Welcome back to the fifth and final installment in our Independent Contractor vs. Employees series. Last week (will link to blog last week once it is posted), we discussed the common law factor test that the IRS established to distinguish an employee from a contractor. While this test “worked” for a while, it wasn’t until 2004 that a scarcely noticed amendment changed the Commonwealth of Massachusetts’ standard for determining whether an individual is an employee or independent contractor.
Let’s discuss this change…
The new law created a much stricter standard than the IRS’s factor test for determining contractor status. It also made it much more likely that individuals customarily considered independent contractors now being employees under Massachusetts’ law. This new law created a three-prong test to find out whether or not an independent contractor relationship exists. A limousine company would be required to pass all three prongs, being:
1. 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
2. The service is performed outside the usual course of the business of the employer; and
3. 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.
Now, according to the Massachusetts Attorney General, “…a worker who performs the same type of work that is part of the normal service delivered by the employer MAY NOT be treated as an independent contractor.” This MUST be followed! If not, the penalties are harsh, from $25,000 or imprisonment up to one year for a first offense to $50,000 and imprisonment up to two years for a second offense.
Many limousine companies find that the best solution to avoiding penalties is to simply file their workers as employees. Why make it harder than it needs to be? Just remember, it is your responsibility to protect all of your employees, especially with limousine insurance and workers compensation. For more information on either, contact our agents at Wolpert Insurance! We are the experts and would be happy to answer your questions, assist you, and provide you with a free quote.
We hope you have enjoyed our 5-part series!