Minnesota lawmakers have passed some sweeping changes in regards to employment law across the state, but one of the biggest changes that will officially take effect on July 1 is how the state handles employers who misclassify employees as independent contractors.
As we’ve talked about on the blog in the past, employees can run into major issues when their employer incorrectly misclassifies them as an independent contractor as opposed to an employee of the business. When someone is classified as an independent contractor, they are not afforded many of the same benefits that a company employee would normally be entitled to receive, with the main issue being ineligibility for workers’ compensation protections through their employer. That means if a worker is classified as an independent contractor and gets hurt on the job, the only way they’d be eligible for workers’ compensation is if they carry their own work comp insurance, which many don’t carry because they believe they are an employee of the business.
Whether or not an employer knowingly or unknowingly misclassifies an employee, the fact of the matter is that this misclassification saves the business on employee expenses. It helps the business’s bottom line, so there is a financial motive for the business to classify certain employees as independent contractors. Governor Tim Walz and other lawmakers hope the new increased penalties for employer misclassification force companies to think twice when working to classify their employees.
New Employee Misclassification Laws And Penalties
Under the new law, all employers are subject to liability for:
- Failing to classify, represent or treat an individual as an employee under local, state or federal law.
- Failing to report or disclose a person as an employee to any local, state or federal government agency when required.
- Requiring an individual who is an employee to enter into an agreement or complete any document that misclassifies an individual as an independent contractor.
On top of the updated guidelines, the state has also added increased penalties for companies who violate the law on or after July 1, 2024. Under the new law, employers would face monetary penalties of up to $10,000 for each individual violation, meaning that if a company were to misclassify 50 employees, the Minnesota Department of Labor & Industry could issue a $500,000 fine to the employer. Moreover, if the employer also failed to report the individuals as employees to a state agency, such as the unemployment insurance division, the company could face additional penalties and sanctions. Individual business owners who knowingly or repeatedly engage in any of the prohibited acts may also be held liable by the DOLI.
Employees could also be compensated in the event that an employer violates the new misclassification laws. If found to have breached the new misclassification laws, the DOLI may order compensatory damages to each impacted worker in the form of:
- Minimum Wage
- Overtime
- Shift Differentials
- Vacation Pay
- Sick Pay
- Health Insurance
- Life and Disability Insurance
- Retirement Plans
- Saving Plans
- Contributions to Unemployment, Social Security and Medicare
Needless to say, these changes should help better protect employees from intentional misclassification by an employer and ensure they get all the benefits they deserve. If you believe you have been misclassified and rightful benefits have been withheld, now is the time to act. Reach out to a workers’ compensation firm today. In the greater Twin Cities area, connect with the team at Hey Workers today at (844) 439-9675.
