The Chamber has made it one of our legislative priorities to change the law to help small businesses. The below Boston Business Journal article quotes Chamber President & CEO Peter Forman as well as Chamber members Kathy Czerny of the South Shore Conservatory and Marie Peeler of Peeler Associates.
Critics want contractor law made flexible
Premium content from Boston Business Journal by Don Seiffert, Special to the Journal
Date: Friday, December 9, 2011, 6:00am EST
W. Marc Bernsau
Peg Primak of Primak Partners in Waltham says a new state law touted as a way to protect workers is costing her business.
As a probate accountant, Peg Primak works for some 50 law firms across the state, many for just two or three hours a year.
Her clients, most of whom she never meets face to face, consider her as an independent contractor. But under current Massachusetts law, Primak is considered a regular employee of every one, eligible for unemployment, workers compensation and tax withholding.
“The independent contractor law says that if the work being performed is part of the normal course of business, they should count me as an employee,” she said. “That’s absurd.”
Ever since state law changed in 2004 to narrowly define independent contractors, there’s been a move under way to broaden the definition. Many employers argue that the law makes it practically impossible for almost anyone to be classified as an independent contractor in this state, and that’s hurting the state’s economy as a whole.
Defenders of the status quo say that despite the flaws, proposals to eliminate those discrepancies would also get rid of necessary measures that protect employees.
John Regan of the Associated Industries of Massachusetts Inc. testified before a state legislative committee this fall in favor of a bill that would allow more workers to be classified as independent. He says that nationwide, the number of temporary and freelance workers has risen despite the recession, but Massachusetts has added no new jobs since 1990.
“As the way in which we work evolves ... the pattern is that people work either as freelancers, or offer their services to multiple organizations,” he said.
Under the current law, passed as part of a construction reform bill, workers are presumed to be regular employees unless they fit three specific criteria.
That exposes employers to significant risk: if the courts find a company misclassified employees as independent contractors, employers can be fined triple damages plus attorney fees.
Mike Hruby, president of New Jobs for Massachusetts Inc., a pro-job advocacy group that formed in May, says the independent contractor law is the single biggest barrier to job growth in Massachusetts. Changing the law would result in almost immediate job growth, both from companies in-state and those out of state that want to tap into our well-educated workforce.
“Out-of-state companies, who would normally contract with Massachusetts employees, don’t want to do so, because this law makes the presumption that they will be employees,” he said. “The law suppresses entrepreneurship, especially in the services industry.”
But Stephen Joyce, government relations director for the New England Carpenters Labor Management Program, said the current law’s three-part test is like 22 other states in the U.S., and the effects of the 2004 change has been widely overblown.
“The truth of the matter is that I haven’t seen any evidence that anyone fell under the rule who didn’t fall under the rule before,” he said.
Attorney General Martha Coakley’s office has issued more than 70 citations in the past two years for misclassification of workers. The total fines more than doubled from 2010 to 2011, to $238,670 from $106,500.
In May, Dedham construction company Lancaster Enterprises Inc. and its owner, 68-year-old Marie Raftes, were ordered to pay $100,000 in restitution and penalties after being accused of improperly paying workers and misclassifying their employment status. The amount includes unpaid wages of more than $37,000 for 10 employees and a $50,000 fine for willful misclassification of employees as independent contractors. And in June, Allston flooring company Floor Sanders and Finishers of Massachusetts Inc. was ordered to pay $26,000 in fines for misclassifying its employees as independent contractors and record-keeping violations.
Joyce argued that the current law protects employees from being exploited, and protects honest employers from unfair competition.
While the construction industry has been the most vocal opponent of any changes, Joyce said there are similar abuses of employees in fields like janitorial services and bike couriers.
But the current difficulty with classifying anyone as an independent contractor affects a wide variety of fields. Kathy Czerny, president of the South Shore Conservatory in Hingham, said musicians typically cobble together a living through various employers.
She says a handful of teachers at her school who aren’t full-time travel from Boston to teach there, and prefer to be considered independent contractors so they can deduct travel expenses on their income taxes.
Peter Forman, president of the South Shore Chamber of Commerce, said the Attorney General’s enforcement of the law has stepped up in recent years, as the state is under pressure to collect unemployment insurance from businesses.
Joyce has seen in increase as well, but contends enforcement “is still woefully lacking.”
Marie Peeler, an executive coach from Pembroke who’s been working independently since 2005, says she’s been denied jobs from out-of-state companies after telling them about the strict Massachusetts laws. — regulations she described as “onerous rules.”
But Joyce contends that the hardships on some are outweighed by the need to protect others.
“You can’t weaken a law just because someone says they’re inconvenienced by it, if it’s protecting tons of other people,” he said.
