Minnesota Passes Expanded Worker Misclassification Bill

All businesses should be aware of the new Minnesota law impacting the classification of independent contractors.

For All Businesses

As of July 1, 2024, all employers are subject to liability if they:

1) fail to classify, represent, or treat an individual as an employee under local, state, or federal law;

2) fail to report or disclose to a local, state, or federal agency a person as an employee when required; or

3) require an individual to enter into an agreement that misclassifies them as an independent contractor.

In addition, there are significantly higher penalties for employers for misclassifications as well as individual liability for owners, officers, or agents who knowingly or repeatedly engage in the above activities. There is also a new provision providing successor liability for misclassifications, as well as a private right of action.

For Construction Businesses

Effective March 1, 2025, a new 14-factor test will determine whether an individual is an employee or an independent contractor. The test focuses on whether the individual is operating a separate business entity and whether the contractual relationship is a legitimate business-to-business transaction “at the time the services were provided or performed.”

Among many other requirements, an independent contractor needs to operate under a written contract that is signed and dated by both the independent contractor and the person for whom services are provided, and needs to provide for compensation on a commission or per-job or competitive bid basis and not on any other basis.

The new 14-factor test covers both the public and private sector and applies to all commercial or residential construction or improvement services with exceptions for certain landscaping services.

New Intergovernmental Agency Cooperation

The new law also includes the “Intergovernmental Misclassification Enforcement and Education Partnership Act,” which will allow five agencies to coordinate and share information relating to alleged misclassifications. The five agencies included are: the Department of Labor of Industry, the Department of Revenue, the Department of Employment and Economic Development, the Department of Commerce, and the Attorney General in its enforcement capacity.

We Can Help

If you have questions about how to protect your company’s business interests in the midst of new legislation or other issues, please contact Maslon's employment and construction attorneys.