Massachusetts employs a stricter standard than under federal law regarding whether an individual is an employee or an independent contractor. The Commonwealth first established its Independent Contractor law in 1990. Since then, it has been amended a number of times and, in 2004, significantly broadened.

Massachusetts uses a test in which three separate elements must exist in order for someone to be classified other than as an employee. On May 1, 2008, the Massachusetts Attorney General’s Fair Labor Division issued an advisory superseding the prior advisories on this topic and clarifying on how the three-part test is applied.

In contrast, the Internal Revenue Service used to use a 20-factor test that later was simplified into an 11 point test organized into three primary groups: behavioral control, financial control and the type of relationship of the parties. IRS Publication 15-A discusses these characterizations in detail, and this text provides an overview and information on related topics.

The Commonwealth of Massachusetts just became the only state in the nation to set a strict liability standard for state wage and hour violations.  The new law makes awards of treble damages for all violations, with no exception or defense, even if they were inadvertent.

The law, which takes effect on July 13, 2008, increases the cost of doing business in Massachusetts.  Watch for an increase in employment-related litigation.  More information is available here and here.