In the heartland, Minnesota state legislators are tired of playing patty-cake with contractors that misclassify workers as subcontractors. They want to know who’s doing exactly what work in their state and that effort has led to a new law that could serve as a model for other states.
The law also could bring more contractors into compliance with existing state laws regulating the construction industry, and provide greater protection for workers.
After some success with the new effort, the Minnesota legislature recently extended the state's Contractor Registration Pilot Program for another year, saving it from expiring on June 30 as it was set to do, and extending its life until at least June 30, 2015.
In place since late in 2012, the program is administered by the Minnesota department of Labor and Industry, and has a scope that is a broad as its details are specific. From mid-2012 to the end of 2013, 12,198 contractors registered with the Dept. of Labor & Industries. Using the information, the department entered into 80 registration enforcement orders under classification statutes and rules. State officials revoked licenses from nine contractors.
The program is intended to identify all individuals and firms providing building construction and improvement services in the state, and to ensure that workers are classified appropriately. Minnesota legislators have the lofty goal of bringing all contractors in the state into compliance with state laws, and if they can do so, they might be the first state in the nation to successfully do so.
The new law means all commercial and residential building construction contractors who aren’t already licensed or registered with the state’s Dept. of Labor and Industry must register through the Contractor Registration Pilot Program. Additionally, contractors who hire subcontractors must ensure that all of their independent contractors are registered or licensed with the Minnesota Department of Labor and Industry. No exceptions; the state has made it so simple to check a sub’s status with the state that pretending to not be able to, will not fly.
A contractor’s registration can be easily checked, by visiting https://secure.doli.state.mn.us/lookup/licensing.
Minnesota contractors, in addition to being required to register or be licensed with the state’s department of Labor and Industry, also must have a current business filing with the Minnesota Secretary of State. How these firms—whatever size they are—do business also is of concern to the state, legislators have decided.
They believe the devil is in the details, specifically, in how the paperwork is sometimes done. As a result, contractors are required to use written contracts or invoices in their company’s legal business name, and to meet all requirements that apply to the construction industry.
In the case of a subcontractor who doesn’t comply with all four of the aforementioned requirements, the state can deem the subcontractor to be an employee of the hiring contractor. That could mean the state puts the hiring contractor on the hook for the misclassification of the worker, and penalizes the firm for the misclassification.