In a recent Massachusetts case, the court denied a motion to dismiss a misclassification claim (among other claims) based on its determination that it could not find, as a matter of law, that the plaintiffs did not perform any service for defendants. Plaintiffs distributed baked goods for the defendents. They formed a corporation and delivered defendants’ baked goods to defendants’ existing customers. Plaintiffs alleged, among other things, that they were misclassified as independent contractors. The court started its analysis by reviewing the requirements of Massachusetts independent contractor statute:
Under the statute, there is a presumption that “an individual performing any service . . . shall be considered to be an employee.” Mass. Gen. Laws ch. 149, § 148B(a); see also Sebago v. Bos. Cab Dispatch, Inc., 28 N.E.3d 1139, 1146 (Mass. 2015). The putative employer may, however, rebut the presumption of employment by establishing, by a preponderance of the evidence, each of the three following indicia of an independent contractor relationship, known as the “ABC test”:
- the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
- the service is performed outside the usual course of the business of the employer; and,
- the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
Mass. Gen. Laws ch. 149, § 148B(a); see also Patel I, 183 N.E.3d at 403; Sebago, 28 N.E.3d at 1146. “If any one of these criteria is not shown, the statute directs that the individual is an employee for purposes of [the Massachusetts] wage statutes and entitled to the protections set forth therein.” Patel I, 183 N.E.3d at 404–05.
The court said that the parties did not present an argument on the ABC test but focused on the question of whether the plaintiffs “performed any service” for the defendants. The court reviewed recent decisions addressing whether a party “performed any service” for another.
The Massachusetts Supreme Judicial Court’s decision in Patel II, however, set forth “a few principles . . . that guide [the] analysis.” 240 N.E.3d at 772. First, “the label—such as ‘franchisee’—used by the parties to characterize their relationship” is not dispositive. Id. at 773. Second, the analysis “focuses on the question whether the individual performs a service for the putative employer,” rather than on what “services [are] performed by the putative employer for the individual.” Id. at 774. Third, an individual does not “perform[] a service” within the meaning of the statute “simply because a putative employer derives revenue from the sales of its products or services to the individual who is claiming to be an employee[,] . . . regardless of whether the revenue derived . . . from such sales is a fixed fee or an ongoing, percentage-based royalty payment.” Id. Fourth, an individual may “perform[] a service” if “the individual carriesout labor that renders more attractive the putative employer’s products to the employer’s customers,” even if the individual is “not paid by the putative employer.” Id. at 776.
The court applied these principles and concluded court concluded that it could not say, as a matter of law, that the plaintiffs did not perform any service for the defendants.
In sum, based on the current record, the Court cannot find that Plaintiffs did not perform any service for Defendants as a matter of law. Defendants have not established, through undisputed facts, that Plaintiffs operated their business, T&B, “for themselves,” rather than for Defendants. Patel II, 240 N.E.3d at 768. The Court finds it “significant” that Plaintiffs, unlike the convenience store owners in Patel II, apparently serviced only existing customer accounts rather than “the general public,” 240 N.E.3d at 773, regardless of whether they could have solicited new customers and sold products other than Lepage’s, an issue that the parties dispute, cf. Coverall N. Am., Inc. v. Comm’r of Div. of Unemployment Assistance, 857 N.E.2d 1083, 1088 (Mass. 2006) (declining to adopt “capability test” that “considers what an individual is capable of doing as opposed to what an individual actually did”). Despite their ownership of T&B, Plaintiffs personally delivered Defendants’ products to stores, Defendants’ ultimate buyers—performing many of the same services for Defendants that they performed before forming T&B—and Defendants collected payments for those deliveries from many such buyers, remitting them to Plaintiffs, through T&B, after deducting, among other things, the cost of the products, meaning that Plaintiffs were, in effect, paid for delivering Defendants’ products. Although Plaintiffs arguably made a “business decision” to create and operate a business “using the goodwill and associated market power of [Defendants’] intellectual property,” Patel II, 240 N.E.3d at 774, the circumstances here, at least when viewed in the light most favorable to Plaintiffs, indicate that they did, in fact, perform a service for Defendants. Because Defendants do not argue that all three elements of the ABC test are satisfied, they cannot establish as a matter of law that Plaintiffs were not their employees. Accordingly, their motion for summary judgment on Plaintiffs’ misclassification claim is denied.
As a result, the court denied the motion to dismiss on the misclassification claim.
