(Last Updated On: May 12, 2021)
According to a recent article in Forbes, the “gig economy is a term that refers to the increased tendency for businesses to hire independent contractors and short-term workers, and the increased availability of workers for these short-term arrangements.” Inuit estimates that “gig workers” currently represent about 34 percent of the entire workforce in the United States, and that it is possible the number of gig workers will rise to a total of 43 percent of the workforce by the year 2020. You might not even realize that you regularly rely on the gig economy in your everyday life. For example, Uber and Lyft drivers are gig workers, as are individuals who regularly rent rooms from their homes on Airbnb. Delivery drivers often are gig workers, too—such as drivers for GrubHub or OrderUp.
There are benefits and limitations to being part of the gig economy. As the Forbes article explains, “the gig economy is a mixed bag; it represents massive potential, but at the same time, fewer and more difficult opportunities [for workers].” More and more millennials are turning to the gig economy to find employment, especially in the years immediately after college, and numerous other workers who are having trouble finding full-time jobs or simply want to earn more money on the side are becoming Uber or Lyft drivers.
Some of the benefits to being part of the gig economy are that the hours are flexible, workers can make their own schedules, and many workers have the potential to earn more than they would in an hourly wage job that requires going to work and clocking in. However, there are downsides, too. For example, gig workers are not entitled to benefits, and there are fewer employment protections for them. What are independent contractor rights, and what protections are workers entitled to in Massachusetts?
Abuse of the Independent Contractor System
Are employers abusing the independent contractor system? Employers can save a substantial amount of money by hiring independent contractors instead of employees. For instance, all of the following are benefits to employers of the independent contractor system:
- No requirement to pay employer-provided benefits;
- No need to provide equipment or a work space;
- No requirement to purchase workers’ compensation insurance and other forms of insurance;
- No requirements with regard to wage taxes;
- No need to provide some of the same types of employer trainings required under law;
- Reduced liability in terms of lawsuits brought by employees (independent contractors are limited in their ability to bring a lawsuit against the employer compared to employees); and
- Reduced exposure more generally to employment claims.
While some independent contractor arrangements are lawful, some employers improperly misclassify employees as independent contractors in order to be eligible for all of the benefits mentioned above. As the U.S. Department of Labor (DOL) explains, employees sometimes can be misclassified as independent contractors and as such can be denied benefits and protections to which they are entitled. This benefits employers and harms the workers who are misclassified as independent contractors. Those workers end up without benefits, with fewer rights and with less job security.
Employee or Independent Contractor: 3-Prong Under Massachusetts Law
Are you an employee or an independent contractor? Independent contractor abuse can occur when a worker actually should be classified as an employee with benefits and other protections. There is no quick test to determine whether a person should be classified as an employee or an independent contractor. Instead, Massachusetts has a three-prong test. An employer must be able to show each of the elements of the three-prong test in order to classify a worker as an independent contractor, and those three prongs include the following:
- Freedom from control, which means that the work is completed without the employer’s direction and control;
- Service is performed outside the employer’s usual course of business; and
- Work is performed by an individual with his or her own independent business or trade that does that particular type of work.
What do each of these prongs mean in practice? Most importantly, the burden is on the employer in Massachusetts to prove that the worker should indeed be classified as an independent contractor (rather than as an employee).
The first prong assesses the degree of control that the employer has over the worker. What does it mean to be free from control and direction of the employer? In the most immediate terms, the worker’s job duties should be done with little to no instruction from the employer. For instance, the worker should be doing the job in a manner that she or he has deemed appropriate, taking an approach that is her own without the employer’s oversight. In addition, the worker should be determining her own hours without the employer attempting to set hours for completing the job.
The second prong assesses whether the worker’s job duties are outside the usual course of business of the employer. Although Massachusetts law does not specifically define what it means by the “usual course of business,” the term has been interpreted in the state. Typically, to be outside the usual course of business, a worker’s services cannot be part of a regular and continuing part of the employer’s business. To show this, an employer can provide evidence that the worker has been performing services as part of his or her own business that is distinct from the employer’s business.
For the third prong, the employer needs to be able to show that the services provided by the worker could be provided to anyone who wants to pay for them, as opposed to a situation in which the employer’s business requires dependence upon the worker for these continued services.
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