THE MASSACHUSETTS INDEPENDENT
CONTRACTOR ANOMALY:
What is it and how can it be managed?
Presented to
M&A Club Boston
Needham Sheraton Hotel, Needham, MA
Wednesday, December 11, 2013
By
Michael J. Radin, Esq. and Matthew S. Furman, Esq.
Tarlow, Breed, Hart & Rodgers, P.C.
Boston, Massachusetts
MRadin@tbhr-law.com
Other States / Traditional Test
E.g. IRS’s 20 Factors:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Worker compliance with
instructions required;
Training;
Integration of worker’s services
into the business;
Services are rendered personally;
Ability to hire, supervise and pay
assistants;
A continuing relationship;
Set hours of work are established;
Full time is required;
Work performed on business
premises;
Services performed in a set order
or sequence;
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Oral or written reports required;
Payment by the hour, week or
month;
Payment of business and/or travel
expenses;
Furnishing of tools and materials;
Worker’s investment in facilities
used in performing services;
Worker’s realization of a profit
or loss;
Worker performs services for
more than one business at a time;
Worker makes services available
to the general public;
Business has the right to
discharge worker; and
Worker has the right to terminate
the relationship.
An Employee Unless . . .
Before July 19, 2004:
Since July 19, 2004:
(1) such individual has been and will
continue to be free from control and
direction in connection with the
performance of such service under his
contract; and
(1) the individual is free from control and
direction in connection with the
performance of the service, both under
his contract for the performance of
service and in fact; and
(2) such service is performed either
outside the usual course of the business
for which the service is performed or is
performed outside of all places of
business of the enterprise; and,
(2) the service is performed outside the
usual course of the business of the
employer; and,
(3) such individual is customarily
engaged in an independently established
occupation, profession or business of the
same nature as that involved in the
service performed.
(3) the individual is customarily engaged
in an independently established trade,
occupation, profession or business of the
same nature as that involved in the
service performed.
Mass. Gen. Laws c. 149, § 148B (emphasis added to “Prong 2” on both).
Found To Be Employees
Delivery Drivers
Fucci v. E. Connection Operating, Inc. (2009)
Taylor v. E. Connection Operating, Inc. (2013) (drivers living and working in New
York with Massachusetts law clauses in their agreements).
Cleaning Franchisees
Awuah v. Coverall N.A., Inc. (2010) – “The[] undisputed facts establish that
Coverall sells cleaning services.”
See also DePianti v. Jan-Pro Franchising Int’l, Inc. (2013) (multi-tier system).
Contra Jan-Pro Franchising Int’l, Inc. v. DePianti (Court of Appeals of GA 2011)
Exotic Dancers
Chaves v. King Arthur’s Lounge, Inc. (2009)
Current Court Challenges
Real Estate Agents
Monell v. Boston Pads, LLC (2013) – “Therefore, it is impossible for salespersons
to satisfy the second prong of the independent contractor statute while
simultaneously following the applicable real estate laws. . . . [Because there is a
specific statue governing real estate salespersons,] ‘[t]he specific and not the
general provision applies.’”
This decision is currently under appeal.
Boston Taxicab Drivers
Sebago v. City of Boston et al. (2014?)
This case is currently under advisement.
Penalties For Noncompliance
I. Types of Damages
 Timely Minimum Wage and Overtime
 Benefits Other Employees Receive
 E.g. vacation pay, sick pay, holiday pay, healthcare, retirement
 Worker’s Compensation Insurance Premiums
 Other Liability Insurance Premiums
 Pay-to-Work Fees
Awuah v. Coverall N.A., Inc. (2011) – “In substance, [franchise fees]
operate to require employees to buy their jobs from employers, and in that
respect we think they violate public policy.”
II. Calculation of Damages
 Mandatory Tripling of All Damages
 Interest (12% per annum from final violation)
Responsibility For Penalties
“Any entity and the president and
treasurer of a corporation and any
officer or agent having the management
of the corporation or entity shall be liable
for violations of this section.”
Mass. Gen. Laws c. 149, § 148B(d) (emphasis added).
Managing The Anomaly
(1) Pay Minimum Wage and Overtime
(2) Deal with Legitimate Entities (?)
Attorney General’s Advisory (2008) – “The AGO will enforce the Law
against entities that allow, request or contract with corporate entities such as
LLCs or S corporations that exist for the purpose of avoiding the Law.”
Amero v. Townsend Oil Co. (2008) – “If incorporation alone sufficed . . .
many employers would require that their employees do just that, and thereby
exempt themselves from the requirements of the law.”
(3) Specific Releases
Crocker v. Townsend Oil Co. (2012) – “[An agreement] that includes a
general release, purporting to release all possible existing claims will be
enforceable as to the . . . Wage Act only if such an agreement is stated in
clear and unmistakable terms. In other words, the release must be plainly
worded and understandable to the average individual, and it must specifically
refer to the rights and claims under the Wage Act.”
(4) Restructure (?)