Let’s say you’re an independent contractor based in the Berkshires, and you work from home as a freelance writer. Then let’s say you get an e-mail from one of your main clients, a big, out-of-state publishing company. You’re informed they won't be giving you any more assignments. In fact, the company has pretty much blacklisted Massachusetts independent contractors altogether.
"All the industries we’re trying to grow in the creative economy, we’ve now just put up a huge roadblock," says Kathy Bitetti.
Bitetti calls this a horror story that's playing out across the state. She’s a tireless arts advocate, constantly roaming Beacon Hill's halls, cornering politicians, going to bat for artist health care and housing. Now she’s obsessed with the Massachusetts Independent Contractor Law.
"We’ve been very quiet about it because we’ve been trying to fix it," Bitetti says. "But now it’s just like, forget it, you know, this is really a problem, and the fact that our writers cannot get work, and it’s going to start hitting our graphic designers, our illustrators."
Longtime freelance illustrator Ken Dubrowski says he's already feeling it. Some of his out-of-state clients are in a tizzy. They're confused by the state law.
"It’s like a stigma, you know, the Scarlet Letter," Dubrowski says. "It’s like, 'Oh my God, I’m from Massachusetts, what does that mean?' This tax law, this Independent Contractor’s Law."
So, what exactly is the law? And how did we get here?
"It’s a law that went into effect in 1990," says Waltham employment attorney Robert Shea, who consults corporate clients about this law all the time. "And it was tweaked in 2004 to deal with a concern about the use of independent contractors in the construction area, and the tweak has had a lot of unintended consequences."
In a 2005 article, Shea predicted the “tweak” would reach beyond the construction industry. It has.
But in a nutshell — if complex law can ever be put into a nutshell — the law was created to prevent worker exploitation. Companies hiring, say, a carpenter would classify him or her as an independent contractor to save money on payroll, taxes and benefits. Under the tweaked law, that carpenter must be granted employee status unless he or she performs duties “outside the usual course of business.” What that means, exactly, can seem gray. And there are other criteria that must be met.
Critics say the law is broadly written, making it susceptible to open interpretation.
But, bottom line, classifying workers as independent contractors now requires major hoop-jumping. If employers get busted classifying incorrectly — say, giving a worker a 1099 form at tax time rather than a W-2 — they’ll face hefty fines. The attorney general's office is charged with enforcing the law.
"This law applies to so many different businesses that use so many different types of independent contractors," Shea says, including bike messengers, delivery drivers and accountants. And it protects a lot of them. But, the attorney adds, writers and artists are a different breed. "I mean, they’re a clear victim of this change in the law," he says, somewhat bemused.
Artist Bitetti says — whether by design or by accident — the law needs to change. Not every worker wants a W-2.
"Most of us are independent contractors and we want to be because once you’re classified as an employee you don’t own any rights to your intellectual property," she says, "whether you’re a visual artist, a dancer, an engineer, videogamer."
Bitetti is endeavoring for an amendment to acknowledge this. But Frank Callahan, president of the Massachusetts Building Trades Council, is wary.
"At the risk of sounding very stubborn, we’ve been working on this very hard for over six years," he explains, "and we’re always open to any change that could address legitimate concerns without impacting the workforce as a whole in a negative manner."
Callahan was a prime mover on the 2004 amendment. He represents 74 local unions and says the law is doing exactly what it was intended to do — especially in the drywall and painting industries.
"I haven’t seen the unintended consequences that you reference," Callahan says. "We heard this argument back in 2004 and 2005. They trotted out a number of different groups — the hair dressers, the bike messengers."
And they’re fine, he says. But state Rep. Smitty Pignatelli, D-Lenox, is concerned about the law’s unintended impact ripping through his district. Many of his constituents are indie artists, and he says western Massachusetts — and the state as a whole — really can’t afford to lose its creative workforce because of this law.
"This creative economy is certainly putting people back to work and all I know is out in the Berkshires, if it wasn't for the creative economy, I'm not sure where the Berkshires would be on the radar map at this point," he says.
Pignatelli also co-chairs the House's Cultural Caucus, which is organizing an upcoming forum at the State House to educate legislators and artists unions on the contractor law — a lot of people don’t know the law exists. Or how it really works. But Sen. Thomas McGee, D-Lynn, does. He voted on the more restrictive version back in 2004.
"There’s strong, legitimate arguments on both sides of this issue, so you don’t want to blow up a piece of legislation that’s doing what it was intended to do," McGee says.
At the same time…
"We have been able to clearly recognize — particularly in the arts and in freelance writing — that there is an impact that is not an intended impact and that we are trying to address," he adds.
McGee, also chairman of the Committee for Workforce and Labor Development, introduced a draft of a new amendment to the law a few weeks ago. It didn't make it out of committee, though. Bitetti calls it a nice try, but says "it doesn’t even come close to fixing it."
While Massachusetts tries to figure it out, other states are also starting to crack down on companies that incorrectly classify independent contractors. And there's movement on the federal level to do the same.
This program aired on June 30, 2010.