Experienced Engineer Hurt by Independent Contractor Law.
This is the true story of Heinz, an electrical engineer who lives near Interstate 495, the outer perimeter of metropolitan Boston. Heinz is a naturalized US citizen, a native of Switzerland, and a named inventor on six US patents.
Hard Hit. Talking with him, one senses his meticulous Swiss engineering temperament and his problem-solving optimism. But that natural optimism has been sorely tried over the last few years, as the Massachusetts Independent Contractor Law (MICL) has steadily reduced his income, shrunk his consulting business, and frozen his dream of establishing a manufacturing firm.
The MICL keeps Heinz and 7,410 other electrical engineers from starting new businesses, serving clients, and employing others in their disciplines.
Serving Hot Fields. Heinz worked for 10 years as a wireless engineering consultant at a business he founded in 2003. Selling his own time and that of friends who worked with him on a project basis, his firm offered design, analysis, modeling and trouble-shooting of radio-frequency circuits, microwave and wireless systems, and wireless components.
His design work applied to fast-growing fields including cell phones, WiFi, backhaul radio, satellite communications, and radio frequency identification, all filled with fast-growing firms worldwide. Wireless is an industry surging with new ideas. It spends freely to meet production deadlines using quick-turnaround design projects like Heinz’s company did.
Heinz enjoyed his consulting work and business grew steadily. He saw that if he hired several specialized engineers he could immediately overcome some inefficiencies of his small scale.
Heinz’s Dream in Three Steps. Heinz’s plan is straightforward and feasible. The first step: build up his electrical design consulting business, expand his contacts throughout the wireless industry, and add consultants to staff his projects as he sold work to clients.
Consulting in growing fields like electrical engineering generates cash flow that exceeds the daily needs of a service business. Consulting also generates novel ideas. Those ideas can become patents, the lifeblood of successful technical manufacturing.
As the second step, Heinz expected that he and his staff would spot product design opportunities he could patent. Patent applications take time and money which consultants can usually afford. Then as the third step, Heinz would turn the patented idea into a small manufacturing firm whose initial investment would be financed by the consulting cash flow.
The innovative nature of electrical engineering design services means that almost any design project has the potential to reveal product opportunities outside the project relationship.
Services and manufacturing grow in parallel in a limber innovation-driven economy. But not in Massachusetts – a state whose economy should be uniquely driven by innovation.
Stopped at the Massachusetts Border. One Massachusetts law prohibits Heinz’s growth dream. Despite dynamic growth in his field, during the last three years Heinz struggled to find enough work to keep his design business viable. While many of his customers were small Massachusetts companies, 65 percent of his design consulting revenue came from out-of-state.
There’s enough work in his field for him to hire one to two people to work with him but because of MICL that work steadily dried up. Mass law forbids independent contractors from doing the same kind of work performed by the companies that hire them. Heinz can neither sell nor buy.
In the spring of 2013, with his savings mostly gone, Heinz had to find work through a contracting agency, which landed him a temporary contract with a large Massachusetts company that Heinz calls “Company T,” at an hourly compensation half what he made as a consultant.
He had previously solicited Company T directly through a close contact there, but without success. Now he knows why—the independent contractor law. To comply with the IC law, Company T does not hire any contractors directly but works exclusively with contracting or temporary staffing agencies.
The Law Encourages Paperwork and Middlemen. In fact, Heinz fills out three time sheets: one for Company T, one for his W-2 “employer” and one for a temp agency that has an exclusive recruitment arrangement with Company T. Together, Company T and Heinz are in effect each paying a sharp premium to allow Company T to staff its short-term projects and shield it from the risk of having their project contractors classified as employees. They are paying ransom to use a legitimate business model that’s legal everywhere else.
Heinz is one of many engineers so affected. He volunteers as an officer of an 82-member engineering consulting network that helps electrical engineers connect with potential clients. Even the chairman of the network has been forced to relinquish his status as a voluntary independent contractor and take full-time employment. These well-respected electrical engineering professionals are effectively sidelined in Massachusetts even as their field continues to explode worldwide. Heinz wishes he could go back to his consulting.
You Can Help Change the MICL. You can help hundreds of thousands of people like Heinz whose careers and dreams have been harmed by the law. Write or email your State Senator and State Representative and ask them to eliminate our competitive disadvantage by bringing the Massachusetts independent contractor law in line with federal law and its counterparts in other states.
Every dollar you give--$5, $50, $500, $1,000--will help spark a million-job explosion.