If you’re running a business in Worcester or any of the surrounding towns (Auburn, Shrewsbury, Millbury, or Grafton), you may think you’ve done everything right: hired help, paid them fairly, and moved the work forward. But if one of those workers is misclassified as an independent contractor instead of an employee, your business could face serious legal trouble.
Employee misclassification isn’t just a paperwork error. In Massachusetts, it can lead to lawsuits, back wages, and personal liability, even if it was unintentional. So, let’s take a walk through what it means, what the consequences are, and what you can do about it.
What Is Employee Misclassification in Massachusetts?
Classifying an employee as a contractor is the most common type.
What’s the Difference Between an Employee and an Independent Contractor?
The difference between an employee and an independent contractor in Massachusetts is determined by the strict “ABC test” under M.G.L. c. 149 § 148B.
To legally treat a worker as an independent contractor, you must prove all three parts of the ABC test:
A. The worker is free from control and direction in performing the work.
B. The work is outside the usual course of the business.
C. The worker is engaged in an independently established trade or business.
If you fail any one part, the law presumes the person is an employee. This affects payroll taxes, W-2 vs. 1099 reporting, and benefits eligibility. In other words, there’s more to it than what label you give the person. It’s really about how the relationship works in practice.
Why Do Businesses Misclassify Workers?
Businesses often misclassify workers to avoid paying payroll taxes, overtime, unemployment insurance, health benefits, or workers’ compensation.
Some do it to cut costs; others simply don’t understand the law. But regardless of intent, the risk is the same. If the Massachusetts Department of Labor Standards (DLS) finds a violation, penalties can be steep and in some cases, personal.
What Happens If an Employee Files a Misclassification Lawsuit?
]The first step is an investigation, possibly followed by an enforcement action.
What Are the First Signs Your Business Is Being Investigated?
The first signs of an employee misclassification issue may include a complaint filed with the Attorney General’s Fair Labor Division, an audit by the DLS, or receiving a civil complaint in the mail.
Sometimes it starts with one frustrated worker. Other times, it follows a routine audit. Either way, the earlier you respond, the better your chances of resolving it with minimal damage. Ignoring the issue only escalates the situation.
Can a Single Worker File a Claim — Or Is It Class Action?
A single worker can file a misclassification claim, but if multiple workers are affected, the case may expand into a class action wage claim.
Massachusetts law allows individuals to bring private enforcement actions under the Wage Act, and class actions are common when companies use the same contractor model across the board. In either scenario, your business can face multiple layers of exposure, including back pay, interest, and statutory penalties.
What Are the Legal Penalties for Misclassification?
Penalties can range from damages paid to workers and fines to your business.
What Damages Can a Misclassified Worker Recover?
A misclassified worker can recover back wages, unpaid overtime, unreimbursed expenses, and the value of lost benefits.
That might include vacation time, health contributions, and any work-related expenses they were forced to cover out of pocket. If you paid them as a 1099 contractor, you might now owe what should have been paid under a W-2 employee model.
Can a Court Impose Additional Penalties?
Yes, Massachusetts courts can impose treble damages (triple the unpaid wages), attorney’s fees, and civil fines per misclassified worker.
Under M.G.L. c. 149, these penalties are mandatory, not optional. That means even if the misclassification was accidental, a court must award liquidated damages. Add interest on unpaid wages and a legal bill you may be responsible for, and the costs add up fast.
Are Business Owners Personally Liable for Misclassification?
Yes, they are, but the situation is complex.
Can Company Officers or Managers Be Held Responsible?
Yes, under Massachusetts law, corporate officers and decision-makers can be held personally liable for misclassification.
This falls under M.G.L. c. 149 § 148, which imposes direct liability on those who “have the management of such corporation.” That means your LLC or corporation might not shield you, and the court may pierce the corporate veil to reach your personal assets if the violation is egregious.
What If You Hired Workers Through a Subcontractor?
Even if you hired workers through a third-party labor subcontractor, you may still be considered a joint employer and share responsibility for proper classification.
If you control the work, provide tools, or determine hours, you may be liable even if a different company wrote the checks. This is a common issue in the construction, gig work, and logistics industries.
How to Defend Against a Misclassification Claim in Massachusetts
Defending against misclassification claims requires proving that you did not, in fact, misclassify workers.
What Are the Best Defenses Available?
To defeat a misclassification claim, you must meet all three prongs of the ABC test, and the burden of proof is on you, not the worker.
Your best defense is usually documentation: contracts, payment records, project details, proof of independent work, and evidence that the person runs their own business. These support affirmative defenses and show the court you had a legal basis for your classification.
Should You Settle or Litigate?
Whether to settle or litigate depends on your exposure and the strength of your evidence.
Mediation can resolve matters efficiently if you’re missing documentation or facing a strong case. But if your business clearly meets the test, your civil litigation attorney in Worcester, MA may advise fighting the claim. Either way, don’t delay. The longer you wait, the higher your risk.
What Role Do State Agencies Play in Misclassification Disputes?
It varies depending on the agency but can range from investigations to enforcement actions.
What Is the Role of the Attorney General’s Fair Labor Division?
The Fair Labor Division investigates complaints, issues citations, and enforces penalties for misclassification and other Wage Act violations.
They may conduct interviews, request records, and issue administrative subpoenas. Their findings carry weight in court and can trigger further investigations by other agencies.
Can the Department of Unemployment Assistance Also Investigate?
Yes, the Department of Unemployment Assistance (DUA) often conducts parallel audits related to employer tax contributions and benefit eligibility.
In some cases, the Massachusetts Department of Revenue (DOR) and federal agencies may also become involved. These agencies often cooperate, and a finding by one can prompt enforcement action by another.
How to Prevent Employee Misclassification in Your Business
Preventing employee misclassification in your business requires taking some specific steps, including converting independent contractors to employees where applicable.
Should You Convert Independent Contractors to Employees?
Yes, if you control how, when, and where someone works or if they rely on you for most of their income, you may want to reclassify them as employees.
This is especially true if they’ve worked for you long-term or exclusively. Updating your employment agreements and submitting proper tax forms can reduce risk moving forward.
What Internal Steps Can Reduce Risk?
To reduce the risk of misclassification claims, conduct an internal classification review, update contracts, and consult an employment lawyer in Worcester, MA.
You should also audit your 1099 compliance, double-check payroll tax records, and clarify job descriptions. A little preventive maintenance now can save you from a lawsuit later.
What Should You Do If You’re Accused of Misclassifying Workers?
The key is to be proactive. Don’t wait to respond and make sure your documentation is accurate.
What’s the First Step Once a Complaint Is Filed?
Once you receive notice of a complaint or investigation, respond immediately and do not ignore any position statement request from the Attorney General’s Office.
Missing deadlines can lead to default findings and automatic fines. Gather your records, notify your insurer if you have one, and contact legal counsel.
How Can a Civil Defense Attorney Help?
A civil litigation attorney can help you prepare documents, respond to subpoenas, challenge how the ABC test was applied, and negotiate settlements.
They may also develop a wage and hour defense strategy tailored to local Worcester employment law procedures and help limit your exposure. The sooner you involve them, the more they can do to protect your business.
FAQ
Can I be sued for misclassifying one freelancer?
Yes, even a single misclassified worker can bring a claim and win significant damages.
What is the ABC test in Massachusetts?
It’s a three-part test under M.G.L. c. 149 § 148B that determines whether a worker is an employee or independent contractor.
Will I have to pay taxes and benefits retroactively?
Possibly. Courts can require payment of back wages, overtime, tax contributions, and lost benefits.
Can I fix past misclassification voluntarily?
Yes. Voluntary reclassification and backpay can help reduce penalties—but speak to a lawyer first.
How much does it cost to defend a misclassification case?
Costs vary, but legal defense, damages, and penalties can run into tens of thousands or more depending on the size of your workforce.
Misclassification can feel like a gray area, but in Massachusetts, the law draws a sharp line. If you’re facing an employee classification claim in Worcester or beyond, act quickly, document everything, and get the right legal help. Because when it comes to protecting your business, clarity beats confusion every time.