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Misclassification of Workers in Massachusetts

In Massachusetts and other states, employers are required to obtain workers’ compensation for employees, but not for independent contractors. This means that independent contractors may not have recourse to funds to pay for medical care or time off work or permanent disabilities if they are seriously injured on the job unless they can prove negligence or an intentional tort.

During the recession, it was a common practice to hire workers and improperly designate them as independent contractors. This allowed employers to avoid paying for insurance, including workers’ compensation insurance and unemployment insurance, taxes, overtime and fair wages.

A report from the Treasury Inspector General for Tax Administration showed that employers saved $3710 per employee every year by failing to properly classify employees and not paying Social Security, Medicare or federal unemployment taxes. Many states, including Massachusetts have started to crack down on employers that misclassify their workers by enacting laws on worker misclassification. Massachusetts was able to identify 5,491 workers that were misclassified last year, contributing to $46 million in unreported wages.

This problem is particularly acute in the construction industry because of the large numbers of independent contractors working alongside employees. Often employers who follow the law and label their employees correctly have higher labor costs, leading to higher bids than their competitors.

Intentionally misclassifying employees and failing to disclose money through that misclassification is serious business. In 2012, the attorney general discovered that a contractor in Newton was engaged in shady business practices.

Among these practices was to misclassify half of the workforce as subcontractors and failing to disclose to a workers’ compensation auditor over $3.4 million of its misclassified subcontractor payroll for four policy periods.

The owners and the company were indicted and ultimately pled guilty. The owners of the company were sentenced for workers’ compensation premium evasion, unemployment contribution evasion, misclassification of employees as independent contractors, and failure to pay the prevailing wage. One of the owners was sentenced to two years in the House of Correction, with the balance of the sentence suspended. The company had to pay $100,000 in restitution and fines of $150,000. The owners and company were barred from bidding on public construction projects for five years.

If you work in the construction industry, you are at greater risk for injuries than many other kinds of workers are. For example, falls leading to back injuries, broken bones or even death, tend to be more prevalent in construction and other kinds of intense physical labor. Therefore, it matters a great deal how you are classified for purposes of workers’ compensation and unemployment insurance. Section 148B provides that workers are presumed employees unless they are free from control and direction in performing their work, the service is performed outside the employer’s usual course of business, and the worker is usually engaged in an independent business or trade of the same nature involved in the service performed.

If you are injured on the job and classified as an independent contractor, but believe that you are actually an employee, you should contact an experienced Massachusetts workers’ compensation attorney. We can fight for the benefits you and your family need. Contact us by calling 800-367-0871 or using our online contact form.

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