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Vendor associates providing merchandising services misclassified as independent contractors under Massachusetts law

By Ronald Miller, J.D.

Whatever the wisdom of the Massachusetts statute, the text is clear, and it makes no exception for employers simply because they are participants in the gig economy.

Exercising supplemental jurisdiction over state-law wage and hour claims, a federal district court in Massachusetts granted a named plaintiff’s motion for partial summary judgment as to employee status of vendor associates under Massachusetts law, after concluding that they were providing services in the employer’s usual course of business. Additionally, the court granted the plaintiff’s motion for class certification of claims alleging that the employer treated its vendor associates as independent contractors, rather than employees. The court also granted a motion to amend to add as a second named plaintiff an individual who had filed a duplicative action against the employer (Hogan v. The InStore Group, LLC, January 11, 2021, Woodluck, D.).

Merchandising services. The employer contracts with retailers and manufacturers to provide merchandising services, including inventory correction, display building, and surveys, among other things. It employed vendor associates to perform those services. Vendor associates registered with the employer on its website. They are free to select the projects they want. The employer cannot force vendor associates to take a project. However, it does at times solicit vendor associates to do so. Vendor associates must perform the selected merchandising jobs for the client during certain windows of time, and some of the jobs require completion on certain dates, at certain times, or during certain lengths of time.

The employer provides vendor associates with a written general policy, which includes a dress code, bans the use of personal electronics while working, and specifies the tools the vendor associate must independently bring. Vendor associates are provided with a worksheet that identifies the assignment and the steps for invoicing the job.

In this action, a vendor associate brought suit alleging that the employer violated Massachusetts law by treating him and other associates as independent contractors, rather than employees. Vendor associates signed an “Independent Contractor Vendor & Release Form,” which provided that their employment was not exclusive, they had the right to accept or decline engagements offered by the employer, and they could market their services through means other than the employer. The parties filed cross-motions regarding the employee status of the vendor associates. Additionally, the named plaintiff sought class certification of this litigation.

ABC test. Under Mass. Gen. Laws ch. 149, § 148B(a), “an individual performing any service . . . shall be considered to be an employee under [chapters 149 and 151] unless” all three following requirements are met: (1) 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 (2) the service is performed outside the usual course of the business of the employer; and, (3) 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. Massachusetts law effectively “presumes that ‘an individual performing any service’ is an employee and therefore is entitled to the benefits of the Massachusetts wage and overtime laws.”

Claiming that he was an employee under Section 148B(a), the named plaintiff alleged that the employer failed to pay him minimum wage in violation of Mass. Gen. Laws ch. 151, § 1, which requires employers to ensure that, no matter how employees are paid, they receive at least the minimum wage.

Employee status. The fact that the plaintiff signed the “Independent Contractor Vendor & Release Form,” which classified him as an independent contractor, did not resolve the question of his employment status. In terms of the employer’s contractual right to control the performance of its vendor associates, the court observed that the employer’s general policy assigned the specific level of control regarding the dress code, required name tags, and banned personal electronics. Thus, the court concluded that the policy evidenced the exercise of control over the vendor associates.

However, the court found that the question whether the employer’s “tool” requirements evidenced control to be a disputed issue of material fact, since certain tools could potentially be retrieved from the client on site if the vendor associate came without one. Moreover, because vendor associates had the power to select projects according to blocks of time predetermined for their completion, the court declined to find that the employer controlled their hours. Further, the court found a genuine issue of material fact whether worksheets providing instructions on how to perform the jobs evidenced control. Thus, the court concluded that the employer did not assert control over vendor associates.

Usual course of business. When determining whether the services performed by the vendor associates are outside the usual course of the employer’s business, the Massachusetts Supreme Court has evaluated two factors: (A) what is the usual course of business of the employer, and (B) what are the services performed by the worker. Here, the court rejected the employer’s contention that the plaintiff’s provision of retail services was distinct and incidental to its usual course of business—the coordination of retail services. The employer held itself out to the public as an “On-Demand,” “nationwide full-service retail merchandising organization.” Thus, the court concluded that the reality of the employer’s business model was providing retail services.

Next, relying on the Massachusetts high court’s decision in Sebago v. Boston Cab Dispatch, Inc., the court examined “whether the service the individual is performing is necessary to the business of the employing unit or merely incidental.” Here, the court observed that the employer did not argue that it could continue as a company without vendor associates. Further, it did not leave vendor associates “to their own devices to make a profit” from its services; rather the employer was involved in directly selling its retail services through its internal sales division. Moreover, the employer was continually engaged at every stage of the relationship between vendor associate and client. Thus, the court found that the vendor associates were providing services in the employer’s usual course of business.

Independent trade. Although the usual course of business prong was sufficient to dispose of the parties cross-motions as to the employee status issue, the court briefly addressed whether the vendor associates were engaged in an independently established trade. Under Massachusetts law, the defendant was required to prove that “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.”

Pointing out that vendor associate had the right to pick and choose projects that he wanted to do on his own schedule, the court concluded that the employer met its burden regarding this prong.

Certification. Finally, finding sufficient commonality regarding whether the retail services were in the usual course of the employer’s business, that the named plaintiff’s claims were typical of the class, that he was an adequate class representative, and that common evidence relied on by the plaintiff predominated over individualized issues identified by the employer, such that a class action was the superior method for adjudicating this case, the court granted the plaintiff’s motion for class certification.