New “Independent Contractor” Rules
Workers who perform services for companies are legally considered “employees” of those companies, with all the accompanying benefits and legal protections. Many companies, however, have traditionally classified their workers as “independent contractors,” and thus avoided giving those workers such benefits as retirement, unemployment compensation and workers’ compensation, and even social security withholding. Paying workers on a 1099 basis has great advantages for companies, which save money and potential liability. The government and courts have never approved of this approach; misclassification of workers has always been legally suspect, but enforcement has been inconsistent and haphazard. While sometimes companies have been legally taken to task for misclassification, most often the companies get away with this practice, and the workers are left holding the bag.
The Minnesota legislature recently moved to shut down this practice. The new Independent Contractor rules, which went into effect on July 1, 2024, make it much more difficult to treat a worker as an independent contractor. The legislature created a list of factors which must all be present for a legal “contractor” situation to exist. For example, the worker must maintain his or her own office, equipment and materials, must contract for specific projects (as opposed to being continually employed), and must have independent tax status (among several other factors). Unlike under the old rules, courts will not “weigh” these factors to make a decision. Instead, all factors must be present for there to be a legal “independent contractor” relationship. The new law also contains a series of tests for whether a worker truly has an “independent business.” The new law also has extensive rules concerning the construction industry in particular (construction workers are automatically presumed to be employees and not independent contractors).
Significantly, the new law gives extensive enforcement powers to both the Department of Labor and Industry and to individuals, who are allowed to bring claims directly in state court. The law provides for actual damages, penalties, and attorney fees.
This new law will give thousands of Minnesota workers the ability to enforce their rights and obtain the full benefits of legal employment status. If you are being treated as an independent contractor, you should consider whether you are being treated fairly, and whether you should take advantage of the new rules. An attorney at Parker Daniels Kibort would be glad to give you a free consultation to make that determination.
Attorney Alec Beck practices in the areas of Labor and Employment Law, Litigation and Campaign Finance Law. He has decades of experience appearing before many federal, state and local agencies.
Action Item: If you are being treated as an Independent Contractor and believe you are being mistreated, please contact Parker Daniels Kibort for a free consultation at 612.355.4100. You may be entitled to damages. There are no fees for these types of cases unless you receive a recovery.
