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Author: Kayla Schoenberg

Construction

The 5 Worst Things About Misclassification Law

Top 5 Worst Aspects of this Minnesota Worker Classification Statute for Construction Contractors:

  1. Massive, Stacking Financial Penalties:
    • The potential for fines that accumulate per misclassified worker and per violation creates a severe financial threat. Even minor, unintentional errors could lead to crippling penalties, potentially forcing business closures.
  2. Strict and Unforgiving 14-Factor Test:
    • The rigid requirement to meet all 14 factors, with no room for error, creates an extremely high compliance burden. Even temporary lapses or simple mistakes can trigger misclassification.
  3. Vague and Ambiguous Language:
    • The poorly defined terms within the statute make it difficult for contractors to understand and comply with the law. This creates a high risk of unintentional misclassification and legal disputes.
  4. Risk of Criminal Penalties:
    • The potential for criminal charges related to wage theft adds a significant layer of risk and stress for construction contractors. This creates a fear of prosecution for mistakes made in a very unclear regulatory environment.
  5. Increased Risk of Litigation and Disputes:
    • The combination of unclear rules, and large financial penalties creates a very high risk of lawsuits from workers, or from the state. This increases the cost of doing bus

 

Minnesota’s Contractor Classification Chaos: A Fight for Fairness

Minnesota’s Contractor Classification Chaos: A Fight for Fairness

March 8, 2025

The world of residential construction in Minnesota is facing a seismic shift, and it’s kicking up a serious dust storm. At the heart of it all? A newly implemented misclassification law that’s drastically changing how we define independent contractors. In February, BAM filed a Federal injunction to block the implementation of the misclassification bill. Learn more here.

Here’s the breakdown:

  • The 9-to-14 Point Shift: The old 9-point test for classifying independent contractors has been replaced with a 14-point system. This seemingly small change has huge implications, fundamentally altering how many construction professionals are categorized.
  • Steep Penalties: To add fuel to the fire, the new law introduces hefty fines, up to $10,000 per violation. This is a massive burden for businesses, especially smaller operations.
  • BAM Takes a Stand: The Builders Association of Minnesota (BAM) is leading the charge against this law, arguing it will cripple the residential construction industry.
  • The Courtroom Battle: We took our fight to Federal Court Judge Tunheim, seeking a temporary restraining order and a preliminary injunction to halt the law’s implementation. Unfortunately, our request was denied.
  • The Faces of the Fight: Key BAM members, John McGuine, Mike Gohman, and Chad Kompelien, have bravely stepped up to challenge this law by suing the Attorney General and the Commissioner of Labor and Industry. Their dedication is vital to this case.
  • Industry-Wide Impact: This law isn’t just about a few contractors; it will impact everyone involved in residential construction.
  • Appealing to the 8th Circuit: In a joint decision with our key partners, we’ve decided to appeal Judge Tunheim’s ruling to the 8th Circuit Court of Appeals.
  • The 8th Circuit: A New Arena: The 8th Circuit, a federal court composed of three justices, is generally considered more conservative than the Minnesota Federal District Court.
  • Speeding Up the Process: While federal appeals typically take around six months, we and our attorneys are pushing for an expedited timeline. We’re aiming to file our notice of appeal next week.
  • Anticipating the AG’s Response: We expect the Attorney General’s office to file a motion to dismiss before March 13th.
  • Calling for Support: We’re urging other supportive organizations to file amicus briefs, adding weight to our case in front of the 8th Circuit Court of Appeals.
  • BAM’s Commitment: BAM remains steadfast in its commitment to being a legal advocate for its members and the broader construction community.

This is a critical moment for residential construction in Minnesota. We’re in a fight for fairness and clarity. Stay tuned for updates as we navigate this complex legal battle. We will continue to update our members as this situation progresses.

 

misclassification_lawsuit

BAM Files Federal Injunction to Halt Implementation of Misclassification Bill

Builders Association of Minnesota Files Federal Injunction to Halt Implementation of Misclassification Bill

[St. Paul, MN] – February 13, 2025 – The Builders Association of Minnesota (BAM) today announced it has filed a federal court injunction to prevent the implementation of the recently passed misclassification bill, which deals with independent contractor status for construction businesses. The organization argues that the legislation, set to take effect on March 1, 2025, contains provisions that are overly broad, vague, and violate procedural due process, the 8th Amendment and 14th Amendment of the U.S. Constitution, and the National Labor Relations Act.

The Builders Association of Minnesota (BAM), is a statewide organization with 50 years of service to the residential construction industry. BAM represents a diverse membership of home builders, remodelers, and developers, along with a broad network of supporting professionals, including subcontractors, suppliers, realtors, and financial institutions.

The organization believes that the amended law upends the construction industry in Minnesota by presuming that all workers on a construction project automatically qualify as employees instead of independent contractors unless a strict, yet vague 14-factor test is met.

“The 14-factor test is not only vague, but it also conflicts with common industry standards. In other words, the test invites the innocent or inadvertent misclassifications and then punishes for those misclassifications.”  This bill is a clear overreach that will harm homebuyers and increase the costs of new homes for all Minnesotans. “We are taking legal action to protect the rights of the state’s construction industry and homebuyers to ensure that this harmful legislation does not take effect,” said Dale Juntunen, President of the Builders Association of Minnesota.

The lawsuit was filed in the US District Court for the District of Minnesota in Minneapolis, Minnesota.

BAM is seeking a preliminary injunction to immediately halt the implementation of the bill while the court considers the merits of the case. The organization is confident that the court will recognize the flaws in the legislation and rule in its favor.

Supporting Documents (click to download Word file)

Contact

Kurt J. Erickson  
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612.313.7608 direct, 612.801.6201 mobile, 612.677.3579 fax
KErickson@littler.com

BAM_misclassification

Minnesota’s New Independent Contractor Law: A Nightmare for Homebuilders?

A new law in Minnesota has sent shockwaves through the construction industry, leaving many homebuilders worried about the future of their businesses. The law, passed in May 2024 as part of a massive omnibus bill, significantly changes how independent contractors are classified, and the penalties for misclassification are severe.

What’s the Big Deal?

At the heart of the issue is a new 14-factor test to determine whether a worker is an independent contractor or an employee. This test is incredibly complex and ambiguous, making it difficult for homebuilders to know for sure whether they are in compliance. Even minor, unintentional errors could result in hefty fines and even criminal charges.

Why is this Law So Problematic?

  • Vagueness: The law’s language is unclear, leaving room for interpretation and potentially arbitrary enforcement. This uncertainty makes it challenging for homebuilders to navigate the new rules with confidence.
  • Excessive Penalties: The fines for misclassification are disproportionately high. For each misclassified worker, a contractor could face up to $10,000 in penalties, plus additional fines for other violations. These costs could quickly add up, jeopardizing the financial stability of small and medium-sized homebuilding businesses.
  • Lack of Due Process: The law was passed as part of a massive omnibus bill with little public input or debate opportunity. This rushed process raises concerns about transparency and fairness.

Stay Informed – BAM will update you on our Actions on your Behalf

This is a developing story, and we will continue to provide updates as they become available. In the meantime, homebuilders should familiarize themselves with the new law and seek legal advice if they have any questions about how it applies to their businesses.

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