independent contractor vs. employeeLaws and regulations in general can run counter to what many people consider “common sense.” In this respect, the workers’ compensation laws in Massachusetts are not terribly unique. First of all, if you are an employee searching for an attorney to handle your claim this is not the article. What follows is simply an outline designed for employers who want to evaluate whether their workers are employees requiring workers compensation insurance coverage, or independent contractors that do not. The State of Massachusetts enforces its worker’s compensation regulations through its Division of Industrial Accidents (DIA), but the clearest guidance on Massachusetts’ classification of employment status comes from the Attorney General’s office.

How to Determine if Workers Employees or Independent Contractors

According to the Attorney General’s guidelines, any one of three factors can lead to the State’s determination that a worker is in fact an employee: 1) Behavioral Control, 2) Financial Control or 3) Type of Relationship.

An individual can be an employee via behavioral control if the employer instructs him or her when and how to work, what tools to use, where to purchase supplies or services and other such directions. These are characteristics that look generally to whether it is the employer or employee who decides the means to complete the work.

Financial Control as a determinant for employment looks at whether the worker is paid a flat rate or can realize his or own profit or loss, whether the worker provides the same service to the public at large, and how the worker is invested and paid with the employer. Similar to behavioral control, these characteristics look to how much autonomy the worker has, but in this case with respect to incurring expenses or earning income.

Looking at the “type of relationship” between the employer and employee is a kind of catch-all provision that the State can use to determine a worker’s status. Guidelines from the Attorney General indicate that the presence of employee-type benefits and a permanent relationship might constitute an employee status. A written contract between the employer and employee by contrast, or the fact that the worker’s service is not integral to the employer’s principal business, might indicate the reverse.

It is worth mentioning again that the existence of any one of these factors can lead to a determination that a worker is an employee, so that employers need to give some thought to this. In any such situation, however, it is always wise to speak with a specialized business attorney who handles such matters in Massachusetts on a regular basis. We are of course available for this purpose.

There are No Exceptions to the Massachusetts Workers Compensation Rule

InvestigationUnless the business owner is also the only worker in the business, there are no limits to whether an employer must obtain workers compensation insurance. A business with any number of employees, any amount of assets and any amount of income is required to obtain workers compensation insurance. Individual proprietorships, traditional C Corporations, S Corporations and LLCs are treated equally in this requirement. Out of state companies doing business in the State of Massachusetts are also subject to the rules of the State. Even if all of the employees are also family members, there is no related exemption to the worker’s compensation laws in Massachusetts.

What is the Risk of Treating an Employee like an Independent Contractor in Massachusetts?

Some time ago, our office received a call from a distressed landscaping client. An official from the State of Massachusetts visited his work site, and determined that 1) He had an employee working with him and 2) That the business did not carry worker’s compensation insurance. On that day, the business received a “stop work order,” and the client was fined $250.00 for each day then on that he hadn’t yet obtained a worker’s compensation policy. The situation was quickly remedied as soon as the client bought the policy, but not without significant fines to pay. To this day we don’t know how the official came to investigate the client’s work site, but it may have been from a suspicious caller to the State’s hotline: 1-800-MASSSAFE.

The DIA also has other penalties it can impose for failure to comply with the law, especially where the conduct might be more willful than ignorant. Such penalties might include criminal fines of up to $1500.00, imprisonment for up to a year, and a ban on participating in any State or municipal contracts for three years.

Final Thoughts on Workers Compensation Employee Coverage in Massachusetts

crutch 3dHowever unfair Massachusetts worker’s compensation requirements might appear in a variety of instances, an article on the subject would not be complete without some recitation of the likelihood of injuries occurring on the job. And naturally, a particularly dangerous field risks greater injury both in terms of frequency and severity. So it follows that the worker’s compensation premium in such a field will be higher.

Of course there are many benefits from the worker’s compensation regime in Massachusetts, or else the program probably wouldn’t exist. To begin with, it is certainly beneficial for an employee to have a guarantee of compensation after a disabling on-the-job injury. But the employer, too, can rest assured knowing that his help will be adequately cared for while the claim is being worked out. In addition, a worker’s compensation settlement will in most cases save the employer from becoming further civilly liable for the same injury.

Given the sizable penalties for non-compliance and benefits of enrolling employees in a worker’s compensation policy, it is therefore highly advisable for employers to make sure that all eligible employees are covered under a valid policy. For more information on your business and employment determinations, don’t hesitate to give us a call.