Independent Contractor

Information on Legislation filed to address the Independent Contrator Issue & What you can do to Support it

The Independent Contractor 2004 law change has been an issue that has been negatively impacting those in the Creative Economy. The 2004 Independent Contractor law change is also negatively impacting the artist community and the arts community. The law change made it next to impossible for people to be classified as independent contractors in this State. Once you are classified as an employee you do not own or control your intellectual property*. It is the property of the employer.

*Intellectual property encompasses copyright, patents, trademarks, royalties, licensing rights, publishing rights, etc.

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BACKGROUND INFORMATION ON the Massachusetts Independent Contractor 2004 Law Change and how it may impact you.

Many artists earn their income or a key part of their income from being an independent contractor. Many cultural organizations and arts related businesses hire independent contractors (i.e. their earnings are reported via a 1099 IRS form if they are paid over $600 for the entire year. No taxes are taken out of the payment).

In 2004 there was a change to the Massachusetts State law governing Independent Contractors. The change to the law was enacted as part of the Public Construction Reform Act. The Committee that produced the bill was the Committee on State Administration. Our understanding is that the carpenter's union pushed for this legislation.

This law now makes it next to impossible to be an independent contractor or a freelancer in this state. However, it is our understanding that it will be the "employer" who will be fined for the violation by the Massachusetts Department of Revenue (DOR), the Attorney General's Office, and/or the Division of Unemployement Assistance (DUA), not the person who is 1099ed. So just be aware of this law change. The burden is falling on the "employers" at the moment and the three governmental agencies to the best of our knowledge have not implemented a state-wide campaign to check individuals for violation of this law. DOR, however, in 2007 investigated two nonprofit arts organizations for violation of this law as part of "random" audits of those organizations.

It is key to understand if you are "employee" you do not control the use of the intellectual property you create as an employee- your employer does. The employer owns the right to sell and use the intellectual property as they see fit (not the employee). So it is critical that artists of all disciplines and those that create intellectual property can be independent contractors to be able to control their intellectual property. Intellectual property encompasses copyright, patents, trademarks, royalties, licensing rights, publishing rights, etc.

The publishing industry, companies that are not based in Massachusetts, are no longer hiring Massachusetts-based freelance writers, copy editors, editors, etc. due to this 2004 Massachusetts law change. Massachusetts freelancers are losing needed clients and income due to this law change.

What the Massachusetts Independent Contractor 2004 Law Change does:

Under this state law change, which adds to the established IRS 20 part test classifying what constitutes an independent worker, an individual is considered an employee of the company unless the company can establish ALL of the THREE below requirements as stated in the law:

a) such an individual has been and will continue to be free from control and direction in connection with the performance of such services, both under his contract for the performance of service and in fact; and

b) such service is performed either outside the usual course of business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed; and

c) Such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

Translation: The individual must have a contract, decides when to start and when to stop work, uses their skill and knowledge to complete their work without any instruction or direction from the company. The service the individual provides does not duplicate any other employee's job at the company. For example, if an outside a graphic designer is hired to temporarily work at a company "on site or not on site" and there is already a graphic designer on the staff of that company, the company must W-2 the temporary graphic designer. But if you are hired and perform your work off site (i.e. you are not physically at the company's place of business(es)), no one at the company does what you are being paid to do and you regularly provide this work for others outside of the hiring company- you are not an employee. However, please be aware that if what you are "performing" for the company is interpeted as part of the usual course of business (ie you being hired is considered "outsourcing the job") you will more than likely need to be w-2ed.

This state law change is in direct conflict with Federal Copyright law.

For more information: Read an article written by Robert M. Shea on the Massachusetts Independent Contractor Law, and see Kathleen Bitetti's paper written about the law change and its impact: http://www.artistsunderthedome.org/IC_2010_paper.pdf. Also read a Boston Globe editorial and hear/read a WBUR's piece on the issue.

To be informed of Massachusetts Legislation that impacts artists of all disciplines, small arts based businesses and nonprofits- join the ArtistsUndertheDome.org's free listserv, see its section on pending Massachusetts legislation and subscribe to the MALC Blog.