By Jenifer M. Pinkham, Esquire
The new Massachusetts Attorney General, Martha Coakley, has clearly set the tone in her administration that she will prosecute violations on the new Independent Contractor Law. In December of 2007, she fined Federal Express over $190,000 for misclassifying 13 ground delivery drivers as independent contractors rather than employees of FedEx.
Attorney General Coakley was quoted as saying, "Our office places a high priority on the proper classification of individuals in the workplace. The practice of misclassification does great harm, not only to misclassified workers and to the Commonwealth in the form of lost revenues, but also by putting law-abiding businesses at a disadvantage and we intend to pursue aggressively employers such as FedEx Ground when they violate the Commonwealth's Independent Contractor Law."
The Massachusetts Independent Contractor Law provides that an individual performing any service shall be considered to be an employee unless: (1) the individual is free from control and direction in connection with the performance of the service, both under his or her contract for the performance of service and in fact; and (2) the service is performed outside the usual course of the business of the employer; and, (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.
The Attorney General's office concluded that FedEx Ground intentionally violated all three prongs of the Independent Contractor Law by directing and controlling the activities of drivers and restricting the drivers' ability to deliver for any other entity. In addition, the investigation found that the drivers are performing the core business of FedEx Ground. The Attorney General's office found that by misclassifying the drivers, FedEx Ground was depriving their drivers of health care benefits, access to unemployment insurance, worker's compensation benefits, and in some cases, overtime pay. In addition, the AG stated that FedEx Ground deprives the Commonwealth of tax revenue by not deducting and withholding taxes from employee pay checks.
Less than a month later, the AG's office fined the owner of a small plastering corporation because he violated the Commonwealth's Independent Contractor Law by misclassifying seven of his employees as independent contractors. He was fined $6,000. These two prosecutions by the AG's office prove that she is interested in enforcing the law with both small and large companies in Massachusetts.
Further, the AG has drafted a new and more comprehensive Proposed Advisory with respect to the Massachusetts Independent Contractor Law, and it was published for comment in January of 2008. If and when the Proposed Advisory becomes official, a follow up newsletter article will be written. If you have questions regarding classifying your employees, please do not hesitate to contact Attorney Jenifer Pinkham at 781-848-5028 or jpinkham@sabusinesslaw.com.