Minnesota H.F. 2198
Status: Re-referred to Committee, March 17, 2014
This bill would make permanent an independent contractor registration pilot project for individuals performing public or private sector commercial or residential building construction or improvement services. The purpose of registration is to assist the Department of Labor and Industry, the Department of Employment and Economic Development, and the Department of Revenue to enforce laws related to misclassification of employees.
Registration Required
Under this bill, any person who performs public or private sector commercial or residential building construction or improvement services must register with the Commissioner of Labor and Industry before performing construction services for another person and must remain registered while providing construction services for another person.
As part of the registration application, an individual, sole proprietor, or individual who owns 25% or more of a business entity being registered must submit information documenting compliance with workers’ compensation and unemployment insurance laws.
Exemptions
The registration requirements do not apply to:
- (1) A person who, at the time the person is performing the construction services, holds a current license, certificate, or registration under Min. Stat. ch. 299M or 326B;
- (2) A person who holds a current independent contractor exemption certificate that was in effect on September 15, 2012, except that the person must register under this Min. Stat. § 326B.701 no later than the date the exemption certificate expires, is revoked, or is canceled;
- (3) A person who has given a bond to the state under Min. Stat. § 326B.197 or 326B.46;
- (4) An employee of the person performing the construction services, if the person was in compliance with laws related to employment of the individual at the time the construction services were performed;
- (5) An architect or professional engineer engaging in professional practice as defined in Min. Stat. § 326.02, subdivisions 2 and 3;
- (6) A school district or technical college governed under Min. Stat. ch. 136F;
- (7) A person providing construction services on a volunteer basis, including but not limited to Habitat for Humanity and Builders Outreach Foundation, and their individual volunteers when engaged in activities on their behalf; or
- (8) A person exempt from licensing under Minn. Stat. § 326B.805, subdivision 6, clause (5).
Contracting with or Paying Unregistered Persons Prohibited
A person who provides construction services in the course of the person’s trade, business, occupation, or profession shall not contract with or pay another person to perform construction services if the other person is required to register and is not registered. All payments to an unregistered person for construction services on a single project site shall be considered a single violation.
However, a homeowner or business may contract with or pay an unregistered person if the homeowner or business is not in the trade, business, profession, or occupation of performing building construction or improvement services
Rebuttable Presumptions of Employee Status
Unless the appropriate test below is met, for purposes of workers’ compensation, wages, and unemployment insurance, an individual who performs services for a person that are in the course of the person’s trade, business, profession, or occupation is an employee of that person and that person is an employer of the individual.
Individuals – Rebuttable Presumption of Employee Status
An individual performing the above services who is not registered as an independent contractor, if required by Minn. Stat. § 326B.701, is presumed to be an employee of a person for whom the individual performs services in the course of the person’s trade, business, profession, or occupation. However, the person for whom the services were performed may rebut this presumption by showing that the unregistered individual met the nine factors below at the time the services were performed.
The individual is an independent contractor and not an employee of the person for whom the individual is performing services in the course of the person’s trade, business, profession, or occupation only if the individual:
- (1) Maintains a separate business with the individual’s own office, equipment, materials, and other facilities;
- (2)(i) Holds or has applied for a federal employer identification number or (ii) Has filed business or self-employment income tax returns with the federal Internal Revenue Service if the individual has performed services in the previous year;
- (3) Is operating under contract to perform the specific services for the person for specific amounts of money and under which the individual controls the means of performing the services;
- (4) Is incurring the main expenses related to the services that the individual is performing for the person under the contract;
- (5) Is responsible for the satisfactory completion of the services that the individual has contracted to perform for the person and is liable for a failure to complete the services;
- (6) Receives compensation from the person for the services performed under the contract on a commission or per-job or competitive bid basis and not on any other basis;
- (7) May realize a profit or suffer a loss under the contract to perform services for the person;
- (8) Has continuing or recurring business liabilities or obligations; and
- (9) The success or failure of the individual’s business depends on the relationship of business receipts to expenditures.
An individual shall not hold himself or herself out as an independent contractor unless the individual meets the nine requirements above.
Business Owners – Rebuttable Presumption of Employee Status
If the business entity in which the individual has an ownership interest is not registered, if required by Minn. Stat. § 326B.701, the individual is presumed to be an employee of a person for whom the individual performs services and not an employee of the business entity in which the individual has an ownership interest. The person for whom the services were performed may rebut the presumption by showing that the business entity met the three requirements below at the time the services were performed.
If an individual is an owner or partial owner of a business entity, the individual is an employee of the person for whom the individual is performing services in the course of the person’s trade, business, profession, or occupation, and is not an employee of the business entity in which the individual has an ownership interest, unless:
- (1) The business entity meets the nine factors above;
- (2) Invoices and payments are submitted in the name of the business entity; and
- (3) The business entity is registered with the secretary of state, if required.
Misclassification Prohibited
A person who provides construction services in the course of the person’s trade, business, occupation, or profession shall not:
- (1) Require an individual through coercion, misrepresentation, or fraudulent means to adopt independent contractor status or form a business entity;
- (2) Knowingly misrepresent or misclassify an individual as an independent contractor.
