CWS 3.0: July 24, 2013

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Report Calls for Change in ‘Harshest’ IC Law

An organization in Massachusetts released a report last month urging a change in the state’s independent contractor law, saying employment attorneys call it the harshest such law in the country. It says the state loses out on more than 43,300 self-employment startups each year as a result of the rules.

The report, “Re-Opening the Main Road to Self-Employment in Massachusetts,” is by New Jobs for Massachusetts Inc., an organization that advocates for private-sector job growth. It says the law virtually prohibits self-employment in service occupations. For example, an accountant can’t legally do 1099-type accounting work with an accounting firm, according to the report.

“By restricting service job growth, the [Massachusetts Independent Contractor law] retards our entire state economy,” the report says.

The only legal way to meet the law, according to the report, is to meet all three tests:

  • The worker must be free of direction and control.
  • Work must be outside the “usual course” of the service customer’s line of business.
  • The individual must be “customarily engaged in” work of the same nature.

If a contractual relation is found to fail one of the tests, the contractor customer becomes liable for “damages of three times all possible compensation and benefits which might have been paid if the contractor were an employee,” according to the report.

Prior to 2004, the second bullet point included wording that work must be either outside the usual course of the buyer’s business or be performed outside of the buyer’s place of business, the report says. The change in 2004 removed the wording that allowed for work to be done outside the buyer’s place of business.

Massachusetts could fix the law by simply adopting the IRS standard for independent contractor compliance, according to the report. It also cited two pieces of legislation that would fix the bill: Massachusetts Senate Bill S.886 and House Bill H.3313.

To download a copy of the report, click here.

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