POLICY CLARIFICATION - When do you count Self-Employed Contractors as Employees?

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September 05, 2019

Policy Clarification -
When do you count Self-Employed Contractors as Employees?

The Department of Family and Medical Leave (DFML) is issuing new guidance on when 1099-MISC workers should be included in a business’s workforce count and whether the business needs to report them for the purposes of the Paid Family and Medical Leave program.

Over the course of the summer, DFML staff met with representatives from hundreds of businesses across the Commonwealth. During these discussions, employers consistently asked for clarification on the contribution requirements for 1099-MISC workers – specifically:
  1. In what cases must an employer count 1099-MISC workers as part of its workforce? and
  2. Must an employer report on 1099-MISC workers if 1099-MISC workers make up less than 50% of the business’s workforce?
In order for a 1099-MISC worker to be considered a part of your Massachusetts workforce count – 
The 1099-MISC contractor MUST:
  • Perform services as an individual entity;
  • Live in Massachusetts;
  • Perform services in Massachusetts; and
The 1099-MISC worker MUST NOT:
  • Be an independent contractor as defined by the Massachusetts unemployment statute, (M.G.L. c.151A), which is a guiding authority for the PFML program in many respects. 
The Massachusetts unemployment statute excludes from “employment” services that meet this three part test. If a worker meets the criteria provided above and you have determined that the individual entity is not an independent contractor under the three-part test, then you should count them as a member of your Massachusetts workforce.
Massachusetts 1099-MISC workers count toward your total number of covered individuals for purposes of contributions and reporting only if 1099-MISC workers make up more than 50% of your total Massachusetts workforce (MA W-2 employees and MA 1099-MISC workers combined). Otherwise, an employer is not required to contribute or report on 1099-MISC workers. 
Other content that you may find helpful:
We have also implemented a new tool for organizations seeking a training on the new program. If you are interested in having a member of the PFML team come out to speak to your organization, trade association or local Chamber of Commerce, please fill out the request form
You can also follow us on Twitter (@MassPFML), Linkedin and Facebook (Department of Paid Family and Medical Leave -DFML) for notices on changes to the program. 

PFML Website - Who is a covered individual?