Massachusetts Independent Contractor 2004 Law Change and how it may impact you & talking points (updated on 7/17/10)
Many artists earn their income or a key part of their income from being an independent contractor. Many cultural organizations and arts related businesses hire independent contractors (i.e. their earnings are reported via a 1099 IRS form if they are paid over $600 for the entire year. No taxes are taken out of the payment).
In 2004 there was a change to the Massachusetts State law governing Independent Contractors. The change to the law was enacted as part of the Public Construction Reform Act. The Committee that produced the bill was the Committee on State Administration. Our understanding is that the carpenter's union pushed for this legislation.
This law now makes it next to impossible to be an independent contractor or a freelancer in this state. However, it is our understanding that it will be the "employer" who will be fined for the violation by the Massachusetts Department of Revenue (DOR), the Attorney General's Office, and/or the Division of Unemployement Assistance (DUA), not the person who is 1099ed. So just be aware of this law change. The burden is falling on the "employers" at the moment and the three governmental agencies to the best of our knowledge have not implemented a state-wide campaign to check individuals for violation of this law. DOR, however, in 2007 investigated two nonprofit arts organizations for violation of this law as part of "random" audits of those organizations.
It is key to understand if you are "employee" you do not control the use of the intellectual property you create as an employee- your employer does. The employer owns the right to sell and use the intellectual property as they see fit (not the employee). So it is critical that artists of all disciplines can be independent contractors to be able to control the intellectual property of what they create.
The publishing industry, companies that are not based in Massachusetts are no longer hiring Massachusetts-based freelance writers, copy editors, editors, etc. due to this 2004 Massachusetts law change. Massachusetts freelancers are losing needed clients and income due to this law change.
What the Massachusetts Independent Contractor 2004 Law Change does:
Under this state law change, which adds to the established IRS 20 part test classifying what constitutes an independent worker, an individual is considered an employee of the company unless the company can establish ALL of the THREE below requirements as stated in the law:
a) such an individual has been and will continue to be from control and direction in connection with the performance of such services, both under his contract for the performance of service and in fact; and
b) such service is performed either outside the usual course of business for which the service is performed or is performed outside of all the places of business of the enterprise for which the service is performed; and
c) Such individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
Translation: The individual must have a contract, decides when to start and when to stop work, uses their skill and knowledge to complete their work without any instruction or direction from the company. The service the individual provides does not duplicate any other employee's job at the company. For example, if an outside a graphic designer is hired to temporarily work at a company "on site or not on site" and there is already a graphic designer on the staff of that company, the company must W-2 the temporary graphic designer. But if you are hired and perform your work off site (i.e. you are not physically at the company's place of business(es)), no one at the company does what you are being paid to do and you regularly provide this work for others outside of the hiring company- you are not an employee. However, please be aware that if what you are "performing" for the company is interpeted as part of the usual course of business (ie you being hired is considered "outsourcing the job") you will more than likely need to be w-2ed.
This state law change is in direct conflict with Federal Copyright law.
For more information: Read the Advisory from the Attorney General's Office, Kathleen Bitetti's paper written about the law change and its impact: http://www.artistsunderthedome.org/IC_2010_paper.pdf, an article written by Robert M. Shea on the Massachusetts Independent Contractor Law . Read a Boston Globe editorial, view a WGBH segment and hear/read a WBUR's piece on the issue.
****An Act Relative to Independent Contractors House Bill 4748 (formerly HB 1844)
****This new draft, HB 4748, was released on May 28th, 2010 and it still does not fix the issues our community is facing. It would amend the 2004 Independent Contractor law change but would NOT fix the negative impact the 2004 law is causing. The 2004 law change is negatively impacting the artist community and the arts community because it made it next to impossible for people to be classified as independent contractors in this State. HB 4748 needs to be amended to fix the problems***
WHAT YOU CAN DO-
Contact the Governor, your State Senator and your State Representative, the Senate President and the Speaker of the House to ask them to support amending HB4748 so it will fix the issues impacting our community this legislative session. Stress they should work with the Massachusetts Cultural Council and the Massachusetts Artists Leaders Coalition (MALC) to come up with the legislative language to solve this problem (note MALC already gave legislative language options that would fix the issue!).
Contact the Governor on this issue
Office of the Governor
State House, Room 280
Boston, MA 02133Phone: 617.725.4005
888.870.7770 (in state)
Fax: 617.727.9725
TTY: 617.727.3666To send him an email http://www.mass.gov/?pageID=gov3utilities&sid=Agov3&U=Agov3_contact_us
To contact the Senate President Therese Murray: tel 617-722-1500 and by email: Therese.Murray@state.ma.us
To contact the Speaker of the House Robert A. DeLeo: 617-722-2500 and by email: Robert.DeLeo@state.ma.us
How to find your state representative (on the form it says Rep in General Court) and your state senator (on the form it says Senate in the General Court): http://www.wheredoivotema.com/bal/myelectioninfo.php
WHAT TO INCLUDE IN YOUR WRITTEN and VERBAL COMMUNICATIONS:
EXAMPLE TEXT:
(PLEASE ONLY USE THIS TEXT AN EXAMPLE- PUT YOUR WRITTEN TESTIMONY IN YOUR OWN WORDS AND MAKE IT DISCIPLINE SPECIFIC)
Please support needed amendments HB 4748-An Act Relative to Independent Contractors and pass this legislation this Session! The 2004 Independent Contractor Law change is having negative unintended consequences for Massachusetts artists of all disciplines and freelancers. Those of us who are paid to create intellectual property of any kind need to have the option of being treated and paid as an independent contractor.
A 7/17/10 Globe Editorial states clearly that this needs to be done:
It is key to understand if you are "employee" you do not control the use of the intellectual property you create as an employee- your employer does. The employer owns the right to sell and use the intellectual property as they see fit (not the employee).
For example, if you are hired to create a design for a company's holiday greeting cards as a freelance graphic artist, you negotiate the rate of your pay AND the use of what you create. The company can only use your design for the printing of the greeting card. If they want to use your design again or for another use, they have to contact you and negotiate the pay/compensation of the new use of your design. This only holds true when you are an independent contractor.
Under the 2004 law change, if a company hires a freelance graphic designer and they already have a graphic designer on staff or even if they don't have one on staff, the "freelance" graphic designer has to be w-2/treated as an employee (have withholdings taken out). The freelance graphic designer is not really an employee of the company. They do not get any benefits, they work from home or from their studio/office outside of their home (that they pay for), and use their own supplies and equipment. The same holds true for photographers, illustrators, and other artists of all disciplines. Another example: If you are paid via w-2 to sing at a church for weekly sunday service- the church has the right to record your performance and rebroadcast it/sell it in any format they so choose. If you are paid as an independent contractor you can decline to be recorded or you can negotiate the terms under which they can record your performance and what they may do with it (same holds true for dancers and other performers). When they are "w-2ed" for their work due to the 2004 MA law change, they lose their rights to their intellectual property, and the use of it. They lose their moral and use rights to their work and they also lose needed revenue.
It is critical that artists of all disciplines (and others who create Intellectual Property) can be independent contractors to be able to control the intellectual property of what they create- our livelihoods depend on it. HB 4748 as it is now written doesn't fix the issues impacting our community. Nor does it help other freelancers and the self employed people who are being hurt by this 2004 law change.
I urge you to work with the Massachusetts Cultural Council (MCC) and the Massachusetts Artists Leaders Coalition (MALC) to come up with the legislative language to solve this problem- this legislative session. Please be aware that MALC has crafted several legislative language options that would fix the issue (and has shared them with members of the legislature and with key Joint Committees). I have included contact information for both the MCC and MALC.
Sincerely,
your name, artistic discipline and contact information
Contact information for the MCC- Greg Liakos: Greg.Liakos@State.ma.us and for MALC: Kathleen Bitetti who can be reached at: malc@artistsunderthedome.org
To be informed of Massachusetts Legislation that impacts artists of all disciplines, small arts based businesses and nonprofits- join the ArtistsUndertheDome.org's free listserv and also see their section on pending Massachusetts legislation.