Mass. Must Clearly Define Employee Status
Last month, in a packed committee room, small businesses of every variety told lawmakers that the state’s definition of an independent contractor is making it impossible for them to get work. At a time of record long-term unemployment, consumer pessimism and business uncertainty, this situation is unacceptable.
The dispute over how to define independent contractors and employees has a long and sometimes tortured legislative history in Massachusetts. Since income taxes, Social Security benefits, health insurance, unemployment compensation, workers' compensation, various other benefits, freedoms, flexibility and profitability — as well as employer responsibilities — are all determined based on whether a worker is defined as an employee or an independent contractor, this is a critical issue.
In 2004, under the guise of public construction reform legislation, the Massachusetts Legislature altered the definition of independent contractor in Massachusetts for all employers. But instead of clarifying the matter, the change created even more confusion among business owners, workers, accountants, lawyers, insurance companies and government agencies. In fact, some people are now viewed as employees by some state agencies, and as independent contractors by others. Selective enforcement, while welcome in some industries that had historically been considered independent contractors, has also served to add to the confusion. As legislators heard, the Massachusetts law has created hardships for independent contractors seeking work from companies that don't know how to categorize them. Too often, people lose out on work, especially by potential employers from out of state who just don’t want to deal with the morass.
All this confusion is damaging to the state's business climate. It imposes one more unnecessary cost of doing business in Massachusetts. It fails to recognize the different ways people work and the value workers place on independence and flexibility in our modern economy. And since the Massachusetts definition doesn’t exist anywhere else, it stands out as another example of the impediments that often make this state a uniquely frustrating place in which to operate.
As more and more individuals become aware of the law and its enforcement, legislators are considering a fix to the problem that a broad business coalition, including the National Federation of Independent Business (NFIB), strongly supports. House Bill No. 1412 and Senate Bill No. 957 are based on common sense: Massachusetts should return to the traditional definition used in the other 49 states. It would allow small and independent business owners to rely on their own experience and on professional advice to determine worker classification, and it would let the courts and regulatory agencies resolve disputes based on well-established case law.
The Governor’s Task Force on the Underground Economy focuses on the failure of some businesses and employees to comply with worker classification laws. While NFIB fully supports compliance, we believe a large number of violations are caused by the law itself. The best way to increase compliance is to have one understandable and consistent statutory definition of independent contractor and employee.
Bill Vernon is state director for the National Federation of Independent Businesses (NFIB).
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