Why do employers misclassify employees as independent contractors?

Attorney Answer: Because it is generally more cost-effective for companies to use independent contractors as opposed to employees,    employers routinely misclassify persons as independent contractors when they should lawfully classify them as employees.   If you’ve been treated as an independent contractor,  you understand the consequences of that classification:   you don’t participate in the company’s benefits program,   you have to obtain your own workers compensation insurance,  and you have to pay both the employer and employee portions of the Social Security tax.

Thankfully the law takes a dim view of attempts by companies to engage in such misclassification.   Under Massachusetts law,  an individual performing a service is considered to be an employee unless that the employer can prove the following:

a.  That the individual is free from control and direction in connection with the performance of the service;

b.  That the service is performed outside the usual course of business of the employer;  and

c.  That 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.

An employer’s failure to prove any of these three criteria is fatal to classification of the individual as an employee and subjects the employer to liability for three times the amount of damage sustained by the individual,  along with attorney’s fees.

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