Minnesota Construction Associations To Stop Law on Independent Contractors

Calling a regulation imposing hefty penalties on development trade employers and homeowners who misclassify workers as unbiased contractors “unconstitutional” and “obscure,” two Minnesota-based development associations and a contractor are suing to cease the regulation from taking impact on March 1. 

The lawsuit was filed Feb. 14 by The Related Builders and Contractors of Minnesota and North Dakota (ABC), the Builders Affiliation of Minnesota (BAM) and Rochester-based J&M Consulting. The lawsuit asks the U.S. District Court docket of Minnesota to declare the regulation unconstitutional and argues that it’s pre-empted by the Nationwide Labor Relations Act. 

The criticism alleges that the regulation, which applies a 14-point take a look at for the development trade to find out who’s an unbiased contractor versus an worker, “is impermissibly obscure—an abnormal individual can not moderately perceive what conduct it prohibits, and it additional encourages arbitrary enforcement on the a part of defendants.” 

It additionally expenses that the regulation violates the Eighth Modification’s block on extreme fines by imposing “large compounding fines for even inadvertent, harmless or technical violations.”

The lawsuit names Nicole Blissenbach, commissioner of the Minnesota Dept. of Labor and Trade (DOLI), and Keith Ellison, Minnesota’s lawyer basic, as defendants. 

The law, which was handed in Might 2024, permits compensatory damages and penalties of as much as $10,000 for every particular person the employer fails to categorise, signify or deal with as an worker, and $1,000 a day for failure to offer paperwork.
If the employer additionally fails to report the people as workers to a state company, similar to to the unemployment insurance coverage division, it may face further penalties. Particular person homeowners, officers or brokers may be held liable.

“The brand new laws replaces at present’s piecemeal response to misclassification with a whole-of-government method,” stated Blissenbach in a information launch after the regulation was handed in Might. “It strengthens deterrence, enforcement, penalties and helps DOLI fight misclassification throughout all industries.”

A brand new “14-factor take a look at” within the regulation shouldn’t be solely obscure, nevertheless it additionally conflicts with frequent trade requirements, the lawsuit expenses. The take a look at “invitations harmless or inadvertent misclassifications after which punishes for these misclassifications,” Dale Juntunen, president of the Builders Affiliation of Minnesota, stated in an announcement. BAM represents a majority of open-shop contractor members.

The regulation specifies that an unbiased contractor operates below a written contract to carry out particular companies that have to be signed and dated by a licensed consultant of each enterprise entities, and it have to be totally executed not more than 30 days after the work begins. It additionally identifies particular companies to be carried out and supplies for compensation on a fee, per-job or on a competitive-bid foundation and never on another foundation. Additional, the contract have to be signed and dated by each a licensed consultant of the enterprise offering the service and the individual for whom the companies are supplied. Many development service suppliers similar to ready-mix concrete truck drivers and others function as unbiased contractors when they’re on multi-employer jobsites as a result of it permits them to make deliveries at a number of totally different multi-employer websites, working for a number of totally different concrete contractors per day.

John McGuine, proprietor and president of J & M Consulting, a industrial basic contractor in Rochester, Minn., stated in a courtroom submitting that his firm typically works with prime subcontractors who rent subcontractors for personal initiatives and can’t know their pay preparations with employees. 

“As a result of JMC primarily doesn’t work on state-funded initiatives . . . JMC can by no means actually know what its subcontractors or sub-contractors pay their employees in wages and advantages; nor does JMC actually know the fee construction that the subcontractors and sub-subcontractors use when paying wages and advantages to their employees,” he stated.

Chad Kompelien, CEO of Mike Kompelien Customized Properties, stated it isn’t unusual for a subcontractor to neglect to signal a doc and that “the events begin work and fear about paperwork later.”  

The regulation empowers DOLI to order a enterprise to cease work at a number of of its josbites if DOLI determines that the enterprise violated the regulation associated to misclassification. The cease work order stays efficient till the commissioner determines that the enterprise has complied and paid any damages and penalties. 

The regulation states that DOLI could order the employer to pay compensatory damages to every affected employee to cowl the minimal wage, additional time, shift differentials, trip pay, sick pay, medical health insurance, life and incapacity insurance coverage, retirement plans, financial savings plans and different employment advantages, in addition to employer contributions to unemployment, Social Safety and Medicare.

The lawsuit alleges that the state legislature violated the state’s structure when it stuffed lots of of legal guidelines right into a 1,492-page omnibus invoice that handed earlier than midnight on Might 19, 2024. It claims that legislators and the general public weren’t given enough time to evaluate or debate the omnibus invoice and that it violated a Minnesota constitutional requirement that no regulation can embrace a couple of topic and the topic have to be expressed within the regulation’s title.

The North Central States Regional Council of Carpenters helps the regulation. 

“This laws will increase penalties and establishes important interagency cooperation to empower development employees to talk out and to discourage employers from making an attempt to achieve an unethical aggressive benefit when bidding in opposition to law-abiding employers,” stated Burt Johnson, basic counsel for the carpenters’ regional council. 

James Honerman, communications director for DOLI, stated his division is “reviewing the criticism and has no additional remark.”