Independent Contractors, Employers, and Unemployment Benefits in Massachusetts

From Go Local Worcester

The November 12, 2014 case of Subcontracting Concepts, Inc. v. Commissioner of the Division of Unemployment Assistance takes a practical look at when the independent contractor label might not stick. In that case, the plaintiff was a business from New York who made couriers available to companies in need of a speedy messenger. The couriers had their own cars, did not negotiate their own fees for services, and had to report any accidents to the plaintiff among other restrictions. The couriers also signed a contract that, according to the decision, stated “no employer/employee relationship” existed between the plaintiff and their drivers.

The plaintiff’s position was that the couriers were not employees, only independent contractors. This became an issue when one of their drivers filed for unemployment benefits in Massachusetts.  Upon that filing, one of the questions became who should have to contribute to the benefits being paid to that driver. According to the Department of Unemployment Assistance, as well as the Appeals Court of Massachusetts, the plaintiff was on the hook.

Chapter 151A  of the Massachusetts General Laws lays out the legislative structure for unemployment benefits in the Commonwealth. The various sections include topics as varied as seasonal employees, the suspension of liquor licenses for failure to pay monies owed, as well as punishments for businesses and employees who try to game the system.

 Section 2 of Chapter 151A also provides a three part test for whether, or not, a service provided by an individual is an employee for the purposes of this law. In the Subcontracting Concepts decision, this is referred to as the “ABC” test and shows how the statutory requirements will be applied by the court to the specific facts of a case. The three parts to the test are:  a) whether the actor was free from the control of the business in question during the performance of services; b) whether the services were outside the usual course of business for the employer; and c) were part of an independently established “trade, occupation, profession, or business” that was separate from the employer.

When the judges applied this test, they found that Subcontracting Concepts was obligated to pay into the unemployment assistance fund. This was partially based on finding that even though the employee had signed an agreement stating that he was an independent contractor, he was functioning as an employee. Part (c) of the three part test requires a showing that the actor in question was engaging the employer as an “entrepreneur.” In the Subcontracting Concepts case, the court found that the couriers relied on the employer for their pay as many as 45 hours a week, required prior approval by the employer to perform work for other clients, and worked for no one else due to the lack of additional available time. This, in the court’s opinion, was inconsistent with a claim that this courier was able to conduct an enterprise independent from the services provided to Subcontracting Concepts, Inc. and was, therefore, an employee for the purposes of chapter 151A….”

Read the full story at Independent Contractors, Employers, and Unemployment Benefits in Massachusetts.

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