SF 4934
Introduction - 94th Legislature (2025 - 2026)
Posted on 04/15/2026 08:40 a.m.
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A bill for an act
relating to labor and industry; modifying treatment of independent contractors;
amending Minnesota Statutes 2024, section 181.723, subdivisions 4, 7.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2024, section 181.723, subdivision 4, is amended to read:
Subd. 4.
Independent contractor.
(a) An individual is an independent contractor and
not an employee of the person for whom the individual is providing or performing services
in the course of the person's trade, business, profession, or occupation only if the individual
is operating as a business entity that meets deleted text begin all ofdeleted text end the following requirements new text begin based upon the
totality of the circumstances: new text end deleted text begin at the time the services were provided or performed:
deleted text end
(1) was established and maintained separately from and independently of the person for
whom the services were provided or performed;
(2) owns, rents, or leases equipment, tools, vehicles, materials, supplies, office space,
or other facilities that are used by the business entity to provide or perform building
construction or improvement services;
(3) provides or performs, or offers to provide or perform, the same or similar building
construction or improvement services for multiple persons or the general public;
(4) is in compliance with all of the following:
(i) holds new text begin or has applied for new text end a federal employer identification number if required by federal
law;
(ii) holds new text begin or has applied for new text end a Minnesota tax identification number if required by
Minnesota law;
(iii) has deleted text begin received and retaineddeleted text end new text begin or will receivenew text end 1099 forms for income received for building
construction or improvement services provided or performed, if required by Minnesota or
federal law;
(iv) has deleted text begin fileddeleted text end new text begin or will filenew text end business or self-employment income tax returns, including
estimated tax filings, with the federal Internal Revenue Service and the Department of
Revenue, as the business entity or as a self-employed individual reporting income earned,
for providing or performing building construction or improvement services, if anydeleted text begin , in the
previous 12 monthsdeleted text end ; and
(v) has deleted text begin completed and provideddeleted text end new text begin or will complete and providenew text end a W-9 federal income tax
form to the person for whom the services were provided or performed if required by federal
law;
(5) deleted text begin is in good standing as defined by section 5.26, if applicabledeleted text end new text begin has registered with the
secretary of state, if requirednew text end ;
(6) has a Minnesota unemployment insurance account if required by chapter 268;
(7) has obtained required workers' compensation insurance coverage if required by
chapter 176;
(8) deleted text begin holds currentdeleted text end new text begin has applied for and receivednew text end business licenses, registrations, and
certifications if required by chapter 326B and sections 327.31 to 327.36;
(9) is operating under a written contract to provide or perform deleted text begin the specificdeleted text end services deleted text begin for
the persondeleted text end that:
(i) is signed and dated by both an authorized representative of the business entity and
of the person for whom the services are being provided or performed;
deleted text begin
(ii) is fully executed no later than 30 days after the date work commences;
deleted text end
deleted text begin (iii)deleted text end new text begin (ii)new text end identifies the deleted text begin specificdeleted text end services to be provided or performed under the contract;new text begin
and
new text end
deleted text begin (iv)deleted text end new text begin (iii)new text end provides for compensation from the person for the services provided or performed
under the contract on a commission deleted text begin ordeleted text end new text begin ,new text end per-job deleted text begin ordeleted text end new text begin ,new text end competitive bidnew text begin , or time and materialnew text end
basis deleted text begin and not on any other basisdeleted text end ; deleted text begin and
deleted text end
deleted text begin
(v) the requirements of item (ii) shall not apply to change orders;
deleted text end
(10) submits invoices and receives payments for completion of the deleted text begin specificdeleted text end services
provided or performed under deleted text begin thedeleted text end new text begin anew text end written proposal, contract, or change order in the name
of the business entity. Payments made in cash do not meet this requirement;
(11) deleted text begin the terms of the written proposal, contract, or change order provide the business
entity control over the means of providing or performing the specific services, and the
business entity in fact controls the provision or performance of the specific servicesdeleted text end new text begin has a
written proposal, contract, or change order whose terms provide the business entity control
over the means of providing or performing the specific services, and under which the business
entity in fact controls the provision or performance of those specific servicesnew text end ;
(12) incurs the main expenses deleted text begin and costs related to providing or performingdeleted text end new text begin related tonew text end
the deleted text begin specificdeleted text end services new text begin being performed new text end under the written proposal, contract, or change order;
(13) is responsible for the completion of the deleted text begin specificdeleted text end services to be provided or performed
under the written proposal, contract, or change order and is responsible, as provided under
the written proposal, contract, or change order, for failure to complete the deleted text begin specificdeleted text end services;
and
(14) deleted text begin may realize additional profit or suffer a loss, if costs and expenses to provide or
perform the specific services under the written proposal, contract, or change order are less
than or greater than the compensation provided under the written proposal, contract, or
change orderdeleted text end new text begin has the business entity's success or failure dependent on the relationship of
the business entity's receipts relative to expendituresnew text end .
(b)(1) Any individual providing or performing the services as or for a business entity is
an employee of the person who engaged the business entity, unless the business entitynew text begin ,
through the totality of the circumstances,new text end meets deleted text begin all ofdeleted text end the requirements under subdivision
4, paragraph (a).
(2) Any individual who is determined to be the person's employee is acting as an agent
of and in the interest of the person when engaging any other individual or business entity
to provide or perform any portion of the services that the business entity was engaged by
the person to provide or perform.
(3) Any individual engaged by an employee of the person, at any tier under the person,
is also the person's employee, unless the individual is providing or performing the services
as or for a business entity thatnew text begin , through the totality of the circumstances,new text end meets the
requirements of subdivision 4, paragraph (a).
(4) Clauses (1) to (3) do not create an employee-employer relationship between a person
and an individual if: (i) there is an intervening business entity in the contractual chain
between the person and the individual that meets the requirements of subdivision 4, paragraph
(a); or (ii) the person establishes that an intervening business entity treats and classifies the
individual as an employee for purposes of, and in compliance with, chapters 176, 177, 181,
181A, 268, 268B, 270C, and 290.
Sec. 2.
Minnesota Statutes 2024, section 181.723, subdivision 7, is amended to read:
Subd. 7.
Prohibited activities related to independent contractor status.
(a) The
prohibited activities in paragraphs (b) and (c) are in addition to the activities prohibited in
sections 326B.081 to 326B.085.
(b) An individual providing or performing building construction or improvement services
shall not represent themselves as an independent contractor unless the individual is operating
as a business entity thatnew text begin , through the totality of the circumstances,new text end meets deleted text begin alldeleted text end the requirements
of subdivision 4, paragraph (a).
(c) A person who provides or performs building construction or improvement services
in the course of the person's trade, business, occupation, or profession shall not:
(1) as a condition of payment for services provided or performed, require an individual,
who is an employee pursuant to this section, to register as a construction contractor under
section 326B.701, or to adopt or agree to being classified, represented, or treated as an
independent contractor or form a business entity. Each instance of conditioning payment
to an individual who is an employee on one of these conditions shall constitute a separate
violation of this provision;
(2) fail to classify, represent, or treat an individual who is an employee pursuant to this
section as an employee in accordance with the requirements of any of the chapters listed in
subdivision 3. Failure to classify, represent, or treat an individual who is an employee
pursuant to this section as an employee in accordance with each requirement of a chapter
listed in subdivision 3 shall constitute a separate violation of this provision;
(3) fail to report or disclose to any person or to any local, state, or federal government
agency an individual who is an employee pursuant to subdivision 3, as an employee when
required to do so under any applicable local, state, or federal law. Each failure to report or
disclose an individual as an employee shall constitute a separate violation of this provision;
(4) require or request an individual who is an employee pursuant to this section to enter
into any agreement or complete any document that misclassifies, misrepresents, or treats
the individual as an independent contractor or otherwise does not reflect that the individual
is an employee pursuant to this section. Each agreement or completed document shall
constitute a separate violation of this provision; or
(5) require an individual who is an employee under this section to register under section
326B.701.
(d) In addition to the person providing or performing building construction or
improvement services in the course of the person's trade, business, occupation, or profession,
any owner, partner, principal, member, officer, or agent who engaged in any of the prohibited
activities in this subdivision knowingly or repeatedly may be held individually liable.
(e) An order issued by the commissioner to a person for engaging in any of the prohibited
activities in this subdivision is in effect against any successor person. A person is a successor
person if the person shares three or more of the following with the person to whom the order
was issued:
(1) has one or more of the same owners, members, principals, officers, or managers;
(2) performs similar work within the state of Minnesota;
(3) has one or more of the same telephone or fax numbers;
(4) has one or more of the same email addresses or websites;
(5) employs or engages substantially the same individuals to provide or perform building
construction or improvement services;
(6) utilizes substantially the same vehicles, facilities, or equipment; or
(7) lists or advertises substantially the same project experience and portfolio of work.
(f) If a person who has engaged an individual to provide or perform building construction
or improvement services that are in the course of the person's trade, business, profession,
or occupation, classifies, represents, treats, reports, or discloses the individual as an
independent contractor, the person shall maintain, for at least three years, and in a manner
that may be readily produced to the commissioner upon demand, all the information and
documentation upon which the person based the determination that the individual met all
the requirements under subdivision 4, paragraph (a), at the time the individual was engaged
and at the time the services were provided or performed.
(g) The following damages and penalties may be imposed for anew text begin willfulnew text end violation of this
section:
(1) compensatory damages to the individual the person failed to classify, represent, or
treat as an employee pursuant to this section. Compensatory damages include but are not
limited to the value of supplemental pay including minimum wage; overtime; shift
differentials; vacation pay; sick pay; and other forms of paid time off; health insurance; life
and disability insurance; retirement plans; saving plans and any other form of benefit;
employer contributions to unemployment insurance; Social Security and Medicare and any
costs and expenses incurred by the individual resulting from the person's failure to classify,
represent, or treat the individual as an employee;
(2) a penalty of up to $10,000 deleted text begin for each individualdeleted text end new text begin ifnew text end the person failed to classify, represent,
or treat new text begin an individual new text end as an employee pursuant to this section;
(3) a penalty of up to $10,000 for deleted text begin each violation ofdeleted text end new text begin violatingnew text end this subdivision; and
(4) a penalty of $1,000 for any person who delays, obstructs, or otherwise fails to
cooperate with the commissioner's investigation. Each day of delay, obstruction, or failure
to cooperate constitutes a separate violation.
(h) This section may be investigated and enforced under the commissioner's authority
under state law.