Statutory Changes to Definition of Independent Contractor

Beginning on December 31, 2012, employers in Maine will use a single definition for determining whether an individual may be classified as an employee or as an independent contractor. Currently, the Maine Workers’ Compensation Board and the Department of Labor each use different definitions for independent contractor which has resulted in some confusion and lack of uniformity. LD 1314, An Act to Standardize the Definition of Independent Contractor, was enacted to remedy this problem. The new Act, codified at 26 M.R.S. 1043 (11)(E) and 39-A M.R.S. 102 (13-A), creates a rebuttable presumption of employee status for anyone performing services for renumeration. In order for a person to be an independent contractor, the following criteria must be met: (1) The person has the essential right to control the means and progress of the work except as to the final results; (2) The person is customarily engaged in an independently established trade, occupation, profession or business;(3) The individual has the opportunity for profit and loss as a result of the services being performed for the other individual or entity;(4) The individual hires and pays the individual’s assistants, if any, and, to the extent such assistants are employees, supervises the details of the assistants’ work; and(5) The individual makes the individual’s services available to some client or customer community even if the individual’s right to do so is voluntarily not exercised or is temporarily restricted. Additionally, the employer must show that at least three (3) of the following criteria have been met: (1) The individual has a substantive investment in the facilities, tools, instruments, materials and knowledge used by the individual to complete the work;(2) The individual is not required to work exclusively for the other individual or entity;(3) The individual is responsible for satisfactory completion of the work and may be held contractually responsible for failure to complete the work;(4) The parties have a contract that defines the relationship and gives contractual rights in the event the contract is terminated by the other individual or entity prior to completion of the work;(5) Payment to the individual is based on factors directly related to the work performed and not solely on the amount of time expended by the individual;(6) The work is outside the usual course of business for which the service is performed; or(7) The individual has been determined to be an independent contractor by the federal Internal Revenue Service.More information about the Act may be found at the State of Maine Legislature’s website: http://www.mainelegislature.org/LawMakerWeb/summary.asp?ID=280040909