Mass. SJC: Independent Contractor Statute Doesn’t Apply in Workers’ Comp Case

The Massachusetts Supreme Judicial Court (SJC) has ruled the state’s independent contractor statute does not determine whether a claimant is an employee eligible for workers’ compensation benefits in a case that has led to questions about worker misclassification.

“Worker misclassification is a serious problem, both in our Commonwealth and across the nation,” SJC Chief Justice Ralph Gants wrote in a concurring opinion regarding the case.

This issue has come to light after a recent case involving claimant Ives Camargo, in which she sought review of a decision made by the reviewing board of the Department of Industrial Accidents regarding a claim she made for workers’ compensation benefits.

The board had affirmed the findings of an administrative judge by concluding Camargo was an independent contractor not entitled to workers’ compensation. Its decision was based on the definition of an employee in Massachusetts’ workers’ compensation statute.

The law governing employment relations in this state remains far from uniform.

After Camargo appealed, the case was transferred to the SJC, which upheld the decision that she is an independent contractor not eligible for workers’ compensation.

In the wake of the case, however, Gants called for the Massachusetts Legislature to consider greater uniformity among laws that classify workers. He added that part of the challenge in preventing misclassification is that there is no uniform definition of an employee. Instead, the law defines employees and independent contractors by several different standards depending on the context.

“In 2004, the Massachusetts Legislature took a significant step toward harmonizing these standards, amending the independent contractor statute…so that its presumption in favor of employee status applied not only to the wage and hour laws….but also to the minimum wage and overtime laws,” Gants wrote. “However, the law governing employment relations in this state remains far from uniform.”

Case Background

The Camargo case came about after she began working as a newspaper delivery agent for Publishers Circulation Fulfillment Inc. (PCF) in 2001. PCF provides home delivery services for newspaper publishers and pays delivery agents to distribute the newspapers to subscribers.

After Camargo was hired by PCF, she signed various contracts that identified her as an independent contractor. As part of her contract, she was provided with newspaper delivery routes and a list of customers. She could make her deliveries at any time and in any order, as long as they were completed by 6 A.M. on weekdays and 8 A.M. on weekends.

To make the deliveries, she used her own vehicle for twelve years. She was paid for each newspaper delivered as well as a weekly stipend, which was paid when she chose to redeliver newspapers to customers who did not receive a scheduled delivery.

As part of the PCF contract, Camargo was permitted to hire assistants or subcontract her deliveries, which she did. Given the nonexclusivity of the contract between Camargo and PCF, she could deliver newspapers or other items for other businesses as well. She also purchased and collected independent contractor work insurance and filed her taxes as an independent contractor, according to the SJC opinion document written by Chief Justice Scott L. Kafker.

On September 26, 2010, Camargo was loading newspapers from PCF into her vehicle using a hand carriage when she fell off a ramp and hurt her right knee and right hand. She reported her injury to PCF but did not seek medical treatment. Despite the fall, she finished her work for PCF that day.

On January 7, 2011, she reported a second injury in which she had slipped on ice while delivering newspapers and injured her right leg. Following this second injury, she was hospitalized and eventually underwent two surgeries – one for her right knee and the other for her right hand. She was fired in the summer of 2012.

Camargo filed an initial claim for workers’ compensation benefits in 2012 with the department, which the insurer objected. After a conference, the administrative judge issued an order directing the insurer to pay Camargo temporary total incapacity benefits. However, the insurer appealed to a hearing, seeking a denial of all claims, according to Kafker’s opinion document.

In the decision issued after the hearing, the administrative judge determined Camargo was an independent contractor and was not entitled to workers’ compensation benefits, and the reviewing board affirmed this decision.

SJC Decision

Massachusetts workers’ compensation law requires employers to provide workers’ compensation to employees who are injured during their employment. The law applies to employees defined as “every person in the service of another under any contract of hire, express or implied, oral or written,” with certain exceptions.

Massachusetts’ independent contractor statute states that “an individual performing any service, except as authorized under this chapter, shall be considered to be an employee under those chapters unless…the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and…the service is performed outside the usual course of the business of the employer; and…the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.”

According to Kafker’s opinion document, the evidence in Camargo’s case supports the finding that she was an independent contractor. This is because in working for PCF, she was allowed to expand her business to deliver newspapers and items for other companies, supplied everything needed to complete her job at PCF – including using her own vehicle to make deliveries – hired substitutes to complete the job, purchased her own independent contractor work insurance and filed taxes as an independent contractor.

With this in mind, SJC held that the independent contractor statute is not used to determine employment status for workers’ compensation claims under Massachusetts workers’ compensation law, and affirmed the determination of the reviewing board that Camargo was an independent contractor.

Call for Uniformity

As Kafker laid out in SJC’s opinion for the case and Gants wrote in his concurring opinion, Massachusetts law sets at least four different standards for determining employment status.

To determine whether a worker is entitled to wage and hour protections, minimum wage or overtime, a three-prong independent contractor test is applied. To determine whether a worker is entitled to unemployment insurance, there is a different three-prong test. Additionally, whether a worker is entitled to workers’ compensation depends on an analysis of twelve factors, and whether a worker is an employee for purposes of income tax withholding requires an examination of twenty factors, the opinion documents explained.

“The practical result of this patchwork statutory scheme is confusion and uncertainty,” Gants wrote. “With so many different standards, it is difficult for employers to classify their workers properly, even where they intend to comply with the law.”

He added that enforcement can also be a challenge, as greater resources could be required of state agencies to interpret and implement these laws.

“Most importantly, workers must struggle to understand and assert their rights,” he explained. “I do not doubt that the different standards for determining employment status are tailored, as the court points out, to meet the different purposes of the laws governing employment relations in our state.”

That said, he pointed to Maine as one example of a state that has adopted a uniform standard for determining employment status under unemployment insurance, workers’ compensation and other employment laws, and added that other states have set forth measures to provide additional guidance regarding employment status.

“Whether such reforms would be appropriate in Massachusetts is, of course, a question for the Legislature,” he said, “and, as this case illustrates, a pressing one.”