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Massachusetts Clarifies When 1099-MISC Workers Should be Counted for Purposes of the Paid Family and Medical Leave Act Program

Written by: Laura McKelligott Kahl

As published in NEHRA News (9/19/2019)

On September 5, 2019, the Massachusetts Department of Family and Medical Leave (“DFML”) issued new guidance on when employers must count 1099-MISC workers as part of their workforce for purposes of the Paid Family and Medical Leave (“PFML”) program. In its press release announcing the new guidance, the DFML stated that the guidance was issued after meetings with representatives from hundreds of businesses across Massachusetts during which the businesses consistently sought clarification on whether they are required to collect contributions from, and report on, 1099-MISC workers.

The new guidance answers the following two questions:

  1. In what cases must an employer count 1099-MISC workers as part of its workforce?
  2. Must an employer report on 1099-MISC workers if 1099-MISC workers make up less than 50% of the business’s workforce?

According to the new guidance, an employer must count 1099-MISC workers as part of its workforce if the 1099-MISC workers live in Massachusetts and perform services in Massachusetts as individual entities, and are not independent contractors as defined by the Massachusetts unemployment statute. In other words, an employer need not count 1099-MISC workers as part of its workforce if the 1099-MISC workers meet the test for independent contractor status. If an employer determines that it has 1099-MISC workers who meet this test, the employer only needs to report on, and remit contributions on behalf of, the 1099-MISC workers if they make up more than 50% of the employer’s total workforce, which is calculated by adding all W-2 and 1099-MISC workers together.

This new guidance is a reminder of how important it is for employers to properly classify and pay their workforce. Under most circumstances, workers who should be classified as employees rather than independent contractors should not be paid under a Form 1099-MISC. Form 1099-MISC is used for payments of $600 or more that are for non-employee compensation. Therefore, employers that are paying workers under Form 1099-MISC should carefully review their pay practices and the services performed by those workers to be certain that the workers meet the independent contractor test.

Under the unemployment statute, workers qualify independent contractors only if they satisfy the following 3-part test:

  1. They are free from direction and control in connection with the performance of their services;
  2. Their services are performed either outside of the usual course of the business for which the service is performed or outside of all the places of business of the enterprise for which the service is performed; and
  3. The workers are customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

With the October 1, 2019 start date for collecting and remitting contributions to the PFML program fast approaching, employers that have 1099-MISC workers in their workforce must act quickly to determine which members of their workforce to include. To do this, they must first ensure that those 1099-MISC workers are classified correctly. Employers with questions or concerns about the classification of their workforce could benefit from consulting with an experienced employment law attorney to avoid running afoul of the PFML requirements.

Massachusetts enacted the PFML Act in June 2018. The law provides temporary income replacement for eligible workers who are welcoming a new child into their family, are struck by a serious illness or injury, need to care for an ill or ailing relative, or for certain military considerations. While benefits under the law are not available until January 2021, employer contributions and reporting obligations begin on October 1, 2019.

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