The Massachusetts independent contractor statute stifles innovation and independence. If not revised, it will hurt our skilled workers and the state economy.
Consider Jane, a Web-design freelancer who works from home in Waltham to produce branding solutions for clients across the country. She is proof that the just-in-time manufacturing method — developed by Toyota in the 1960s to reduce supply chain flow-times and to bring better and less expensive products to consumers — has become employment’s guiding paradigm.
However, the independent contractor statute in Massachusetts — a well-intended law aimed at protecting workers — complicates things for workers like Jane by discouraging enterprises in Massachusetts, and around the world, from engaging them. This is troubling, because it puts our state at odds with how 21st-century enterprises maximize efficiency and value — and how they will survive. Enterprises competing in the global economy, not only for consumers but also for talent, need to engage the right number of workers, with the right skill sets, at the right time.
Recent studies have found that as many as 53 million Americans — one in three workers — are now freelancing. Sharing-economy companies like Lyft and Handy, as well as service-sourcing portals like Angie’s List and TaskRabbit, leverage mobile technology and the Cloud to connect consumers and entrepreneurial workers seamlessly. This not only brings better services to customers, it creates jobs and tilts work-life balance back in favor of the freelancer.
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As a result, the people working freelance gigs now include those in sales and marketing, IT and programming, design, human resources, and multimedia and training, as well as project managers, writers and translators, and even engineers, lawyers, and physicians.
It is a good thing that American workers have chosen to be more independent and flexible, because enterprises increasingly source talent both globally and episodically. Most businesses are considering engaging human talent on an as-needed basis because their customers want more for less. Employing those with the wrong skills for the immediate need is not competitive or sustainable. Like managing the supply chain to enhance quality while eliminating unnecessary inventory, just-in-time human resource management makes a difference, and is becoming the norm.
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The independent contractor statute in Massachusetts prohibits any firm from engaging an independent contractor unless his work has no relation to the “usual course” of the company’s business. This law, amended in 2004, was part of a bill that focused exclusively on “Regulating Public Construction.” However, through what may have been a drafting error, it applies across all sectors. Therefore, what was supposed to address perceived abuses in the construction industry has become a powerful restriction on workers, in all industries, who choose to work as freelancers. Worse, the Massachusetts independent contractor law is more restrictive than almost all similar state laws across the country. For example, if an IT consulting firm wanted to engage an extra IT freelancer on a short-term basis to roll out a new software program for a client, it would have to hire that person as an “employee.” Because state and federal laws expansively regulate the working conditions of “employees,” engaging this IT freelancer for a short-term project under current Massachusetts law would be far more expensive, and the consulting firm’s latitude in deploying him far more constrained, than if the IT professional were engaged as an independent contractor.
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The result? If a business with pressing labor needs engages freelancers from outside Massachusetts because of the restrictive nature of this state’s independent contractor law — and they will — skilled workers in the Commonwealth will lose out. With freelancer websites like Upwork, HourlyNerd, and Skillbridge gaining increased utilization, sourcing talent from across the globe is now just a mouse click away. At the same time, independent contractor laws from virtually every other state amply protect freelancers from misclassification, and the exploitation that can flow from it. So, by effectively declaring that independent contractors are not welcome in the Commonwealth, the Legislature has used an axe instead of a scalpel. We can and must do better.
The solution is straightforward. The Legislature should amend the independent contractor statute to return it to its pre-2004 language. This would strike the right balance between allowing enterprises to engage skilled Massachusetts workers on a freelance basis while doing so in a manner that would satisfy the labor standards of virtually every other state in the country. Absent such a common-sense approach, skilled workers in Massachusetts will forego high-paying on-demand opportunities in our increasingly dynamic freelancer economy — and the Commonwealth will suffer.
David Casey is an attorney at Littler Mendelson.