A court rules that the workers are independent contractors! Will the wonders never end? | Fox Rothschild LLP

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Most court rulings on the issue of independent contractor status go against the putative employer, concluding that people are statutory employees. A Massachusetts court has just reversed (to a small extent) this unfortunate trend. A court has ruled that home inspectors at an inspection service company are independent contractors under the rigorous ABC Tripartite Test. The case is titled Tiger Home Inspection, Inc. v. Director of the Unemployed Assistance Department and issued by the Massachusetts Court of Appeals.

The test for independent contractor in Massachusetts is (as in New Jersey and other states) based on the so-called ABC test. All three elements of the test must be satisfied. These three parts require the putative employer to demonstrate that: (a) such person has been and will continue to be free of control and direction in connection with the performance of those services, both under their contract of performance of services and in fact; (b) the 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. The trial court found that the company had met Part B because the inspectors provided services at clients who were entirely outside the employer’s place of business, but had failed on the first and third elements.

The Court of Appeal concluded that the first element was satisfied because it concluded that the inspectors performed their services without being subject to the direction and control of the Company. For example, they could work as little as they wished for the Company and could refuse any assignment offered without incurring a penalty. They worked independently, without advice or communication from the Company. They also used their own vehicles and tools. Importantly, they could hire helpers at their own expense without needing Society approval. The Court found, unlike the lower court, that this showed a lack of control. The fact that they had to prepare reports was only to meet the standards of the regulations and was not “control” or “direction”.

The third prong of the ABC test is, as I have always maintained, the most difficult prong for the employer to meet, i.e. whether the entity/person is an “independent business or “. On this issue, the Court was quite satisfied and concluded that there was “little doubt” that the Company met this test. Inspectors could perform their services independently and they were also allowed to advertise and perform these same services for others as part of their “businesses”. The key here was that the inspectors possessed the ability to work for others, not whether they had actually done so.

Takeaway meals

I applaud this result but I remain wary. I know in New Jersey the third prong, the business prong, is not satisfied by simply giving the independent contractor the notional right to take business from others. Here, the DOL (and the law) requires a demonstration that other business is, in fact, protected from others. One response from employers would be (as I have) to require contractors they hire to provide proof, upfront, that the person is getting business from other sources.

An ounce of prevention…

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