Federal Court Rules Against Massachusetts Independent Contractor Law

On Feb. 5, 2015, Judge Robert G. Stearns of the U.S. District Court in Massachusetts issued rulings in two separate cases, finding that federal law preempts the Massachusetts state law governing worker classification as employees or independent contractors. The two separate cases, one involving FedEx Ground, and the other involving J.B. Hunt Transport Services, both involved contracted workers seeking to be re-classified as employees by the companies.

At issue for the companies was a Massachusetts state law that requires employers to meet a threeprong test in order to classify workers as independent contractors. One of those prongs requires employers to show that the services of the worker are “performed outside the usual course of business of the employer” in order to classify the worker as an independent contractor. This provision made it virtually impossible for a trucking or logistics company to conduct business with an owner-operator in Massachusetts while classifying that driver as an independent contractor.

In his decision, Judge Stearns found that state law increased the costs of motor carrier employers. This increased economic burden on employers of motor carriers was in conflict with federal law prohibiting regulation of prices, routes, or services of motor carriers. Further, Judge Stearns found that none of the prongs of the Massachusetts employee classification test were severable, and so found that the entire law was preempted by federal statute. The plaintiffs in the FedEx Ground case have already appealed the ruling to the 1st U.S. Court of Appeals, but in the interim this decision is a significant victory for Massachusetts employers struggling with burdensome employee classification issues.

For TIA members, the challenge of properly classifying workers as independent contractors or employees is a difficult but important distinction. Misclassification of a worker as an independent contractor rather than as an employee can expose the company to substantial judgments involving back-pay for the worker, back-taxes for the government, interest, penalties, and legal fees. For more information on employee classification issues, please consult TIA’s Fair Labor Standards Act Framework, or contact Will Sehestedt at (sehestedt@tianet.org or 703-299-5713).