Some consider Massachusetts to have the highest standards for classifying workers as independent contractors, rather than as employees by default. However, the Supreme Judicial Court recently ruled that taxi drivers in Boston were properly classified as contractors. In its ruling, the SJC reaffirmed the state law qualification test for independent contractors, known as the “ABC test”.
Under the ABC test, a worker is presumed to be an employee, and can only be classified as an independent contractor if all three of the following factors can be shown:
1) The worker is free from control and direction in the performance of her/his services (both under the terms of the contract for services as well as in actual practice).
2) The services performed are outside the usual course of business for the entity receiving the services.
3) The worker is customarily engaged in independently providing services of the same nature.
The court ruled that taxi drivers were not employees of the taxi garages, since the drivers provided no services to the garages, nor were they employees of the medallion owner companies or the dispatch companies, since the dispatch companies provided services to the medallion owners, who then leased their medallions to drivers (with the condition that drivers use the medallion owner’s dispatch company), and the leases were based on a flat fee (rather than fares received) that mean that the drivers were not engaged in the usual course of the medallion owner’s business.
Massachusetts’ ABC test contains three of the more prominent factors of the IRS and Department of Labor tests for independent contractors. However, the difference is that while each factor could separately and independently support a determination that a worker is an independent contractor, the ABC requires that all three factors are met.
The SJC’s ruling serves as a reminder of the difficulties for a company to properly classify its workers as independent contractors.