DOL looks to six factors in determining the nature of a working relationship: (1) Is the work an integral part of the employer’s business? (If yes, employee status is indicated), (2) Does the 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. INDEPENDENT CONTRACTORS IN THE CONSTRUCTION INDUSTRY Effective March 1, 2025, Minnesota has replaced its former nine factor test for classification as an independent contractor in the construction industry with a new 14 factor test. An individual Is an independent contractor and not an employee of the person for whom the individual is providing or performing services in the course of the person’s trade, business, profession or occupation only if the individual is operating as a business entity that meets all of the following requirements at the time the services were provided or performed: 1. It was established and maintained separately from and independently of the person for whom the services were provided or performed; 2. Owns, rents, or leases equipment, tools, vehicles, materials, supplies, office space, or other facilities that are used by the business entity to provide or perform building construction or improvement services; 3. Provides or performs, or offers to provide or perform, the same or similar building construction services for multiple persons or the general public; 4. Is in compliance withal of the following: (i) Holds a federal employer identification number if required by federal law; (ii) Holds a Minnesota tax identification number if required by Minnesota law;
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