Bill to combat worker misclassification advances in Minnesota legislature

By Steve Share, Minneapolis Labor Review editor

SAINT PAUL — “We worked 5-6 days a week, an average of 12 hours per day and never received overtime pay,” said Jose Alfredo Gomez Rosales. He recently shared his experience working as a roofer paid in cash in testimony to the Labor and Industry Finance Committee of the Minnesota House of Representatives. One day, Rosales continued, he fell from the roof of a two-story house. His injuries were so severe he was airlifted by helicopter to a hospital. He stayed there several days and had several surgeries. He received hospital bills in excess of $60,000 but his boss said he wasn’t covered by insurance. “I wasn’t receiving any benefits so we did not have money to pay for our basic needs,” Rosales told the committee.

Stories like the one shared by Rosales illustrate what happens when workers are misclassified as independent contractors by unscrupulous employers or contractors.

A Midwest Economic Policy Institute report estimates that more than 30,000 workers are misclassified in Minnesota’s construction industry

Misclassified workers don’t have payroll taxes withheld. They don’t have protections like overtime pay and workers compensation insurance. They’re often victims of wage theft. They’re not protected as employees under the National Labor Relations Act and other employment laws. And they’re not able to accrue benefits under Minnesota’s new Earned Sick and Safe Time law. 

To address the rampant problem of worker misclassification, State Representative Emma Greenman has introduced House File 4444. The companion bill in the Senate is Senate File 4483.

The bill would establish new tests for clarifying whether a worker is an employee or independent contractor, increase penalties and enforcement when a worker is misclassified, and direct state agencies to work together to address misclassification and coordinate enforcement.

Greenman also serves as chair of a task force on worker misclassification created by Minnesota Attorney General Keith Ellison. “In the task force, we’ve had six hours of testimony,” she said. Many of the stories workers told were “scary and devastating,” she reported. “How do we make sure we’re preventing workers from being cheated out of the social safety net?”

“Misclassification impacts many of our members, particularly in the construction industry,” said Briana Kemp, policy lead for worker center CTUL. “It really has become the norm in the industry outside the union sector to mis-classify workers as independent contractors.”

“This is incredibly harmful to workers and their families, especially in the construction industry, which is one of the most dangerous industries,” Kemp noted.

“Misclassification is an enormous problem in the construction industry,” said Lucas Franco, research manager for LIUNA Minnesota & North Dakota. He cited a report by the Midwest Economic Policy Institute which used 2020 government data to estimate that more than 30,000 workers are misclassified in Minnesota’s construction industry — more than 20 percent of the state’s construction workforce.

He added: “it makes it hard for companies that want to play by the rules… you’re getting undercut by companies that rely on misclassifying workers” to drive payroll costs down.

“This growth of independent contracting has really revolutionized employment relationships,” Franco said. Many times workers don’t know they’re independent contractors — until they get hurt.

“Rarely does misclassification happen without wage theft,” added Richard Kolodziejski, government affairs director for the North Central States Regional Council of Carpenters. “Workers are being misclassified more often than not by dishonest contractors who are choosing to exploit workers.” For these companies, he added, “the financial gains are far too great for them to stop.”

As the Labor Review went to press April 11, both House File 4444 and Senate File 4483 had been advancing through the committee process in their respective chambers. 

“This law is going to level the playing field for honest contractors,” Kolodziejski said.

The bill also will give individuals a private right of action to file a claim if they’ve been misclassified, noted Carin Mrotz, senior advisor in Attorney General Ellison’s office, who staffed the misclassification task force. “We want people to be able to fight for what they deserve,” she said.

Workers like Rosales, meanwhile, are organizing with CTUL to press non-union contractors to adopt a set of standards to protect workers from misclassification, wage theft, and other abuses.

[April 28, 2024 update: House File 4444 was scheduled to go to the House floor April 29].