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Minnesota Legislature

No more misclassifying employees

Published (2/24/2012)
By Nick Busse
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Unscrupulous employers sometimes label their workers “independent contractors” to avoid paying things like unemployment insurance, workers’ compensation and employment taxes.

Sponsored by Rep. Tim Sanders (R-Blaine), HF2093 is intended to solve a problem that has dogged the state for years. When employers misclassify their workers as contractors, they deny them basic benefits and protections afforded to regular employees. The state currently has no effective system for identifying employers who engage in this activity.

The bill would clarify who can be legally considered an “independent contractor.” It would further instruct the Department of Labor and Industry to implement a pilot project to register anyone performing construction services in the state who is not already licensed or registered under another section of law. This program would replace the current Independent Contractor Exemption Certificate. There would be no registration fee.

“We’ve been working on this issue for several years, and hopefully we’ll be able to bring about some resolution with this bill,” Sanders said.

The House Jobs and Economic Development Finance Committee approved the bill Feb. 16 and referred it to the House Commerce and Regulatory Reform Committee.

A 2007 report by the Office of the Legislative Auditor found that one out of every seven employers had misclassified one or more workers in 2005. That was a conservative estimate, the report stated, because it doesn’t account for employers who pay cash “under the table” or who don’t register with the unemployment system.

The report found that the practice of misclassification was highest in industries like real estate and construction, particularly the areas of roofing, drywall and residential remodeling.

Shane Paulson, a board member of the Minnesota Association of Exterior Specialists, said his organization has concerns about the registration process, and that the program might open the door to “unwarranted and unnecessary audits.” Sanders pledged to work with the group to address their concerns.

Sen. John Pederson (R-St. Cloud) sponsors the companion, SF1653, which awaits action by the Senate Jobs and Economic Growth Committee.

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