Independent Contractor vs. Employee – A Perennial Question
G.L. c. 149, § 148B states that a person who provides services is an employee unless three criteria are met – they are not under the control or direction of the person for whom they are providing services, the services are outside the regular scope of the employer’s business, and the engaged person is independently in the trade or business similar to that of the services being provided. IT services are commonly provided to municipalities by workers categorized as independent contractors. Failure to properly categorize a service provider as an employee can subject the employer to civil and criminal liability.
A recent decision of the Appeals Court expressly considered the status of IT specialists as independent contractors. In Harrison v. Massachusetts Bay Transportation Authority, the MBTA had contracts with two companies who provided workers to provide IT services. The MBTA paid the companies and the companies issued W2s to the workers. The workers claimed that they should have been paid as employees of the MBTA. The Appeals Court affirmed the trial court’s ruling that the claims were barred by sovereign immunity.
The Appeals Court noted that Section 148B is silent as to whether employer includes government agencies or municipalities. The Court declined to extend the broad definition of employer found in the Equal Pay Act to Section 148B, finding that there is no indication that the Legislature intended for that definition to apply outside of G.L. c. 149, §§ 105A-105C. While noting that employment statutes are generally to be read expansively, that reading must yield to the strict construction when one claims that sovereign immunity is waived. In short, the Court rejected the argument that “employer” includes government agencies or municipalities for the purposes of the independent contractor statute.
We suggest that municipalities carefully consider potential fallout before deciding that they no longer need to be concerned with the proper categorizations of workers paid to provide services as a result of this opinion. Given the potential significant penalties attributable to violation of the statute, the better practice would seem to be to err on the side of caution and await an opinion from the Supreme Judicial Court.