Independent Contractor Compliance Blog

Massachusetts-The State Supreme Judicial Court recently issued a ruling that increases the amount of damages a worker can receive if he or she has been misclassified as an independent contractor, even though he was paid at a higher rate than he would have gotten as an employee.  (Somers v. Converged Access, No. SJC-10347)

The company attempted to save money by making the engineer an IC, avoiding the costs of an employee.

A quality assurance engineer applied for work as an employee with a software company on two separate occasions. After turning him down a second time as an employee, the company offered him a position as an “independent contractor.” He accepted a 60-day term, because he needed the work, and then they extended his contract for another 90 days. 

They paid him at a higher rate than he would have been paid as an employee.  The client company believed paying at the higher rate protected them from future issues, such as  overtime, vacations, holidays or the other benefits offered to company employees.

Sour grapes set in.

In my seminars I tell of the literally thousands of incidents I have seen where the former IC decides he got a raw deal and files either a complaint with the local unemployment office for unemployment benefits, or finds an attorney and sues his former “client” for employee benefits, such as stock options, overtime, expenses, retirement benefits, etc. Either of these actions can lead to large unplanned liabilities for the company.

That’s what our engineer did. He brought a civil suit claiming, among other things, that he had been misclassified as an independent contractor. He sought to recover the value of the overtime, vacation pay, holiday pay and other benefits that he would have received had the company classified him properly as an employee.

What happened?

The company argued he was an IC. They also said even if he had been an employee he shouldn’t receive benefits at the higher pay rate he was paid as an IC, but should receive them at a lower rate an employee would be paid. They argued he would not have received as much pay as an employee. Paying him full benefits at the higher pay rate would be “unfair.”

The court disagreed. The final decision was the engineer was an employee entitled to all the benefits an employee should receive at his higher IC pay rate. 

The company gambled and lost.

It takes an Expert-not a Weekend Warrior

The company apparently did not consult an expert before venturing in to the worker misclassification jungle. They should have called Collabrus!