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Companies are increasingly using independent contractors in place of employees. Doing so can save them a lot of money, because they avoid payroll taxes, unemployment insurance, benefit costs (think health insurance and paid vacation), and other expenses.
But here’s the problem: many workers are being misclassified, and that misclassification is costing workers real money.
In a recent decision by the Massachusetts Appeals Court, one company that used large numbers of independent contractors learned that it cannot hide behind legal arguments and must instead face a jury.
Loomis Sayles, a large Boston-based financial firm, used dozens and dozens of information technology (IT) contractors, none of whom were provided the generous benefits the company provided to its regular employees. One of those contractors filed suit, alleging that he should have been classified as an employee.
Loomis argued that its use of contractors was legal under Massachusetts law because the contractors were provided through a staffing agency and, in some cases, had set up their own incorporated businesses. A trial judge agreed with Loomis and entered judgment in its favor.
But the Massachusetts Appeals Court reversed, and has sent the case back for a new trial.
The Appeals Court ruled that a company cannot shield itself from liability by using staffing companies or having its contractors set up their own businesses.
The Court also rejected Loomis’s argument that IT work could not be found to be part of its usual course of business simply because it did not classify all of its IT workers as employees.
Fair Work represents the contractor who is suing Loomis, along with many other workers alleging similar misclassification. If you or someone you know has been classified as an independent contractor, it’s worth talking to us to evaluate whether that classification is unlawful.