Attorney General Ellison celebrates signing of employer misclassification fraud bill

New bill makes it harder for employers to incorrectly classify employees as independent contractors

Bill was based on a policy proposal from AG Ellison’s task force on misclassification fraud

Today, Minnesota Attorney General Keith Ellison celebrated Governor Walz’s signing of a landmark bill to combat employer misclassification fraud. The new law, provisions of which went into effect earlier this month, makes it easier for workers to report misclassification fraud, improves government coordination when investigating misclassification fraud, increases penalties for repeat offenders, and allows victims of misclassification fraud to go to court themselves to recoup the wages they were denied.

Employer misclassification fraud happens when an employer incorrectly classifies a full-time employee as an independent contractor, resulting in that employee losing access to important rights, benefits, and protections, like overtime pay, workers compensation, earned sick and safe time, and more. The misclassification fraud law signed today was authored by Representative Emma Greenman and Senator Clare Oumou Verbeten and based on a policy proposal adopted by Attorney General Keith Ellison’s task force on combatting employer misclassification fraud.

The new legislation helps combat employer misclassification fraud in the following ways:

• Creating an Intergovernmental Misclassification Enforcement and Education Partnership to allow the various government agencies tasked with combatting misclassification fraud to share information and coordinate investigations. This will also make it easier for victims of misclassification fraud to report violations of the law.
  • There are currently five government agencies responsible for investigating misclassification fraud and punishing violators: the Departments of Labor and Industry, Revenue, Commerce, and Economic Development and the Attorney General’s Office. The partnership created by the bill gives misclassified workers a single place to report possible violations of the law to all five of those agencies and improves data-sharing and coordination between those agencies.
• Increasing the penalties for repeat offenders to ensure that those penalties provide meaningful deterrence and are not simply seen by bad actors as part of the cost of doing business.
• Improving the independent contractor test for those performing building construction or improvement services with a focus on two core questions: is the asserted independent contractor a separate and legitimate business entity, and is the contractual relationship a legitimate business-to-business transaction?
• Creating a private right of action for victims of employer misclassification fraud, which will allow victims of misclassification fraud to go to court themselves to ensure they receive the wages, rights, and benefits they are owed.

“It is hard to afford your life when your job cheats you out of the pay and benefits you have earned by pretending you are an independent contractor, rather than an employee,” said Attorney General Ellison. “Legitimate independent contractors play an important role in our workforce, but that classification cannot be abused by low-road employers looking to make a buck by misclassifying their workers. Fortunately, the bill signed today will make it easier for both the state of Minnesota and employees themselves to fight back against this affront to working people.

“Minnesotans know there is dignity in a hard day’s work, and we are upholding that dignity by helping workers get the pay and benefits they have earned,” added Ellison. “I would like to thank Representative Greenman, Senator Oumou Verbeten, and Department of Labor and Industry Commissioner Blissenbach for their extensive work on this bill. I am also grateful to the members of my misclassification task force for lending their time, energy, and talent to this important endeavor, as well as to Governor Walz and Lieutenant Governor Flanagan for their steadfast support.”

The signing of this legislation follows the release of a report from the Office of Legislative Auditor, which found that misclassification fraud is a growing problem in Minnesota. The report from the Office of Legislative Auditor specifically cited the need for improved coordination between government agencies and quicker action in resolving instances of misclassification fraud, both of which are addressed in this new legislation. Additional information about what the new law does to protect workers from misclassification fraud can be found in House Research’s summary of the legislation.