Working as an Independent Contractor in Massachusetts
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If you are paid without tax withholding, you are being paid as an independent contractor. This may seem like a good deal in the short term, because your net paycheck is larger. But it is not actually a tax benefit to you in the long run. More importantly, you are missing out on some critical protections that Massachusetts law provides to employees. These include the right to timely payment of wages, paid sick time, and overtime pay. You also may find yourself out of luck if you try to collect unemployment, or if you suffer a workplace injury.
The truth is most people who are paid as independent contractors should be paid as employees under the law. And the difference between being treated as an employee or an independent contractor has very real consequences for you. These consequences include the income tax you have to pay, as well as important benefits you may be missing out on. You can read some case studies here about how this works in Massachusetts. The good news is you have a remedy. The law will allow you to recover compensation for any damages you have suffered by your improper employee status. You can also recover multiple damages and reimbursement for your legal costs and attorneys' fees. Definition of Independent Contractor in Massachusetts
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Need Help With an Independent Contractor Issue?
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The truth is most people in Massachusetts who are paid as independent contractors should be considered employees. You can read more about these three tests on our Massachusetts Independent Contractor law page. The short answer is that is only legal to be paid as a 1099 contractor if all three of the following are true:
If the degree of control your employer exercises includes telling you how to do the job, you may be entitled to employee status. If you work exclusively for your employer, this may mean you should be considered an employee. Finally, if what you do for your employer is similar to work done by W-2 employees, or is delivering the products or services that are core to their business, you may be entitled to employee status.
- You are free from control and direction in your work.
- You offer the same services to others.
- The work you do is not part of your employer's core business.
If the degree of control your employer exercises includes telling you how to do the job, you may be entitled to employee status. If you work exclusively for your employer, this may mean you should be considered an employee. Finally, if what you do for your employer is similar to work done by W-2 employees, or is delivering the products or services that are core to their business, you may be entitled to employee status.
Independent Contractor Taxes: Why You Are Not Making More Money as a 1099 Employee
The check you receive in January may seem larger because you have no tax withholding. But the following April, you will have to pay taxes on that money, without the benefit of having a little bit withheld every pay period.
This can take people by surprise if they haven't planned for it. More importantly, even if you faithfully save money through the year to be ready for tax time, you are actually paying more in taxes as an independent contractor.
Everyone who earns income in the United States pays into the Social Security fund. When you are a W-2 employee, this appears on your pay stub as a deduction for "FICA." The total amount paid into FICA is 15% of your income, up to certain amounts. When you are a W-2 employee, your employer is required to pay half of that amount. When you are an independent contractor, you will have to pick up that 7.5%. This shows up on your tax return as "self-employment income."
What this means is that being a 1099 employee is adding 7.5% of your income to your own personal tax liability. That means if you make $50,000 a year as an independent contractor, you will pay approximately $3,700 in employment taxes that your employer would have otherwise had to pay.
This can take people by surprise if they haven't planned for it. More importantly, even if you faithfully save money through the year to be ready for tax time, you are actually paying more in taxes as an independent contractor.
Everyone who earns income in the United States pays into the Social Security fund. When you are a W-2 employee, this appears on your pay stub as a deduction for "FICA." The total amount paid into FICA is 15% of your income, up to certain amounts. When you are a W-2 employee, your employer is required to pay half of that amount. When you are an independent contractor, you will have to pick up that 7.5%. This shows up on your tax return as "self-employment income."
What this means is that being a 1099 employee is adding 7.5% of your income to your own personal tax liability. That means if you make $50,000 a year as an independent contractor, you will pay approximately $3,700 in employment taxes that your employer would have otherwise had to pay.
Misclassification Consequences: Benefits You Don't Have as a 1099 Employee
Employees in Massachusetts are protected by many wage and hour laws. Your independent contractor status takes you outside of these laws, unless you challenge it.
Timely payment of wages. the Massachusetts Wage Act imposes strict penalties on employers who pay wages or commissions late, or not at all. These include triple damages and responsibility for the employee's legal fees. If you are an independent contractor, these laws do not apply to you unless you can prove that you should have been treated as an employee.
Overtime pay. employees who are not exempt from overtime laws are entitled to time and a half for any hours worked over 40 in a week. Again, these laws do not apply to an independent contractor unless you can prove that you should have been treated as an employee.
Paid sick time. Massachusetts law requires a certain amount of earned sick time for employees. This time must be paid if the business employs 11 or more people. If you are an independent contractor, you may be missing out on this important protection as well.
Timely payment of wages. the Massachusetts Wage Act imposes strict penalties on employers who pay wages or commissions late, or not at all. These include triple damages and responsibility for the employee's legal fees. If you are an independent contractor, these laws do not apply to you unless you can prove that you should have been treated as an employee.
Overtime pay. employees who are not exempt from overtime laws are entitled to time and a half for any hours worked over 40 in a week. Again, these laws do not apply to an independent contractor unless you can prove that you should have been treated as an employee.
Paid sick time. Massachusetts law requires a certain amount of earned sick time for employees. This time must be paid if the business employs 11 or more people. If you are an independent contractor, you may be missing out on this important protection as well.
Other Benefits You Are Missing as an Independent Contractor
There are other important benefits available in many workplaces that are not offered to independent contractors.
Health Insurance: not all businesses provide health insurance to their employees. But if your employer offers insurance to W-2 employees, this is a valuable benefit you are missing out on. Also, if the employer has 50 or more employees, it is required under federal law to provide benefits.
Vacation and PTO: An employer is not required to offer vacation, but if it is available to W-2 employees, it is also something you are missing as an independent contractor.
Unemployment: Chances are if you are being paid as a 1099 employee, your employer is not paying unemployment tax for you. This can leave you in a very bad position if your employment ends and you don't immediately find another job. The full unemployment benefit can be over $20,000, depending on how long you need to collect.
Workers Compensation: Similar to unemployment, your employer may not be carrying workers compensation insurance on you. Workers compensation is designed to ensure that people injured on the job have their medical expenses paid and lost income reimbursed. If you are injured while working as an independent contractor, you may have difficulty accessing this safety net as well.
Health Insurance: not all businesses provide health insurance to their employees. But if your employer offers insurance to W-2 employees, this is a valuable benefit you are missing out on. Also, if the employer has 50 or more employees, it is required under federal law to provide benefits.
Vacation and PTO: An employer is not required to offer vacation, but if it is available to W-2 employees, it is also something you are missing as an independent contractor.
Unemployment: Chances are if you are being paid as a 1099 employee, your employer is not paying unemployment tax for you. This can leave you in a very bad position if your employment ends and you don't immediately find another job. The full unemployment benefit can be over $20,000, depending on how long you need to collect.
Workers Compensation: Similar to unemployment, your employer may not be carrying workers compensation insurance on you. Workers compensation is designed to ensure that people injured on the job have their medical expenses paid and lost income reimbursed. If you are injured while working as an independent contractor, you may have difficulty accessing this safety net as well.
Your Rights Under the Independent Contractor Law
If you think your independent contractor status is not legal, you do have a remedy. You can bring a claim under the Independent Contractor Law. If you are successful in that claim, you can recover a money award to compensate you for any of the damages listed above that you have suffered. Read more about what to expect as a plaintiff in a civil lawsuit.
The law also requires that the court award you three times the amount of your damages. Finally, if you win a claim under the Independent Contractor Law, the court will require your employer to reimburse you for legal costs and expenses, including reasonable attorneys' fees.
The law also requires that the court award you three times the amount of your damages. Finally, if you win a claim under the Independent Contractor Law, the court will require your employer to reimburse you for legal costs and expenses, including reasonable attorneys' fees.
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, give us a call at 781-784-2322, or fill out our web form to let us know a little more about your situation.
