.
– Applied by Massachusetts courts to employee discrimination
laws (Commodore v. Genesis Health Ventures, 63 Mass.App.Ct,.
57 (2005)), and to worker’s compensation laws (Case of
Whitman, 80 Mass.App.Ct. 348 (2011)).

31. Independent Contractor Law v. IRS and Common Law Test
 Violations of Section 148B require misclassification and violation
of another law (c. 149, c. 151, c. 62B, and c. 152).
 BUT, Chapter 62B and Chapter 152 contain their own definitions of
“employee” and the Department of Revenue and the Department of
Industrial Accidents have stated that the definitions in Section 148B
will not apply to determinations of employee status for purposes of
tax withholding or worker’s compensation.
 “The classification of certain persons as employees or independent
contractors for purposes of chapter 149 does not govern the status of
such persons for purposes of chapter 62B.”
- TIR 05-11: Effect of New Employee Classification Requirements.

32. Independent Contractor Law v. IRS and Common Law Test
 With different definitions, a specific worker could
intentionally be treated as an:
 Employee under Chap. 149 and 151
= Payments.
 Independent contractor under Chap. 62B and 152
= No payments.
 Unintentional misclassification under the ABC Test that
happens to qualify under the common law test may be able
to avoid liability for violations of Chap. 62B and 152.

33.  The Mass. Dept. of Revenue and Dept. of Industrial
Accidents continue to apply the common law test.
Twenty factors:
1. Worker compliance with instructions required.
2. Required training by the employer.
3. Greater integration of worker’s services into business.
4. Services rendered personally by worker.
5. Employer retains ability to hire, fire, supervise and pay
assistants.
6. Worker and employer have a continuing relationship.
7. Set working hours are established.

34. 8. Full time employment is required.
9. Services are performed on the business premises.
10. Services are performed in a set sequence.
11. Oral or written reports to the employer are required.
12. Payment is made in regular intervals.
13. Employer pays for business and travel expenses.
14. Employer furnishes tools and materials.
15. Employer, rather than worker, invests in facility.
16. Employer, rather than worker, realizes profits or loss.
17. Worker only performs services for one employer at a time.
18. Worker does not make services available to general public.

35. 19. Employer has right to discharge worker.
20. Worker has right to terminate relationship.
 Not the current test under Massachusetts law.
 But these factors can be used to assist in analyzing part
one of the ABC Test.

36. Mass. Delivery Association v. Coakley,
2012 WL 170877 (January 20, 2012)
 Currently ongoing in Massachusetts federal court.
 Plaintiff alleges that Section 148B infringes on a federal
law setting rates for motor carriers under the Federal
Aviation Administration Authorization Act.
 District Court determined it would abstain from making a
decision because a few members of the Mass. Delivery
Association had raised the issue as defendants in cases
brought by the Attorney General’s office.

37.  In January, Appeals Court determined that abstention was
not appropriate and that the challenge could continue.
 A victory for the plaintiff in this case, or for the individual
defendants in the state litigation, would open the door for
further constitutional challenges, in cases where federal law
may preempt the definition of employee found in Section
148B.

38.  Section 148B imposes a strict standard.
 Must meet all three parts of the ABC Test.
 Penalties imposed for intentional and
unintentional violations.
 Liability against employers and individuals.
 Incorporating or leasing workers is not a
guaranteed solution.
 May not apply to withholding or worker’s
compensation violations.