worker’s managerial skill affect the worker’s opportunity for profit or loss? (If no, employee status is indicated), (3) How does the worker’s relative investment in his or her business compare to the employer’s investment? (If the worker’s investment is minimal compared to the employer’s investment, employee status is indicated), (4) Does the work performed require special skill and initiative? (If no, employee status is indicated), (5) Is the relationship between the worker and the employer permanent or indefinite? (If yes, employee status is indicated), and (6) What is the nature and degree of the employer’s control over the worker? (If control is asserted by the employer, employee status is indicated.) There are other factors which are immaterial in determining the existence of an employment relationship. For example, the fact the worker has signed an agreement stating that he or she is an independent contractor is not controlling because the reality of the working relationship - and not the label given to the relationship agreement - is determinative. Likewise, the fact that the worker has incorporated a business and/or is licensed by a State/local government agency has little bearing on determining the existence of an employment relationship. Additionally, the Supreme Court has held that employee status is not determined by the time or mode of pay. The DOL has explained that the misclassification of workers as independent contractors has been increasing. To combat this problem, the DOL has entered into a cooperation agreement with the IRS and the State of Minnesota. The cooperation agreement allows both the DOL and the IRS to share information when they determine misclassification has occurred. For employers this means that it is easier to get caught, more difficult to prove contractor status and there are substantially more penalties for misclassification. DOL is proposing to rescind a 2021 rule in which two core factors - control over the work and opportunity for profit and loss - carried greater weight in determining the status of independent contractors. Under the proposed new rule, employers would use a totality-of-the-circumstances analysis, in which all the factors do not have a predetermined weight. (87 FR 62218, RIN 1235- AA43). The DOL has indicated that a final rule should not be expected before January, 2024. INDEPENDENT CONTRACTORS IN THE CONSTRUCTION INDUSTRY An individual who performs public or private sector commercial or residential building construction or improvement services in Minnesota is an independent contractor if he or she: 1. maintains a separate business with the individual’s own office, equipment, materials, and other facilities; 2. holds or has applied for a federal employer identification number or has filed business self- employment income tax returns with the federal Internal Revenue Service if the individual has performed services in the previous year; 3. is operating under contract to perform specific services for the person for specific amounts of money and under which the individual controls the means of performing the services; 4. is incurring the main expenses related to the services that the individual is performing for the person under the contract;
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