HF 1283

5th Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to employment; requiring independent contractor exemption certificates;
providing penalties; authorizing notice to the commissioners of revenue and
employment and economic development; requiring the commissioner of revenue
to review certifications of independent contractor status; proposing coding for
new law in Minnesota Statutes, chapter 181; repealing Minnesota Statutes 2006,
sections 176.042; 268.035, subdivision 9.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [181.723] INDEPENDENT CONTRACTORS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin The definitions in this subdivision apply to this section.
new text end

new text begin (a) "Person" means any individual, limited liability corporation, corporation,
partnership, incorporated or unincorporated association, sole proprietorship, joint stock
company, or any other legal or commercial entity.
new text end

new text begin (b) "Department" means the Department of Labor and Industry.
new text end

new text begin (c) "Commissioner" means the commissioner of labor and industry or a duly
designated representative of the commissioner who is either an employee of the
Department of Labor and Industry or person working under contract with the Department
of Labor and Industry.
new text end

new text begin (d) "Individual" means a human being.
new text end

new text begin (e) "Day" means calendar day unless otherwise provided.
new text end

new text begin (f) "Knowingly" means knew or could have known with the exercise of reasonable
diligence.
new text end

new text begin (g) "Document" or "documents" includes papers; books; records; memoranda; data;
contracts; drawings; graphs; charts; photographs; digital, video, and audio recordings;
records; accounts; files; statements; letters; e-mails; invoices; bills; notes; and calendars
maintained in any form or manner.
new text end

new text begin Subd. 2. new text end

new text begin Limited application. new text end

new text begin This section only applies to individuals performing
public or private sector commercial or residential building construction or improvement
services as described in section 326.83.
new text end

new text begin Subd. 3. new text end

new text begin Employee-employer relationship. new text end

new text begin Except as provided in subdivision
4, for purposes of chapters 176, 177, 181A, 182, and 268, as of January 1, 2009, an
individual who performs services for a person that are in the course of the person's trade,
business, profession, or occupation is an employee of that person and that person is an
employer of the individual.
new text end

new text begin Subd. 4. new text end

new text begin Independent contractor. new text end

new text begin An individual is an independent contractor and
not an employee of the person for whom the individual is performing services in the course
of the person's trade, business, profession, or occupation only if (1) the individual holds
a current independent contractor exemption certificate issued by the commissioner; and
(2) the individual is performing services for the person under the independent contractor
exemption certificate as provided in subdivision 6. The requirements in clauses (1) and (2)
must be met in order to qualify as an independent contractor and not as an employee of
the person for whom the individual is performing services in the course of the person's
trade, business, profession, or occupation.
new text end

new text begin Subd. 5. new text end

new text begin Application. new text end

new text begin To obtain an independent contractor exemption certificate,
the individual must submit, in the manner prescribed by the commissioner, a complete
application and the certificate fee required under subdivision 14.
new text end

new text begin (a) A complete application must include all of the following information:
new text end

new text begin (1) the individual's full name;
new text end

new text begin (2) the individual's residence address and telephone number;
new text end

new text begin (3) the individual's business name, address, and telephone number;
new text end

new text begin (4) the services for which the individual is seeking an independent contractor
exemption certificate;
new text end

new text begin (5) the individual's Social Security number;
new text end

new text begin (6) the individual's or the individual's business federal employer identification
number, if a number has been issued to the individual or the individual's business;
new text end

new text begin (7) any information or documentation that the commissioner requires by rule that
will assist the department in determining whether to grant or deny the individual's
application; and
new text end

new text begin (8) the individual's sworn statement that the individual meets all of the following
conditions:
new text end

new text begin (i) maintains a separate business with the individual's own office, equipment,
materials, and other facilities;
new text end

new text begin (ii) holds or has applied for a federal employer identification number or has filed
business or self-employment income tax returns with the federal Internal Revenue Service
if the person has performed services in the previous year for which the individual is
seeking the independent contractor exemption certificate;
new text end

new text begin (iii) operates under contracts to perform specific services for specific amounts of
money and under which the individual controls the means of performing the services;
new text end

new text begin (iv) incurs the main expenses related to the service that the individual performs
under contract;
new text end

new text begin (v) is responsible for the satisfactory completion of services that the individual
contracts to perform and is liable for a failure to complete the service;
new text end

new text begin (vi) receives compensation for service performed under a contract on a commission
or per-job or competitive bid basis and not on any other basis;
new text end

new text begin (vii) may realize a profit or suffer a loss under contracts to perform service;
new text end

new text begin (viii) has continuing or recurring business liabilities or obligations; and
new text end

new text begin (ix) the success or failure of the individual's business depends on the relationship of
business receipts to expenditures.
new text end

new text begin (b) Individuals who are applying for or renewing a residential building contractor
or residential remodeler license under sections 326.83 to 326.992 and any rules
promulgated pursuant thereto may simultaneously apply for or renew an independent
contractor exemption certificate. The commissioner shall create an application form
that allows for the simultaneous application for both a residential building contractor
or residential remodeler license and an independent contractor exemption certificate.
If individuals simultaneously apply for or renew a residential building contractor or
residential remodeler license and an independent contractor exemption certificate using
the form created by the commissioner, individuals shall only be required to provide, in
addition to the information required by section 326.89 and rules promulgated pursuant
thereto, the sworn statement required by paragraph (a), clause (8), and any additional
information required by this subdivision that is not also required by section 326.89 and
any rules promulgated thereto. When individuals submit a simultaneous application
on the form created by the commissioner for both a residential building contractor or
residential remodeler license and an independent contractor exemption certificate the
application fee shall be $150. An independent contractor exemption certificate that is in
effect before March 1, 2009, shall remain in effect until March 1, 2011, unless revoked by
the commissioner or cancelled by the individual.
new text end

new text begin (c) Within 30 days of receiving a complete application and the certificate fee, the
commissioner must either grant or deny the application. The commissioner may deny
an application for an independent contractor exemption certificate if the individual has
not submitted a complete application and certificate fee or if the individual does not
meet all of the conditions for holding the independent contractor exemption certificate.
The commissioner may revoke an independent contractor exemption certificate if the
commissioner determines that the individual no longer meets all of the conditions for
holding the independent contractor exemption certificate, commits any of the actions
set out in subdivision 7, or fails to cooperate with a department investigation into the
continued validity of the individual's certificate. Once issued, an independent contractor
exemption certificate remains in effect for two years unless:
new text end

new text begin (1) revoked by the commissioner; or
new text end

new text begin (2) canceled by the individual.
new text end

new text begin (d) If the department denies an individual's original or renewal application for
an independent contractor exemption certificate or revokes an independent contractor
exemption certificate, the commissioner shall issue to the individual an order denying or
revoking the certificate. The commissioner may issue an administrative penalty order to
an individual or person who commits any of the actions set out in subdivision 7.
new text end

new text begin (e) An individual or person to whom the commissioner issues an order under
paragraph (d) shall have 30 days after service of the order to request a hearing. The
request for hearing must be in writing and must be served on or faxed to the commissioner
at the address or facsimile number specified in the order by the 30th day after service of
the order. If the individual does not request a hearing or if the individual's request for a
hearing is not served on or faxed to the commissioner by the 30th day after service of the
order, the order shall become a final order of the commissioner and will not be subject to
review by any court or agency. The date on which a request for hearing is served by mail
shall be the postmark date on the envelope in which the request for hearing is mailed. If
the individual serves or faxes a timely request for hearing, the hearing shall be a contested
case hearing and shall be held in accordance with chapter 14.
new text end

new text begin Subd. 6. new text end

new text begin Performing services under exemption certificate. new text end

new text begin An individual is
performing services for a person under an independent contractor exemption certificate if:
new text end

new text begin (a) the individual is performing services listed on the individual's independent
contractor exemption certificate;
new text end

new text begin (b) at the time the individual is performing services listed on the individual's
independent contractor exemption certificate, the individual meets all of the following
conditions:
new text end

new text begin (1) maintains a separate business with the individual's own office, equipment,
materials, and other facilities;
new text end

new text begin (2) holds or has applied for a federal employer identification number or has filed
business or self-employment income tax returns with the federal Internal Revenue Service
if the individual performed services in the previous year for which the individual has the
independent contractor exemption certificate;
new text end

new text begin (3) is operating under contract to perform the specific services for the person
for specific amounts of money and under which the individual controls the means of
performing the services;
new text end

new text begin (4) is incurring the main expenses related to the services that the individual is
performing for the person under the contract;
new text end

new text begin (5) is responsible for the satisfactory completion of the services that the individual
has contracted to perform for the person and is liable for a failure to complete the services;
new text end

new text begin (6) 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;
new text end

new text begin (7) may realize a profit or suffers a loss under the contract to perform services for
the person;
new text end

new text begin (8) has continuing or recurring business liabilities or obligations; and
new text end

new text begin (9) the success or failure of the individual's business depends on the relationship of
business receipts to expenditures.
new text end

new text begin Subd. 7. new text end

new text begin Prohibited activities. new text end

new text begin (a) An individual shall not:
new text end

new text begin (1) perform work as an independent contractor who meets the qualifications under
subdivision 6, without first obtaining from the department an independent contractor
exemption certificate;
new text end

new text begin (2) perform work as an independent contractor when the department has denied or
revoked the individual's independent contractor exemption certificate;
new text end

new text begin (3) transfer to another individual or allow another individual to use the individual's
independent contractor exemption certificate;
new text end

new text begin (4) alter or falsify an independent contractor exemption certificate;
new text end

new text begin (5) misrepresent the individual's status as an independent contractor; or
new text end

new text begin (6) make a false material statement, representation, or certification; omit material
information; or alter, conceal, or fail to file a document required by this section or any rule
promulgated by the commissioner under rulemaking authority set out in this section.
new text end

new text begin (b) A person shall not:
new text end

new text begin (1) require an individual through coercion, misrepresentation, or fraudulent means to
adopt independent contractor status;
new text end

new text begin (2) knowingly misrepresent that an individual who has not been issued an
independent contractor exemption certificate or is not performing services for the person
under an independent contractor exemption certificate is an independent contractor; or
new text end

new text begin (3) make a false material statement, representation, or certification; omit material
information; or alter, conceal, or fail to file a document required by this section or any rule
promulgated by the commissioner under rulemaking authority set out in this section.
new text end

new text begin (c) A person for whom an individual is performing services must obtain a copy of the
individual's independent contractor exemption certificate before services may commence.
A copy of the independent contractor exemption certificate must be retained for five years
from the date of receipt by the person for whom an individual is performing services.
new text end

new text begin Subd. 8. new text end

new text begin Remedies. new text end

new text begin An individual or person who violates any provision of
subdivision 7 is subject to a penalty to be assessed by the department of up to $5,000 for
each violation. The department shall deposit penalties in the assigned risk safety account.
new text end

new text begin Subd. 9. new text end

new text begin Commissioner's powers. new text end

new text begin (a) In order to carry out the purposes of this
section, the commissioner may:
new text end

new text begin (1) administer oaths and affirmations, certify official acts, interview, question, take
oral or written statements, and take depositions;
new text end

new text begin (2) request, examine, take possession of, photograph, record, and copy any
documents, equipment, or materials;
new text end

new text begin (3) at a time and place indicated by the commissioner, request persons to appear
before the commissioner to give testimony and produce documents, equipment, or
materials;
new text end

new text begin (4) issue subpoenas to compel persons to appear before the commissioner to give
testimony and produce documents, equipment, or materials; and
new text end

new text begin (5) subject to paragraph (c), with or without notice, enter without delay upon
any property, public or private, for the purpose of taking any action authorized under
this subdivision or the applicable law, including obtaining information or conducting
inspections or investigations.
new text end

new text begin (b) Persons requested by the commissioner to give testimony or produce documents,
equipment, or materials shall respond within the time and in the manner specified by the
commissioner. If no time to respond is specified in the request, then a response shall be
submitted within 30 days of the commissioner's service of the request.
new text end

new text begin (c) Upon the refusal or anticipated refusal of a property owner, lessee, property
owner's representative, or lessee's representative to permit the commissioner's entry onto
property as provided in paragraph (a), the commissioner may apply for an administrative
inspection order in the Ramsey County District Court or, at the commissioner's discretion,
in the district court in the county in which the property is located. The commissioner may
anticipate that a property owner or lessee will refuse entry if the property owner, lessee,
property owner's representative, or lessee's representative has refused to permit entry on a
prior occasion or has informed the commissioner that entry will be refused. Upon showing
of administrative probable cause by the commissioner, the district court shall issue an
administrative inspection order that compels the property owner or lessee to permit the
commissioner to enter the property for the purposes specified in paragraph (a).
new text end

new text begin (d) Upon the application of the commissioner, a district court shall treat the failure of
any person to obey a subpoena lawfully issued by the commissioner under this subdivision
as a contempt of court.
new text end

new text begin Subd. 10. new text end

new text begin Notice requirements. new text end

new text begin Unless otherwise specified, service of a document
on a person under this section may be by mail, by personal service, or in accordance with
any consent to service filed with the commissioner. Service by mail shall be accomplished
in the manner provided in Minnesota Rules, part 1400.5550, subpart 2. Personal service
shall be accomplished in the manner provided in Minnesota Rules, part 1400.5550,
subpart 3.
new text end

new text begin Subd. 11. new text end

new text begin Facsimile; timely service. new text end

new text begin When this section permits a request for
hearing to be served by facsimile on the commissioner, the facsimile shall not exceed 15
pages in length. The request shall be considered timely served if the facsimile is received
by the commissioner, at the facsimile number identified by the commissioner in the order,
no later than 4:30 p.m. central time on the last day permitted for faxing the request.
Where the quality or authenticity of the faxed request is at issue, the commissioner
may require the original request to be filed. Where the commissioner has not identified
quality or authenticity of the faxed request as an issue and the request has been faxed in
accordance with this subdivision, the person faxing the request does not need to file the
original request with the commissioner.
new text end

new text begin Subd. 12. new text end

new text begin Time period computation. new text end

new text begin In computing any period of time prescribed
or allowed by this section, the day of the act, event, or default from which the designated
period of time begins to run shall not be included. The last day of the period so computed
shall be included, unless it is a Saturday, Sunday, or legal holiday, in which event the
period runs until the next day which is not a Saturday, Sunday, or legal holiday.
new text end

new text begin Subd. 13. new text end

new text begin Rulemaking. new text end

new text begin The commissioner may, in consultation with the
commissioner of revenue and the commissioner of employment and economic
development, adopt, amend, suspend, and repeal rules under the rulemaking provisions
of chapter 14 that relate to the commissioner's responsibilities under this section. This
subdivision is effective the day following final enactment.
new text end

new text begin Subd. 14. new text end

new text begin Fee. new text end

new text begin The certificate fee for the original application and for the renewal
of an independent contractor exemption certificate shall be $150. Fees collected under
this subdivision are deposited in the construction code fund and are appropriated to the
commissioner of labor and industry in fiscal years 2008 and 2009 to administer and
enforce the provisions of this act.
new text end

new text begin Subd. 15. new text end

new text begin Notice to commissioner; review by commissioner of revenue. new text end

new text begin When
the commissioner has reason to believe that an individual who holds a certificate has failed
to maintain all the conditions required by subdivision 6 or is not performing services for a
person under the independent contractor exemption certificate, the commissioner must
notify the commissioner of revenue and the commissioner of employment and economic
development. Upon receipt of notification from the commissioner that an individual who
holds a certificate has failed to maintain all the conditions required by subdivision 6
or is not performing services for a person under the independent contractor exemption
certificate, the commissioner of revenue must review the information returns required
under section 6041A of the Internal Revenue Code. The commissioner of revenue shall
also review the submitted certification that is applicable to returns audited or investigated
under section 289A.35.
new text end

new text begin Subd. 16. new text end

new text begin Data classified. new text end

new text begin Data in applications for an independent contractor
exemption certificate and any required documentation submitted to the commissioner are
private data on individuals as defined in section 13.02. Data in exemption certificates
issued by the commissioner are public data. Data that document a revocation or
cancellation of an exemption certificate are public data. Upon request of the Department
of Revenue or Department of Employment and Economic Development, the commissioner
may release to the requesting department data classified as private under this subdivision
or investigative data that are not public under section 13.39 that relate to the issuance or
denial of applications or revocations of certificates.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2008.
new text end

Sec. 2. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2006, sections 176.042; and 268.035, subdivision 9, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2009.
new text end