Independent Contractor or Employee? What it Means and Why it Matters

Employees have the benefit of a whole set of laws designed to protect them in the workplace. But what happens when an employer tells a worker that they are an independent contractor, or simply gives that worker a 1099? What you as a worker need to know is that whether you are an employee or an independent contractor doesn’t necessarily depend on what the employer says—it depends on the nature of the work you do.

Massachusetts has a three-part test that defines an independent contractor under the Wage Act, sometimes referred to as “the ABC test.” If these three elements are met, Massachusetts courts will find that someone is an independent contractor:

Control: an independent contractor provides a service to an employer and is “free from control and direction in connection with the performance of the service,” both under the terms of the agreement and in fact;
Employer’s Usual Course of Business: an independent contractor’s service is “outside the usual course of the business of the employer;” and
Individual’s Independent Business: an independent contractor is “customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.”

Federal law is not as protective of workers as Massachusetts law – under the Fair Labor Standards Act (FLSA), there is no strict test to determine who is an independent contractor. Instead, courts analyze the total activity or situation of the service provided and the relationship between the service provider, the employer, and the parties’ usual businesses. Although Federal courts consider factors similar to those used to determine the elements of the Massachusetts test, the Federal analysis is an overall consideration rather than a bright-line rule, like Massachusetts’ test.

In Massachusetts, all three of the ABC test factors must be present for someone providing services to be correctly classified as an independent contractor—otherwise, they are, by law, an employee. For example, a delivery driver for a newspaper that promised physical delivery of a paper to its subscribers was an employee, and not an independent contractor, because his work was not “outside the usual course of business” of the employer, but a taxi driver who owned his own cab and set his own schedule was not an employee of the dispatch company that only matched potential drivers with people looking for a taxi. All workers providing services to an employer are presumed to be employees unless the employer can prove that they satisfy the independent contractor test.

How someone is classified matters because employees have the benefit of more legal protections than independent contractors. Under Massachusetts wage and hour laws, which are based on the ABC test, most employees have the right to be paid bi-weekly, to accrue sick time, and to receive paystubs notifying them of deductions from their pay. They are protected from retaliation for seeking their rights under the wage and hour laws. Employees who are not paid on time can recover treble damages for late or missing payments. Under a different statutory test, employees who work for a public employer, like the Commonwealth or a city, have whistleblower protections. Workers who qualify as employees under a test very similar to the ABC test may qualify for unemployment if they are terminated.

Independent contractors’ protections are much more limited, but they do still exist. For example, independent contractors are protected against discrimination by the Massachusetts Equal Rights Act, though those protections are not as robust as 151B, the statute that protects employees who qualify under a broader multi-factor control test against antidiscrimination. If an employer does not hold up their end of the agreement, or doesn’t act in good faith, an independent contractor may be able to seek to have the agreement enforced.

Workers who are being treated by their employer like an independent contractor, but who are actually an employee under the Massachusetts ABC test, can bring a claim of misclassification to recover damages they have incurred as a result of being misclassified, such as late payments.

If you have been misclassified as an independent contractor or deprived of workplace protections, contact our employment attorneys at (617) 742-6020.