Senate Counsel, Research
and Fiscal Analysis
Minnesota Senate Bldg.
95 University Avenue W. Suite 3300
St. Paul, MN 55155
(651) 296-4791
Tom Bottern
Director
   Senate   
State of Minnesota
 
 
 
 
 
S.F. No. 1653 - Independent Contractors Provision Modifications
 
Author: Senator John C. Pederson
 
Prepared By: Carlon D. Fontaine, Senate Counsel (651/296-4395)
 
Date: March 19, 2012



 

Section 1 [Definitions] clarifies that the definition of “person” includes limited liability companies and limited liability partnerships as related to independent contractors.  Adds a definition for “business entity” to mean a person other than an individual or sole proprietor.

Section 2 [Employee-employer relationship]  utilizes the term “worker” instead of “individual” and changes an effective date.

Section 3 [Independent contractor] replaces current language concerning the independent contractor exemption certificate with language that makes a worker an independent contractor if the worker is registered with the Department of Labor and Industry (DOLI) and:

  • maintains a separate business with the worker's own office, equipment, materials, and other facilities;
  • holds or has applied for a FEIN or has filed business or self-employment income tax returns with the IRS if the worker has performed services in the previous year;
  • is operating under contract to perform the specific services for the person for specific amounts of money and under which the worker controls the means of performing the services;
  • is incurring the main expenses related to the services that the worker is performing for the person under the contract;
  • is responsible for the satisfactory completion of the services that the worker has contracted to perform for the person and is liable for a failure to complete the services;
  • 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;
  • may realize a profit or suffer a loss under the contract to perform services for the person;
  • has continuing or recurring business liabilities or obligations; and
  • the success or failure of the worker's business depends on the relationship of business receipts to expenditures.

Specifies that if a worker is an owner or partial owner of a business entity, the worker is an employee of the person for whom the worker 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 worker has an ownership interest, unless:

  • the entity meets all other requirements;
  • invoices are submitted in the name of the business entity;
  • the business entity is registered with the secretary of state, if required; and
  • the business entity is registered with DOLI, if required.

Section 4  [Registration pilot project] directs the commissioner to implement a pilot project, effective July 1, 2012, to register persons performing public or private sector commercial or residential building construction or improvement services.  Provides that the purpose of the pilot project is to evaluate whether the information obtained through registration assists the named agencies enforce laws related to misclassification of employees.  Requires the commissioner to issue a report to the legislature by January 1, 2014, on any changes to the project, including any recommended registration fees.  Provides that the commissioner must not charge a fee for registration under the pilot project.  Provides an expiration date of June 30, 2014.

Provides that the registration requirements under the pilot do not apply to:

  • a person who holds a current license, certificate, or registration under chapter 299M (fire protection industry) or section 326B (construction codes);
  •  a person who holds a current independent contractor exemption certificate in effect on September 15, 2012;
  • a person who has given a bond to the state under section 326B.197 (gas, heating, ventilation, cooling, air conditioning, fuel burning, or refrigeration work) or section 326B.46 (plumbing);
  •  an employee of the person performing the construction services, if the person was in compliance with employment laws at the time the construction services were performed;
  • an architect or professional engineer engaging in professional practice under section 326.02;
  • a school district or technical college; or
  • 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.

Section 5  [Registration application] requires submission of an electronic application for those required to register.  Provides the information that must be submitted for any individual who is registering as an individual or a sole proprietor, or who owns 25 percent or more of a business entity being registered, including:

  • the applicant's legal name; assumed name filed with the secretary of state, if any; designated business address; physical address; telephone number; and e-mail address;
  • the applicant's Minnesota tax ID, if required;
  • the applicant's FEIN, if required;
  • evidence of the active status with the secretary of state, if required;
  • whether the applicant has any employees at the time the application is filed;
  • the names of all other persons with an ownership interest in the business entity;
  • information documenting compliance with workers' compensation and unemployment insurance laws;
  • a certification by the person signing the application; and
  • a signed authorization for DOLI to verify the information provided on or with the application.

Requires a registered person to notify the commissioner within 15 days after there is a change in any of the information on the application as approved.  Requires a registered person to remain registered while providing construction services for another person.

Section 6 [Web site] directs the commissioner to develop and maintain a Web site for submission of applications and issuing registration certificates.

Section 7 [Prohibited activities] clarifies prohibited activities.

Section 8 [Enforcement; remedies; and penalties] provides a maximum penalty of $2,000, for failing to register.  Requires the commissioner to forgive the penalty if the person registers within 30 days of the penalty order.

Section 9 [Notice to commissioner; review by commissioner of revenue] makes corresponding changes to reflect modifications to the list of prohibited activities.

Section 10 [Data classified] clarifies language regarding data classification for contractor registration information.  Provides that registration information may be accessed for registration verification purposes only.

Section 11 [Applicable law] adds section 181.723 (relating to independent contractors) to the definition of “applicable law” for purposes of administering chapter 326B.

Section 12 [Repealer] repeals laws and rules relating to the independent contractor exemption certificate. 

Section 13 [Effective date] provides an effective date of July 1, 2012, except that the sections do not apply to individuals who hold an independent contractor exemption certificate, until the certificate expires, or is revoked or canceled.

CDF/syl

 
Check on the status of this bill
 
Back to Senate Counsel and Research Bill Summaries page
 

 
This page is maintained by the Office of Senate Counsel, Research, and Fiscal Analysis for the Minnesota Senate.
 
Last review or update: 03/19/2012
 
If you see any errors on this page, please e-mail us at webmaster@senate.mn