What You Need to Know About Working as an Independent Contractor in Massachusetts

Unveiling the Truth About Working as an Independent Contractor in Massachusetts

If your paychecks arrive without tax withholdings, it's likely that you're classified as an independent contractor. At first glance, this might seem advantageous as your take-home pay appears more substantial.

However, the reality is that this setup doesn't necessarily offer long-term tax benefits. What's more, it could mean missing out on essential protections provided by Massachusetts law, such as timely payment of wages, paid sick time, and overtime pay. In addition, you might find yourself in a precarious situation when it comes to collecting unemployment or addressing workplace injuries.

The truth is, many individuals currently classified as independent contractors should legally be considered employees, and this distinction carries significant consequences. It affects your income tax obligations and could mean overlooking valuable benefits. Explore these case studies to understand how this plays out in Massachusetts.

The good news is that you have recourse. The law provides a means for you to seek compensation for damages resulting from your improper classification as an employee. Furthermore, you may be eligible to recover multiple damages and receive reimbursement for legal costs and attorney's fees.

Defining Independent Contractor Status in Massachusetts

In Massachusetts, a vast majority of individuals classified as independent contractors should actually be treated as employees under the law. You can delve deeper into the specifics by exploring the three crucial tests outlined on our Massachusetts Independent Contractor law page. In essence, it is legally acceptable to be paid as a 1099 contractor only if all the following criteria are met:

You have autonomy and independence in your work.
You offer the same services to others.
Your work is not integral to your employer's core business.

If your employer exerts substantial control over your work methods, you may be rightfully entitled to employee status. Similarly, if you exclusively work for one employer, you might be in the employee category. Lastly, if your tasks closely resemble those performed by W-2 employees or directly contribute to your employer's core operations, employee status could be warranted.

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Independent Contractor Taxes: The Hidden Costs

The larger paychecks you receive without tax deductions in January might initially seem like a boon. However, when April rolls around, you'll be responsible for paying taxes on that income without the benefit of gradual withholding. This can catch many people off guard if they haven't planned for it.

More critically, being an independent contractor actually results in paying higher taxes. Every U.S. income earner contributes to the Social Security fund, typically noted on pay stubs as "FICA" deductions. This deduction amounts to 15% of your income, up to certain thresholds. When you're a W-2 employee, your employer covers half of this amount. As an independent contractor, you're responsible for the full 7.5% share, listed as "self-employment income" on your tax return.

In essence, being a 1099 employee increases your personal tax liability by 7.5% of your income. For instance, if your annual earnings as an independent contractor reach $50,000, you'll pay approximately $3,700 in employment taxes that your employer would have otherwise covered.

Consequences of Misclassification: Benefits You're Missing as a 1099 Employee

Massachusetts employees enjoy the protection of numerous wage and hour laws, but independent contractor status places you outside the purview of these laws—unless you challenge it.

Timely payment of wages: The Massachusetts Wage Act imposes severe penalties on employers for late or non-payment of wages, including triple damages and legal fee responsibility. If you're an independent contractor, these laws won't apply unless you can prove you should have been treated as an employee.
Overtime pay: Employees not exempt from overtime regulations receive time-and-a-half for hours worked beyond 40 in a week. Once again, these provisions won't cover independent contractors unless they can demonstrate employee status.
Paid sick time: Massachusetts mandates a certain amount of earned sick time for employees, which must be paid if the business employs 11 or more people. Independent contractors could potentially miss out on this crucial protection.

Additional Benefits You're Missing as an Independent Contractor

There are other essential benefits that many workplaces provide but may not extend to independent contractors:

Health Insurance: While not all businesses offer health insurance, if your employer provides it to W-2 employees, you're missing out on a valuable benefit.
Vacation and PTO: Employers aren't obligated to offer vacation, but if it's available to W-2 employees, you won't have access as an independent contractor.
Unemployment: If you're paid as a 1099 employee, your employer might not pay unemployment tax for you. This could leave you in a precarious position if your employment ends without an immediate replacement. Full unemployment benefits can exceed $20,000, depending on your situation.
Workers Compensation: Similar to unemployment, your employer may not provide workers' compensation insurance for independent contractors. Workers' compensation is designed to cover medical expenses and lost income for job-related injuries. As an independent contractor, accessing this safety net can prove challenging.

Your Rights Under the Independent Contractor Law

If you believe that your independent contractor classification is unjust, you have legal recourse. You can initiate a claim under the Independent Contractor Law and seek monetary compensation for any damages you've incurred due to misclassification.

Additionally, the law mandates courts to award three times the amount of your damages in such cases. If you prevail in your Independent Contractor Law claim, your employer will also be required to reimburse your legal expenses, including reasonable attorney's fees.

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

We have helped many people in your situation assess their employment status and get compensation for damages they have suffered. We would love to help you get clarity on your rights and obligations, and take the steps you need to take to protect your rights. 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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