by Peter D. Lowe
Maine employers need to pay attention to a new Maine law on the definition of “independent contractor” that goes into effect December 31.
Legislative Document 1314, passed in Maine earlier this year, outlines two sets of conditions that must be in place for an individual to qualify as an independent contractor for purposes of workers’ compensation and unemployment compensation. In the first tier of criteria, to meet the definition of an independent contractor, an individual must:
- Have the “essential” right to control the particulars of the work (except the final results);
- Be engaged in an “independently established” business;
- Have the opportunity to experience either a profit or a loss as a result of the services performed;
- Hire, pay, and supervise the work of any assistants; and
- Make his services available to other clients or consumers in the community.
Also, the worker must meet three or more of the following secondary criteria:
- Have a “substantive” investment in tools and facilities used to complete the work;
- Not be required to work exclusively for the company;
- Be responsible for satisfactorily completing (or failing to complete) the work;
- Be protected by a contractual agreement that establishes legal rights in the event the contract is terminated before the work is completed;
- Base his payment on factors related to work performance;
- Perform work outside the employer’s usual course of business; and
- Be considered an independent contractor by the IRS.
Employers found guilty of intentionally misclassifying employees as independent contractors may face fines ranging from $2,000 to $10,000.
The new law is an effort to simplify the independent contractor tests and put them under “one roof” for Maine law purposes. My advice to clients is to pose the fundamental question: “Without your business, does the person have a business?” The answer will go a long way in steering you in the right direction.
Peter Lowe is an attorney with Brann & Isaacson in Lewiston and an editor of Maine Employment Law Letter, which published a thorough report on this new law in its June 2012 issue. You can reach Peter at email@example.com.