What is an Independent Contractor?

In a decision that further clarifies Massachusetts law regarding employee classification, the Massachusetts Court of Appeals recently ruled that home inspectors working for an inspection services company are contractors. self-employed (not employees) according to the ABC test to determine employment status, and therefore ineligible for unemployment benefits. Decision, Tiger Home Inspection, Inc. v. Director of the Unemployed Assistance Departmentreversed a lower court’s decision upholding the Department of Unemployed Assistance’s (DUA) final status determination on the matter.

Background

In 2008, Tiger, a home inspection company, stopped using the services of an inspector who then filed for unemployment benefits. Tiger objected to his claim for unemployment benefits, saying the inspector was an independent contractor, not an employee. The DUA disagreed and found that the inspector (and all other “likely employees”) were employees under the ABC test. The district court upheld the DUA’s decision and Tiger appealed.

In the context of unemployment benefits in Massachusetts, “all services rendered by an individual for an ’employment unit’ are presumed to be employment unless the ‘ABC test’ is satisfied. … The three-part conjunctiva [ABC] the test requires the entity to seek to rebut the presumption [of employment] prove that “(a) such person has been and will continue to be free of control and direction in connection with the performance of such services, both under its contract for performance of services and in fact; and (b) that service is provided either outside the ordinary course of the business for which the service is provided or is provided outside of any premises of the business for which the service is provided; and (c) such person is ordinarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service rendered. because the inspectors performed services at customers who were entirely outside of Tiger’s place of business, he found that Tiger had failed to establish the first and third prongs of the test. The Massachusetts Court of Appeals disagreed.

First part of the ABC test: direction and control

The Court of Appeal found that Tiger established the first prong of the ABC test, which revolves around “two essential questions”: did the person providing the services (1) have the right to control the details in the manner whose services were provided; and (2) are free from control ‘not only as to the result to be achieved but also as to the means and methods which are to be employed in the performance of the work.’ According to the Court of Appeal, the inspectors are free from the direction and control of Tiger where they

  • “could work as little or as much as they wanted for Tiger”;
  • “worked at his own pace”;
  • “could refuse any assignment offered by Tiger without penalty”;
  • “performed their inspection services without any communication with Tiger”;
  • “contacted customers directly”;
  • “traveled to the inspection sites in their own vehicles and at their own expense”;
  • used its own tools and equipment for inspections;
  • issued inspection reports to customers without any input from Tiger; and
  • were free to hire helpers at their own expense without having to obtain Tiger’s approval.

The Court of Appeal held that the factors taken into account by the DUA in concluding that Tiger had failed this first prong, while relevant to the relationship between the inspectors and Tiger, did not affect the essential investigation of whether “Tiger” exercised considerable direction and control. ‘ about the inspectors. These factors included that “customers had to go through the Tiger office to get an inspection, and…any customer who contacted an inspector directly to schedule an inspection had to be referred to Tiger for central scheduling”; “customer payments were made to Tiger and not directly to inspectors”; “inspectors received shirts with Tiger logos and were featured on Tiger’s website wearing these shirts”; “the inspection reports were on Tiger letterhead”; and that “Tiger has provided a manager to handle customer complaints and … has purchased errors and omissions insurance for inspectors”.

Moreover, when the DUA focused on factors relating to direction and control – for example, the fact that inspectors had to complete a written report after each inspection – the Court of Appeal concluded that the direction of the DUA was wrong when Tiger simply demanded that the inspectors meet regulatory terms. The Court of Appeal explained that requiring inspectors to meet regulatory standards did not establish Tiger’s direction and control over the inspectors’ services.

ABC Test Part Three: Independently Established Trade or Business

The third part of the ABC test deals with “the question of whether the service in question can be considered an independent trade or business because the worker is capable of rendering the service to any person wishing to avail himself of it or, at the Conversely, if the nature of the business requires the worker to depend on a single employer for the continuation of services. The Court of Appeal concluded that there was “little doubt” that Tiger had satisfied this prong. The evidence showed not only that the inspectors were able to perform inspection services independently, but that Tiger permitted the inspectors to advertise and perform inspection services for others in the their own independent businesses.

In concluding that Tiger failed to meet this third prong, the DUA erroneously concluded that while the inspectors were able to carry out inspections independently, there was no evidence that any of them had. do. As the Court of Appeal stated,[t]The relevant inquiry…is not whether the inspectors were in fact running their own business, but whether they were free to do so.

Key points to remember

Although the ABC test continues to be a very evidence-based analysis, Tiger provides helpful tips for navigating this test. (It should be noted that in December 2021, the Massachusetts Supreme Judicial Court ruled that the federal Fair Labor Standards Act’s “totality of the circumstances” test was the proper test to determine joint employment under Massachusetts wage laws.) With respect to the first prong of the ABC Test, the Court of Appeals clarified that the analysis must focus on controlling and directing factors and not simply related to the relationship between the entity and the worker. Further, the Court of Appeal emphasized that requiring workers to meet regulatory or legal requirements does not establish control or direction. With respect to the third prong, the Court of Appeal emphasized that the analysis must be based on whether workers are free to provide services independently and not on the fact that they actually provide services. services independently.

© 2022, Ogletree, Deakins, Nash, Smoak & Stewart, PC, All rights reserved.National Law Review, Volume XII, Number 212

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