Both businesses and individuals have reasons to favor an independent contractor arrangement rather than an employment relationship. Unemployment tax obligations, workers’ compensation and state statutes regulating wages and hours are important issues for any business. Individuals often request independent contractor status, usually for their own tax considerations.
In Massachusetts’ law, for purposes of workers’ compensation and wage laws, there is a presumption of an employer-employee relationship unless three conditions are met:
(1) Freedom from control - Is the worker free from management control and direction? Does he have discretion / decision making power in performing the service?
(2) The work is outside the employer’s usual course of business - Is the work to be performed by the individual ordinarily done within the business setting? Is it unique or different from the work normally carried out?
(3) The work is engaged in an independent trade - Is this person normally engaged in the same type of occupation, profession or business?
The Department of Workforce Development (DWD)/ Division of Unemployment Assistance (DUA) is particularly stringent in its application of the employee presumption. It’s also true that individuals who happily agreed to serve as independent contractors sometimes run down to the unemployment office to apply for benefits once their contracts have been terminated.
The DWD narrowly interprets the term “freedom from control.” In a recent decision, an independent contractor who performed most of his work out of his own garage, using his own laptop and tools, was found to be an employee. The reasons: he did report into the business on occasion; he used the company’s timesheet to report his hours; and he worked at the employer’s premises several times when his own equipment was not sufficient for the particular job. He was not “supervised” in the traditional sense but he was viewed as under “control” of the business. He was allowed to collect benefits.
There are situations where an outside service provider is usually an independent contractor, such as an attorney, accountant, web designer or bookkeeper. Other functions are not as easily categorized, especially with individuals who perform the work at your premises. If you’re unsure whether a worker meets all three conditions, you should consult an employment law attorney.
Considering the federal analysis test (20 factors used by the Internal Revenue Service), as well as the Fair Labor Standards Act, more often than not a person providing services to your business is an employee.
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