Your “Independent Contractor” May Be An Employee in Massachusetts or RI

Massachusetts and Rhode Island small businesses use so-called “independent contractors” for two main reasons – a) to avoid having to pay payroll tax, workers compensation, and other benefits for that person; and 2) to avoid legal liability for that person’s negligence.  Unfortunately, too many Rhode Island and Massachusetts small businesses mistakenly think that calling someone an “independent contractor” and handing them a 1099 at the end of the year is enough to accomplish the above purposes.  In fact, the IRS, the Massachusetts and Rhode Island Departments of Revenue, and the courts all examine the nature of the relationship between the business and the so-called “independent contractor” to determine whether, as a matter of law, that person or entity is truly an “independent contractor” or is really an “employee.”

The legal test regarding “independent contractor” status is referred to as the “right to control” test.  Government agencies and courts look at several factors to determine the degree of influence a business has, or may rightfully have, over the way the so-called “independent contractor” performs his work.  These factors include, but are not limited to, whether the would-be “contractor” provides his own equipment and materials; whether the “contractor” makes his own hours; and whether the “contractor” also services, or has the right to service, other businesses.

Knowing the “right to control” factors is a start.  However, understanding how government agencies and courts interpret and apply these factors is far more important.  Thus, any Massachusetts or Rhode Island business using so-called “independent contractors” should consult an experienced Massachusetts or Rhode Island small business attorney.