Damages for Employee Misclassification under the Massachusetts Independent Contractor Law
Misclassification Damages: Understanding the Risk Under the Massachusetts Independent Contractor LawBusinesses often opt for independent contractors over employees to cut costs. However, it's crucial to consider the potential repercussions of this decision. The most significant cost of misclassification is the damages incurred for improperly classifying employees, along with potential legal expenses.
Misclassification Damages: 1099 Employee TaxesUnlike W2 employees, contractors are responsible for their social security tax, often referred to as self-employment tax. This means contractors bear approximately 7.5% of their gross income, with certain caps, and are at a higher risk of facing tax penalties due to the absence of regular withholdings. It's essential to anticipate that a worker who challenges their independent contractor status may seek at least 7.5% of their earnings as damages.
Misclassification Damages: Lost Benefits
Misclassification Damages: Wage and Hour IssuesOn the surface, independent contractors are not protected by Massachusetts wage and hour laws. However, if their classification is incorrect, they can seek compensation for the wage and hour protections they should have received. This could include:
Misclassification: Multiple DamagesBecause the independent contractor law falls under the Wage Act, it is subject to the same liquidated damages provisions. In essence, the court is required to triple the damages awarded to the employee if a violation is found. The law also necessitates the employer to cover the employee's reasonable costs and attorneys' fees, even if they seem disproportionate to the damages.
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Protecting Your Business
The initial step is to consult a labor and employment attorney to determine the appropriateness of your independent contractor designations. While the test is stringent, Massachusetts does have genuinely independent contractors. There may also be strategies to enhance the chances of a court recognizing the independent contractor relationship.
Secondly, monitor factors that could pose issues if the contractor were considered an employee. For example, paying your contractors bi-weekly and ensuring your compensation structure meets or exceeds minimum wage can mitigate some damages.
Thirdly, seek legal advice promptly if a contractor raises concerns about misclassification. Addressing these concerns before a lawsuit is filed can protect you from triple damages.
Lastly, when deciding how to classify a worker, consider the potential damages discussed above. It's essential to compare the cost savings of utilizing independent contractors with the real financial risks posed by Massachusetts law.
Secondly, monitor factors that could pose issues if the contractor were considered an employee. For example, paying your contractors bi-weekly and ensuring your compensation structure meets or exceeds minimum wage can mitigate some damages.
Thirdly, seek legal advice promptly if a contractor raises concerns about misclassification. Addressing these concerns before a lawsuit is filed can protect you from triple damages.
Lastly, when deciding how to classify a worker, consider the potential damages discussed above. It's essential to compare the cost savings of utilizing independent contractors with the real financial risks posed by Massachusetts law.
Meet Our Employment Lawyers
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year. She has written a book on employment law: Rules of the Road, What You Need to Know About Employment Laws in Massachusetts, and helped thousands of clients on both the employee and employer side with severance and non compete review and negotiation, wage and hour, discrimination and retaliation disputes, and navigating the nuances of the Massachusetts Independent Contractor Law.
Rebecca Rogers: Rebecca is a 2006 graduate of Boston College Law School, and has worked with slnlaw since 2013. She previously worked as an intellectual property litigation attorney for Fish & Richardson in Boston, Massachusetts, and clerked for the Massachusetts Supreme Judicial Court. Rebecca has helped clients with independent contractor misclassification and wage and hour disputes, employment discrimination, harassment and retaliation claims, and review and negotiation of employment and independent contractor agreements.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna has helped clients with review and negotiation of employment and independent contractor agreements, employee misclassification and wage and hour disputes, and advice to small business owners about employment law and other business matters.
Elijah Bresley: Eli is a 2014 graduate of Seton Hall Law school, and has worked with slnlaw since 2020. He previously worked for a boutique employment law firm outside of Boston, and then for the Labor and Employment department of a large Boston firm. He also spent a year clerking for the judges of the Superior Court in Hartford, Connecticut. Eli has helped clients on the employee and employer side with all varieties of employment law issues, including independent contractor misclassification and wage and hour disputes, employment discrimination, harassment and retaliation claims, review and negotiation of employment and independent contractor agreements, and litigation in state and federal courts on employment related issues.
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped clients with independent contractor misclassification and wage and hour disputes, employment discrimination, harassment and retaliation claims, review and negotiation of employment and independent contractor agreements, and litigation in state and federal courts on employment related issues.
How We Can Help
At slnlaw, our experienced team of labor and employment attorneys can provide expert guidance to ensure your worker classifications align with Massachusetts law. We offer proactive solutions to minimize your legal risks, address potential concerns, and protect your business from costly misclassification damages. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
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