In one of the best attended CMBA Government Affairs Committee meetings ever, Tuesday, February 18th, the Minnesota Department of Labor and Industry (DLI) was supposed to be the main act, fielding CMBA members' questions and concerns about the state's new 14-point independent contractor tests set to kick-in March 1st.

However, DLI officials pulled-out at the last minute, leaving some 50 meeting participants wondering how to get clear answers about compliance, enforcement, liability, costs and penalties. Instead, DLI officials indicated they would post a pre-recorded presentation by the end of February, and then entertain only written questions with only a day or two before the new tests would go into effect.

With DLI a no-show, CMBA members attending the meeting spent the time listing-out their questions, concerns and frustrations. CMBA sent those directly to DLI with a request for timely responses to each issue. In no particular order, here they are:

• Why weren't the current 9 points for independent contractor adequate? (Even those points were vague and inadequately enforced.)

• Are supplier subcontractors who provide materials included?  Does a builder have to document them too?

• Does it matter if the subcontractor is incorporated?  Does that meet the new set of 14 tests and subpoints?

• Are there loopholes, or will this be enforced evenly and statewide?

• If you are working with a supplier off a standard price list for materials (as opposed to unique bids/pricing for each project), how does that fit (test #14)?  Is a "blanket" contract OK and does it also cover the suppliers materials sources?

• Can we no longer pay in cash?

• Do I have to verify tax filing information for each one of my subcontractors?

• Materials - Single delivery to one site supplying multiple job sites: General contractor's liability?

• Materials -  Multiple deliveries, one to each job site: Subcontractor's (supplier's) liability?

• It's not clear how DLI will apply these new 14+ tests.  Can DLI walk us through the decision-making tree so we can make sure we are accurately and consistently complying?

• What assurance do we have DLI will use mistakes as "educational opportunities" (instead of immediately imposing the stiff fines and penalties contained in the state law)?  The law contains no such discretion.

• General contractor doing remodeling:  Already tough to find project-specific subs (carpenters, drywall, tiling, cabinetry, painting, etc.).  Need a contract with each one?  Will lose many subs who don't want to deal with more complexity and bureaucracy.

• How does this impact the cost and affordability of needed housing in Minnesota? This will drive up the cost of building new housing at the very time when policymakers are making the building of more and more affordable housing a top priority.

• Can I put a separate line-item on my bills and invoices specifying a surcharge covering the costs of complying with these new tests?

• Was this law and these new tests driven by workers comp issues?  Unions motivated to go after non-union builders?  Why are we doing this?  DLI can't adequately enforce the existing requirements, let alone these more complex and burdensome new ones.

• Why are Minnesota's regulations and requirements so much more than other (surrounding) states?

• If we flag "bad operators" to DLI, will DLI enforce?  Frustrations that enforcement is currently inconsistent.

DLI officials have acknowledged receiving the list, and have promised to provide responses which CMBA will post on this page.  One probable reason for DLI's sudden no-show was the filing last week of a federal lawsuit to block implementation of the new tests. There is a federal court hearing on the matter Wednesday, February 26th. 

CMBA members were also curious as to why the state needed a new set of independent contractor tests. The tests were part of a Worker Misclassification law passed in 2024, a union-backed initiative apparently targeting large builders for allegedly skirting the state's existing independent contractor tests.  Some builders and subcontractors have commented that the complexity, uncertainty and liabilities associated with the new tests could cause them to close their doors.

One CMBA member also noted, "This is going to drive-up the cost of building badly needed housing, even as lawmakers say they want more affordable housing."  Most indicated they will continue to do their best to "do what's right" and comply as best they can.

CMBA actively opposed the bill during the 2024 Minnesota Legislative Session, has published several articles about the new independent contractor tests, and held three meetings on the topic, including one last October featuring three leading DLI officials.

"We know DLI did not pass the law," said CMBA Government Affairs Consultant, Steve Gottwalt. "But they have provided almost no clarity in addressing these major concerns of contractors and subcontractors who simply want to comply and do their jobs."  He said CMBA welcomes additional questions or concerns from members, and will work to get answers from DLI.

For more information:  Steve Gottwalt, steve@cmbaonline.org, 952-923-5265.  You can also contact DLI Labor Standards Division: dli.laborstandards@state.mn.us, 651-284-5075, https://www.dli.mn.gov/misclassification-construction, or email Michelle.Fournier@state.mn.us.

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