With Spring right around the corner many businesses will start to think about seasonal help. As they do, it is very important for employers to make sure that all their workers, whether they are permanent or seasonal, are classified properly in their systems. Failure to do so is in violation of Massachusetts General Law M.G.L. c. 149, s. 148B and may be illegal in your state, as well.
In 2000, the Department of Labor commissioned a study through the unemployment system and found that 30% of workers were misclassified nationally. For employers, the benefits for keeping a worker as an independent contractor are significant savings in payroll, tax and overhead costs. At the same time a worker will forfeit their rights under FLSA and other benefits and protections provided to employees.
So, how do you know if a worker should be an employee or is an independent contractor? According to the MA Attorney General’s Office Fair Labor Division,Massachusettslaw requires all employers to classify anyone working for a company as an employee unless the employer can prove that the individual meets certain criteria to be considered an Independent Contractor.
In order to be considered an Independent Contractor, an individual must be:
- free from the employer’s direction and control as it relates to the service he or she is being asked to perform
- performing a service that is not part of the employer’s normal type of business
- performing this type of service independentl
These regulations make it very difficult to classify people as Independent Contractors. Think, for example, of the extra accounting hires needed just during tax season. If the regular course of business is tax accounting, then people hired to help out during the busy season who are doing the same work as other employees there year round, should also be employees. They may be temporary, but they should be employees nonetheless.
While many workers may choose to be an independent contractor, the law does not specify anything about the worker’s choice. For example, if you have a graphic designer handling overflow work at an ad agency, even though they may want to remain an independent contractor, if they’re reporting to an account manager who controls the work and there are employees of the firm doing similar work, you’re likely going to run into trouble keeping them as an independent contractor.
Do you think there are grey areas when it comes to classifying individuals as employees or independent contractors? What situations have you come across where this has not been an easy determination?
This article was written by Kendra Bissonette, Executive Recruiter at Insight Performance