39. Worker Misclassification Issues
The UI law carries a strong presumption that services performed are “employment.” Sometimes employers wish to have their employees characterized as “independent contractors” in order to reduce payouts for unemployment, workers’ compensation, and other employee costs. The UI law uses a three-part test under which any individual performing services will be presumed to be an employee unless the alleged employer can prove all three of the following:
(1) the worker has been and continues to be free from control and direction in performance of the service;
(2) the work is performed either outside the usual course of business or outside all of the enterprise’s places of business; and
(3) the worker is customarily engaged in an independently established business of the same nature as the service performed. G.L. c. 151A, § 2.
The employer bears the burden of proof on this issue. The employer’s failure to withhold federal and state income taxes or pay workers compensation premiums does not affect status determination. G.L. 151A, § 2. The employer’s description of the work in an employment contract or elsewhere is not controlling. SRH §§ 2009, 2011(D); Driscoll v. Worcester Telegram & Gazette, 72 Mass. App. Ct. 709, 893 N.E.2d 1239 (2008) (news carriers were employees where newspaper retained control over order in which newspapers were delivered and retained authority to discharge carriers because of customer complaints); Commissioner of the Div. of Unemployment Assistance v. Town Taxi of Cape Cod, 68 Mass. App. Ct. 426, 862 N.E.2d 430 (2007) (taxi drivers who had discretion to choose which shifts they worked and which customers to accept from company dispatch were independent contractors); BR-112274-XA (02/09/12) (owner-operator truck drivers who determined their own routes, hours, truck-repair/service providers, and insurance providers are not independent contractors because: (1) the truckers could not sublease or hire others to drive their vehicle without the employer’s approval; (2) the truckers could not refuse an assignment unless another trucker was available to take it; and (3) the truckers could not use their trucks to transport goods for other carriers without cancelling their lease agreement with the employer); BR-117473-XA (01/24/12) (pedicab drivers who were subject to a covenant not to compete for a time after their termination, restricted to operating their cabs within an employer-prescribed geographic area, and prohibited from operating any similar business in the employer’s area of operation were employees, but pedicab drivers working pursuant to the terms of a new contract removing those restrictions [including the non-compete covenant] were independent contractors); Coverall North America, Inc. v. Commissioner of the Div. of Unemployment Assistance, 447 Mass. 852, 857 N.E.2d 1083 (2006) (although employer claimed individual was a franchisee and not an employee, the court held the employer did not meet the third prong of the test where claimant performed janitorial services as an employee and where the nature of the business effectively compelled her to accept work solely from the employer); cf. De Giovanni v. Jani-King International, Inc., 262 F.R.D. 71, 84-85 (D. Mass. 2009); BR-108261-XA (3/10/10) (delivery drivers were not independent contractors because they were not permitted to carry competitors’ products without the employer’s prior approval); BR-102711-XA (11/21/2007) (mortgage originators could not be free from employer discretion and control, and could not engage in an independent trade or business, because they were required by law to perform work under the license of a broker); BR-121929-XA (6/26/12) (tutors, who were required to meet extensive reporting and performance requirements, were subject to so much direction and control by the employing unit within the meaning of G.L. c. 151A, § 2(a), as to be employees, notwithstanding the tutors’ high level of skill and the fact that several tutors held themselves out as independent contractors and performed tutoring services for other entities); Subcontracting Concepts, Inc. v. Commissioner of the Div. of Unemployment Assistance, 86 Mass. App. Ct. 644, 19 N.E.3d 464 (2014). The court ruled that a courier who drove his own vehicle, but was not allowed to have nonessential passengers and was required to report accidents, was an employee, even though claimant’s agreement with the employer stated that “no employer/employee relationship is created under this agreement or otherwise,” no taxes were deducted from claimant’s pay, and he received no benefits from the employer); BR-1919023 (1/14/15) (A person in a “talent” position was an employee where she was not “free from the direction and control of the employing unit when she performed her services.” The claimant relied on the employing unit’s instructions on where and how to perform the assigned marketing services; the employing unit, not the client, directly paid the claimant, and claimant had to accept the rate of pay that the employing unit offered to her); BR Issue ID: 0002 4356 65 (6/20/2014) (holding a worker who worked at a law firm that exercised a reasonable degree of control over her work was an employee, not an independent contractor)..
Employers are required to “keep true and accurate records of all individuals employed” G.L. c. 151A, § 45, and to pay contributions based on the wages of those employees. 430 CMR § 5.03(3). If the alleged employer raises a question about employee status, the case is sent to the Status Department, where the DUA Adjuster conducts a “status determination,” asking a series of questions of both parties to get at the facts relevant to the three-part test. An advocate may intervene and provide the Status Department with information. Both the alleged employer and the claimant are interested parties to this determination and may appeal an adverse determination.
In March 2008, Governor Patrick signed Executive Order #499 establishing the Joint Employment Task Force on the Underground Economy and Employee Misclassification, later codified in the General Laws. See St. 2014, c. 144, §§ 23, 24, adding § 25 to G.L. c. 23 and amending G.L. c. 62, § 21. The Task Force has since been replaced by a permanent Council on the Underground Economy (CUE). More than 17 state agencies participate in CUE, whose mission is to ensure business compliance with applicable state labor, licensing, and tax laws. A toll-free referral line (1-877-96-LABOR) and online referral are available to provide information and to receive complaints about suspected cases of misclassification. In 2014, DUA found over 450 misclassified workers and $5.5 million in unreported wages.