What’s The Difference Between An Independent Contractor And Employee?

Howard Stempler

Partner, Seder Law

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Massachusetts law recognizes several distinctions between independent contractors and employees. Understanding these differences is important because both kinds of workers have their own unique sets of rights. Employers who misclassify their employees could unwittingly expose their companies to legal liability. Does your business work with both independent contractors and regular employees? Let SederLaw explain the difference and help protect your best interests.

Employees vs. Independent Contractors

In general, most people who work – who provide labor to companies – are considered employees under Massachusetts law. This classification is important because being an employee entitles an individual to certain benefits such as minimum wage and overtime pay. That, in turn, means that a company’s failure to provide those benefits could open the door to serious liability. That could include civil penalties and even criminal punishment.

But there are exceptions. A company that wants to treat a worker as an independent contractor must prove that the work:

  • Is done without the control or direction of the employer. This means that not only must a contract not create an employer-employee relationship, but the work must in fact meet this standard. In other words, an employer can’t contractually define a worker as an independent contractor while actually treating that individual as an employee.
  • Is performed outside the usual scope of the employer’s business. If the worker is doing the same kind of work that everyone else in the company is doing, it’s highly unlikely he or she is an independent contractor. Conversely, bringing in someone to perform a one-time task or service for the company that’s outside of its usual line of work will more likely be an independent contractor situation.
  • Is performed by someone with their own business or trade. This element is satisfied when a worker provides similar services to other businesses and has set up a company with the purpose of doing so. The worker must be customarily engaged in an independently established trade or occupation to qualify as an independent contractor.

Misclassifcation of Workers

Misclassifying a worker can not only get a business in trouble with the state but with the federal government as well. The IRS has a number of different factors it uses to evaluate the relationship between the worker and the company, but they all come down to a fundamental question: how much control does the company maintain over the worker? For example:

  • Does the company tell the worker how to do his or her job, or claim the right to do so?
  • How is the worker paid?
  • Are expenses reimbursed?
  • Who provides tools and supplies, the company or the worker?
  • Is there a written contract between the company and worker, and what does it say?
  • Will the relationship between the worker and company continue beyond a single task?

There are many benefits incident to being an employee that touch on taxes, wages and hours, unemployment, workers’ compensation, retirement plans, and more. A company that runs afoul of the law may be forced to pay accumulated benefits to workers who should have been treated as employees. And that’s on top of penalties and other legal issues the company could face.

Contact Our Worcester Employment Law Attorney Today

Hiring independent contractors is a wise decision for many businesses because of the flexibility and skill sets these workers provide. But it has to be done correctly. SederLaw is ready to advise your company on the differences between contractors and workers so you don’t incur unnecessary liability. Reach out to us today to learn more.