128 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP X. CLASSIFYING WORKERS AS INDEPENDENT CONTRACTORS One of the most challenging workplace issues facing Massachusetts businesses is the correct classification of certain workers as independent contractors rather than employees. In the past, the definition of an independent contractor was more flexible, and many companies retained independent contractors for a variety of reasons: to supplement their work force, to provide unique or specialized skills, to complete a defined task or project, or to augment their staffing levels for a short term. The definition of an independent contractor has become stricter, and Massachusetts and federal law specifically regulate and limit the circumstances under which a worker may legally be classified as an independent contractor.743 The Massachusetts Independent Contractor Statute is one of the most restrictive in the country, sharply limiting who may be classified legitimately as independent contractors.744 The Office of Massachusetts Attorney General has issued an advisory on the statute (148B Advisory), which warns companies of the risks of associated with misclassifying individuals as independent contractors rather than employees. Those risks include civil and criminal charges, including insurance fraud, violation of minimum wage and overtime laws, and failure to keep full and accurate payroll records.745 While a company may challenge the Attorney General’s position in 743 See M.G.L. ch. 149, § 148B(a). Depending on the issue at hand, the law determining whether an individual may be classified as an independent contractor varies. The number of different tests for independent contractor status is evidence of the complexity of this area of law. See Camargo’s Case, 497 Mass. 492, 500 (2018) (identifying the different independent contractor classification standards under Massachusetts wage and hour, unemployment insurance, workers’ compensation insurance, and tax withholding laws). For purposes of minimum wage, overtime pay, timely payment of wages, and personnel recordkeeping, the more restrictive Massachusetts Independent Contractor Statute applies, as discussed in this chapter. M.G.L. ch. 149, § 148B(a). For purposes of the Massachusetts Unemployment Insurance Statute, a similar but less restrictive standard applies. M.G.L. ch. 151A, § 2. For purposes of the Massachusetts Workers’ Compensation Statute, a twelve-factor test applies to determine independent contractor status. See Whitman’s Case, 80 Mass. App. Ct. 348, 353 n.3 (2011). The Massachusetts Department of Revenue uses the IRS twenty-factor test to decide whether workers are independent contractors for state wage withholding purposes. Effect of New Employee Classification Requirements Under M.G.L. ch. 149, § 148B on Withholding of Tax on Wages Under M.G.L. ch. 62B, Department of Revenue TIR 05-11 (2005). The DOL looks to the “economic reality test” in enforcing the FLSA. See Administrator’s Interpretation, No. 2015-1 (Dep’t of Labor July 15, 2015). The economic reality test has approximately six factors but focuses somewhat heavily on whether the worker is economically dependent on the company or in business for him or herself, along with the degree of control that the company has over the worker. See id. Although the conclusions under the various tests may be similar, separate analysis is required to avoid violations. 744 See M.G.L. ch. 149, § 148B(a). The California Supreme Court adopted the Massachusetts test regarding independent contractor status for California wage and hour law, characterizing the test as “simpler [and] clearer” and explaining that the Massachusetts test is more consistent with the broad reach of California wage orders. Dynamex Ops. West v. Superior Court, 4 Cal. 5th 903, 950-51 n.20, 956-57 n.23 (2018). 745 Massachusetts Attorney General Advisory 2008/1, at 1, 4. The Attorney General most closely scrutinizes situations in which the following factors are present: • Individuals are providing services for an employer but are not reflected on the employer’s business records • Individuals are providing services who are paid “off the books,” “under the table,” in cash, or provided no documents reflecting payment • Insufficient or no workers’ compensation coverage exists • Individuals are providing services who are not provided 1099s or W-2s by any entity
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