By: Chad A. Staul, Esq.
New Minnesota Independent Contractor Law.
It has been less than a year since a new Minnesota law redefined what it means to be an independent contractor in the trucking and messenger/courier industry in an attempt to deter worker misclassification. One of the law's sponsors, Rep. Sheldon Johnson (DFL-St Paul), stated that misclassification of independent contractors is a "huge problem" in Minnesota and noted that 14% of Minnesota employers and 35% of a sample taken from the trucking industry wrongly misclassified some workers as independent contractors.
Seven Strict Criteria.
Minn. Stat. §§ 176.043 and 268.035, effective since Aug. 1, 2009, spell out seven criteria that must all be met in order for a worker in the trucking and messenger/courier industry to be considered an independent contractor. The worker:
(1) must own the equipment or hold it under a bona fide lease arrangement;
(2) be responsible for the maintenance of the equipment;
(3) be responsible for the operating costs, including fuel, repairs, supplies, vehicle insurance and personal expenses;
(4) be responsible for supplying the necessary personal services to operate the equipment;
(5) be compensated based on factors related to the work performed, such as a percentage of any schedule of rates, and not on the basis of the hours or time expended;
(6) substantially control the means and manner of performing the services in conformance with regulatory requirements and specifications of the shipper; and
(7) must enter into a written contract that specifies the relationship to be that of an independent contractor and not that of an employee.
Guessing Wrong.
If you have what you believe to be independent contractors in the trucking and/or messenger/courier industry in Minnesota and at least one of the seven items listed above is not met, the worker will be classified as your employee. This classification may subject you to potential IRS tax liability, as well as individual and collective wage and hour claims under both the State and Federal Fair Labor Standards Act. In addition, misclassification can raise serious issues in the areas of unemployment and workers compensation.
Do a Self Audit.
Many employers may be operating under polices and procedures that were implemented (and valid) prior to this law's enactment. Because of this, and because the law has been in effect for less than a year, now is the perfect time to assess whether your classification methods stand up to these new requirements. Do not wait until you are audited by the Department of Labor to find out that your previously valid set of checks and balances is no longer applicable. Wessels Sherman can cost-effectively review your independent contractor policies, agreements, files and any other documentation that you use with your independent contractors to ensure that you are in compliance.
Questions? Please contact WS Attorney Chad Staul at (952) 746-1700, or chstaul@wesselssherman.com for help in strengthening your independent contractor relationships in Minnesota.
