Last week, the Massachusetts Appeals Court held that Gatehouse Media, the company that owns the Patriot Ledger (and the New Bedford Standard Times) misclassified its newspaper delivery drivers as independent contractors and ruled that they were employees with all of the rights and protections afforded to employees.
This is a very important decision and unless it is overturned by the Supreme Judicial Court it could further threaten the economic viability of the traditional press in Massachusetts, which is already having a very difficult time in the environment of free online news and alternate means of distribution.
In the suit, a delivery provider who had worked for the Patriot Ledger sued Gatehouse after he was terminated, claiming it had misclassified him as an independent contractor for years, citing prong 2 of the 3 prongs established as the tests to determine whether a person is properly classified. He asserted claims “dependent on his being an employee under § 148B that Gatehouse had deducted unauthorized charges and fees from its payments to him, in violation of G. L. c. 149, §§ 148 and 150; failed to pay him a minimum wage, in violation of G. L. c. 151, § 1; and violated his rights under the tip-sharing statute, G. L. c. 149, § 152A. He also asserted an unjust enrichment claim. He was certified by the Court to represent the class of delivery personnel who were similarly situated.” Timothy P. Chambers & another vs. RDI Logistics, Inc. & another; Dee & Lee, LLC & another, third-party defendants 476 Mass. 95.
The Massachusetts Independent Contactor statute, G. L. c. 149, § 148B, provides that:
“To establish that a presumptive employee is actually an independent contractor, an employer must prove that
- the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
- the service is performed outside the usual course of the business of the employer; and
- the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed."
The Appeals Court decided that Gatehouse failed to prove and could not prove that the delivery service was performed “outside the usual course of the business of the Patriot Ledger which itself had defined itself as a publisher and distributor of news to its customer.” It also based its decision on the critical importance of the delivery service to the newspaper’s core business. It also discussed the detailed and pervasive control the newspaper exercised over the services and duties of the delivery personnel.
Since the employer has to prove all three tests were met to establish that he or she is an employee, the failure to prove even one was fatal to its defense.
The Appeals Court recognized that a last-minute argument raised by Gatehouse after briefs were submitted, namely that Federal preemption arising from the Federal Aviation Administration Authorization Act was a jurisdictional bar to the Massachusetts Independent Contractors Act when applied to delivery personnel, might be recognized by the Supreme Judicial Court. Although that is not likely, it is a source of hope for Gatehouse.
This case is important as the practical results could impact all newspapers in Massachusetts and indirectly their readers. It is also instructive for all Massachusetts business operators who use the independent contractors business model to review their situations to determine their exposure. And it is important for those who are currently characterized as independent contractors to be aware of the protections that might be available to them.
It is very difficult to pass all three tests outlined above together with the Federal rules promulgated by the IRS. If you are considering your own situation for the future, feel free to consult us to help evaluate your unique situation.