The use of independent contractors is an important component of many Massachusetts businesses, but since the establishment of the Independent Contractor Statute in 1990 and more recently the Amendments of 2004, it comes with some inherent risks that small businesses owners should be aware.  Massachusetts’ Independent Contractor Statute creates the ”presumption” of employee status for the purpose of the state’s wage laws and requires businesses to meet a strict three-part test to overcome this presumption.  Since the Amendments of 2004, the test virtually makes it impossible for a company to meet the new criteria if its “independent contractor” is providing services that are within the company’s usual course of business.  As a result, those companies who misclassify an individual as an independent contractor versus employee are now exposed to serious penalties for noncompliance.  Maybe even more important than the penalties is the potential exposure for a class action suit.  Although the stricter application found in the 2004 Amendments have been around for nearly seven years many Massachusetts’ small businesses still apply the IRS test or Fair Labor Standards Act test for determining whether a person is an “independent contractor” versus “employee”.  Attempts are being made to broaden the strict language found in the 2004 Amendments, however, until such time as this language is broadened it is very important to review any individual that you are currently classifying as an “independent contractor”.  If you have any questions concerning an individual’s status, please feel free to call Attorney Scott J. Clifford at 781-829-9100.

In the case of Wentworth v. C. Becker Custom Building, the Supreme Judicial Court of Massachusetts ruled that a general contractor that pays workers’ compensation benefits to an employee of an uninsured subcontractor is not immune from liability for common-law claims the injured employee may have against the general contractor. Employers are typically exempt from common-law liability under G.L.c. 152, § 23 of the Massachusetts Workers’ Compensation Statute. The general contractor in this case argued that since it was required to cover an injured employee of a subcontractor who failed to maintain workers’ compensation coverage that it should not be exposed to a direct lawsuit by the employee on the employee’s common-law claims (which are typically referred to as third party claims). The SJC concluded that § 23 only applies to employers and employees, and did not apply to a general contractor who may be obligated to provide workers compensation benefits to employees of an uninsured subcontractor pursuant to § 18 of the Statute.

Employers should be aware that beginning in early November, 2010 some of the changes in the bill aimed at overhauling the state’s Criminal Offender Record Information (CORI) system will take place. The major change that will affect most employers is that most employers will be barred from questioning potential employees about their criminal background during the application process. This will mean the elimination of the standard section of an employment application asking about whether an applicant has been convicted of a crime. An employer needs to think about why they want the information and how it is necessary for their business. More sweeping changes will occur in May, 2012 when five years will be removed from the current waiting period to seal most misdemeanor and felony convictions (some records can never be sealed).