Massachusetts employer cited $6.2 million for classifying workers as independent contractors

The Massachusetts Attorney General (AG) announced on March 30 that the office issued three citations totaling more than $6.2 million against an employer for allegations of:

• Misclassifying employees as independent contractors,
• Failing to furnish suitable paystubs, and
• Failing to provide earned sick leave per state law.

The AG’s office began its investigation after receiving complaints from former and current workers. The investigation showed that the employer misclassified its delivery drivers as independent contractors.

State law

Under Massachusetts state law, employers are to presume that all workers are employees unless they can demonstrate that the work is:

A. Done without the direction and control of the employer,

B. Performed outside the usual course of the employer’s business, and

C. Performed by someone who has their own independent trade or business.

This is commonly referred to as the “ABC” test. The employer failed to prove its workers met criteria in the independent contractor misclassification statute.

Other states have versions of their own “ABC” tests. Employers should carefully assess worker classification rules under both state and federal laws.

Federal law

While this incident involved a state law, in May 2023, employers can expect to see a final rule about the independent contractor status under the federal Fair Labor Standards Act (FLSA).

The federal law won’t adopt an ABC-basis but based on the language of the proposed rule, the final rule will likely:

• Align the DOL’s approach with courts’ FLSA interpretation and the economic reality test.
• Restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.
• Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
• Revert to the longstanding interpretation of the economic reality factors. These factors include the investment, control, and opportunity for profit or loss. The integral factor, which considers whether the work is integral to the employer’s business, is also included.
• Assist with the proper classification of employees and independent contractors under the FLSA.
• Rescind the 2021 Independent Contractor Rule.

Key to remember: While this violation occurred under Massachusetts law, employers nationwide must follow employee classification rules in their states of operation, as well as comply with federal employment laws.