Massachusetts Issues Guidance on When Contractors and Other Workers Count Towards the ‘25 Covered Individuals’ Threshold
The Massachusetts Department of Family and Medical Leave (“DFML”) has been providing on-going substantive and procedural regulations and guidance to effectuate the state’s Paid Family and Medical Leave program (“PFML”), which applies to employers with 25 or more “covered individuals” in the employer’s workforce. Most recently, the DFML issued further guidance (“Guidance”), to clarify when an employer should include 1099-MISC contractors and certain visa holders in their workforce count.
How to Determine if You Meet the 25-Covered Individual Threshold for Reporting
Identifying When a 1099-MISC Contractor Is a ‘Covered Individual’
The PFML requires Massachusetts employers to report their total workforce count to the DFML, but only employers with 25 or more “covered individuals” need to withhold and remit contributions to the PFML program.
The Guidance clarifies that, under the PFML program, an individual who meets the three-part criteria for being an independent contractor is not a covered individual. Further, even if a worker does not meet the State’s criteria for being an independent contractor because, for example the individual performs work in the usual course of the employer’s business, the person still should not be counted as a “covered individual” unless they: (i) perform services as an individual entity; (ii) live in Massachusetts; and (iii) perform services in Massachusetts. Notably, the DFML’s Guidance confirms that an employer is required to contribute on behalf of or to report on 1099-MISC workers only when such workers comprise more than 50 percent of the employer’s Massachusetts workforce.
Employers should anticipate that the DFML may continue to revise the rules for determining whether and how employers should count their 1099-MISC workers as part of their workforce total. We understand, for example, that additional guidance will be forthcoming, including how long a worker must have been employed each quarter to count as a covered individual. At this time, we conservatively suggest employers count any 1099-MISC Massachusetts-based workers as covered individuals for the purposes of calculating whether they meet the 25-covered individual threshold, as well as for withholding and remitting PFML contributions from such individuals.
In addition, the Guidance clarifies that:
H-2A visa-holders are not covered individuals. Accordingly, employers are not required to withhold or remit PFML contributions on behalf of these workers and should not count these individuals towards the employer’s 25-covered individual threshold.
However, individuals working under all other temporary foreign worker visa programs, as well as international students and foreign exchange visa holders (e.g. F-1. OPT, H-1B, H-2B, O-1, O-2, etc.), are considered covered individuals and employers must withhold and remit PFML contributions for them.
We are continuing to follow-up with the DFML and will provide updates on any further guidance or refinements to the rules for determining whether and how Massachusetts employers should count their 1099-MISC workers as part of their workforce total under the PFML.
Other Notable Reminders for Massachusetts Employers
As a reminder, all Massachusetts employers were required to display a poster in the workplace that explains benefits available to workers under the PFML law by July 1, 2019. The poster is available in several languages here. Additionally, on or before September 30, 2019, employers and covered businesses were required to provide written notice to their current workforce of PFML benefits, contribution rates, and other provisions. Information about the notices is available here. Finally, October 1, 2019 was the start of the first wage payment withholding period. Regardless of when the work was performed, pay that is issued to covered individuals on or after October 1, 2019 is subject to the PFML withholding mandate.