Massachusetts Appeals Court Clarifies the A’s and C’s of Independent Contractor Status | Epstein Becker & Green


On July 13, 2022, the Massachusetts Court of Appeals signaled a victory for Massachusetts employers who rely on independent contractors. in the Tiger Home Inspection, Inc. vs. Dir. of the Department of Labor, the Court of Appeals reversed decisions of the Department of Unemployment (“DUA”) and the Trial Court, concluding that the inspectors were independent contractors under the Massachusetts Unemployment Insurance Act (“Unemployment Act”) and therefore were not entitled to unemployment benefits. The Court of Appeals focused on items A and C of the Unemployment Act’s “ABC” test for classifying independent contractors and provided employers with excellent precedent and specific guidance for navigating these elements of the test. In particular, the ABC language of the Unemployment Act largely follows the “ABC” test of the Massachusetts Wage Act, with Prongs A and C using identical language. As a result, Tiger Home Inspection arguably provides employers with much-needed clarity for navigating both laws.

Background & Decision

in the Tiger Home Inspection, Tiger provided property inspection services, relying on inspectors it contracted with as independent contractors. Despite this, a licensed home inspector applied for unemployment benefits in 2008 when Tiger ceased service. In response, Tiger claimed that the inspector was not eligible for unemployment benefits due to his status as an independent contractor. Disagreeing, the DUA concluded that the inspector and “all similarly employed inspectors” were employees under the “ABC” test, and the district court upheld this. The Massachusetts Circuit Court of Appeals overturned the lower court’s appeal, objecting to the DUA’s analyzes under Prongs A and C, and ruling that Tiger correctly identified the inspector and “similar employees” as independent contractors.

The “ABC” test

Massachusetts Unemployment Law presumes that employees are employees unless the employer can rebut the presumption by passing the “ABC” test. In particular, employers must prove:

  1. “Such person was and continues to be free from control and direction in connection with the provision of such services, both under their contract and for the provision of the service and indeed;
  2. The service is provided either outside of the usual business operations for which the service is provided, or outside of all business premises of the company for which the service is provided; and
  3. Such a person usually engages in an independently established trade, profession, occupation or business of the same kind as that associated with the service rendered.”
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Prong A: Direction and Control

With respect to Prong A, the Court of Appeals clarified that the proper investigation is: “Has the person performing services: (1) the right to inspect the details of how the services were performed; and (2) have freedom from control, not only as to the result to be achieved, but also as to the means and methods to be employed in the accomplishment of the work.” Im Tiger Home Inspectionsthe appeals court “stated” the evidence and answered “yes” to both questions.

The Court of Appeals also clarified that the substantive investigation focused on “the extent of direction and control over . . . [the inspector’s] Work.” For its part, the DUA had relied on the following Prong-A factors: (1) scheduled customer inspections by Tiger’s office; (2) customers paid Tiger directly for services rendered; (3) Tiger provided branded shirts to inspectors , and Tiger’s website showed them wearing those shirts; (4) Tiger hired a manager to take customer complaints; and (5) Tiger took out fault and omission insurance for the inspectors The Court of Appeals criticized the DUA and found that many of these factors were fully consistent with Tiger’s efforts to generate revenue through branding, not necessarily through leadership and control.The Court of Appeals also criticized the DUA’s emphasis on Tiger requiring inspectors to provide written reports after each inspection to submit, a legal requirement, and justified this by the fact that authorities and courts that the “Contr olle” review should not hold companies responsible for compliance with Massachusetts law.

Next, the Court of Appeal emphasized the facts that were central to its finding that Tiger did not control or direct the work of the inspectors. In particular, the Court of Appeal found that “tiger inspectors could work as little as they wished”; “Inspectors worked at their own pace”; and “Inspectors . . . could refuse without penalty any contract offered by Tiger.” In addition, the Court of Appeal underscored the inspectors’ complete discretion – as long as they adhered to government standards: Tiger left “the means and methods of performance” entirely to the inspectors. This discretion included: (1) not communicating with Tiger when accepting a job; (2) direct contact with customers; (3) travel to the checkpoints in their own vehicles and at their own expense; (4) conducting the inspections with their own tools and equipment; (5) issuance of inspection reports to customers without Tiger involvement; and (6) have the discretion to “hire volunteers at your own expense without requiring Tiger’s approval.” In summary, the Court of Appeal ruled that Tiger had left the inspectors “free” to conduct inspections as independent contractors would, and therefore Tiger prevailed at Prong A.

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Prong C: Independent trade or business

Likewise, the Court of Appeals clarified the critical inquiry under Prong C. In particular, the Court of Appeals noted that the issue “is not whether the inspectors actually ran their own businesses, but whether they were free to do so.” Finding that the records supported a “yes” on that question, the Court of Appeals criticized the DUA’s reliance on the “lack of credible evidence that the inspectors actually worked at independent companies,” and was therefore forced to back down to rely on Tiger for work. While inspectors contacted directly by clients to schedule a Tiger inspection “should refer the inquiry to the Tiger office for central planning,” there was no evidence that Tiger required inspectors to identify all potential clients refer tiger. Rather, the evidence showed that inspectors could advertise their own services and entertain their own clients. Because the inspectors worked as little or as much as they chose, Tiger did not interfere with the inspectors’ ability to conduct their own business. Therefore, the Court of Appeal ruled that Tiger prevailed at Prong C.

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snack

Tiger Home Inspection is a positive development for Massachusetts employers who rely on independent contractors because it provides guidance on how such employers can demonstrate that they do not “control” their workers under Prong A and that their workers under Prong C are in fact “independent.” ‘ are, for purposes of the Massachusetts Unemployment Act. While the “ABC” test remains very fact-intensive, Tiger Home Inspection clarifies that the Prong A investigation focuses on factors implying control and not on the relationship of the parties; that a company’s compliance with the law does not trigger scrutiny; and that the Prong C inquiry is about whether workers are free to run their own business, not whether they run their own business. Significantly, the Court of Appeals found that because the state Unemployment Act and State Wage Act share literal language under Prongs A and C, it Tiger Home Inspection The analysis is instructive in order to pose the same questions to future claims under wage law.

But an annoying wrinkle that Tiger home insurance leaves untouched is the elusive Prong B, which clearly distinguishes between the Unemployment Act and the Wage Act. Prong B of the Wage Act, for example, uses a stricter standard. An employee is an independent contractor under Prong B only if “the service is provided outside of the ordinary course of business of the employer.” To date, the Massachusetts courts have given no practical guidance as to what this language means. The only other advice available comes from a single advisory opinion from the Massachusetts Attorney General, which says workers who go into offices to move furniture are doing work outside of the normal course of business, but otherwise provide no meaningful insight into the problem. While this Prong B challenge for employers may still exist, Tiger home insurance provides much-needed clarity for setting the other two elements of the Unemployment Act and provides helpful guidance for navigating similar points of the Pay Act.

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