The Maine Employment Security Law governs whether one person performing services for another is an independent contractor or an employee for unemployment tax purposes. It requires many employers to pay unemployment taxes on individuals who, under the usual common law rules governing the employer-employee relationship, are independent contractors. This result, caused partly by the structure of the statute and partly by judicial interpretation, has the effect of discouraging business expansion, limiting entrepreneurial opportunities, and ultimately, hampering statewide economic development. This Comment first provides the historical background of unemployment compensation legislation at the federal and state levels. Employer liability and employee/independent contractor status are described, and judicial base lines for constitutionality and statutory construction are presented. Next, a detailed narrative on the Maine experience is presented, including statutory developments, executive-branch administration and adjudication, enforcement efforts and consequences, and judicial review. This overview is followed by an analysis of present statutory and case law. The analysis includes an evaluation of the effectiveness of the law in fulfilling the statutory purposes and an argument for reform in order to achieve those purposes without unnecessarily burdening Maine's economy. Specific proposals for revision of Maine Employment Security Law are presented. After nearly sixty years' experience with unemployment compensation policies and programs, the State of Maine is in the midst of an economic crisis, recovery from which is hampered by the structure of the statute itself. Employers, those responsible for putting Maine people to work, are discouraged from contracting jobs out to “independent contractors” because of the uncertainty concerning employer liability for unemployment taxes. They put off business expansion and forego engaging the services of individual business operators in favor of larger firms. At the same time, entrepreneurial incentive is squelched as a result of businesses' reluctance to engage sole-proprietors for fear of later being called on to pay unemployment taxes for self-employed individuals, who will never file an unemployment benefits claim nor be eligible for benefits even if they did. The courts have been unable to break this cycle, and the legislature's efforts at piecemeal reparations has exacerbated the problem. One way to begin to address the issue is to redefine one of the fundamental principles of unemployment legislation: the definition of “employment” as it relates to the services provided by that staple of entrepreneurship-the independent contractor.

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