New Test May Sting Companies with Independent Contractors in Minnesota

Me in Minnesota in 2024, after running around a lake with a name I can’t pronounce

Here are a few fun facts about Minnesota:

  • The official state beverage is milk
  • The official state bee is the rusty patched bumblebee
  • The official state muffin is blueberry

Who knew the blueberry muffin lobby held such sway?

A less fun facts about Minnesota is that the state has made it really hard to be an independent contractor in the construction industry.

In 2024, the state legislature amended its independent contractor classification law to impose a 14-part test. In reality, it’s a 27-part test because some of the parts have mandatory subparts.

If you’re trying to engage an independent contractor in the construction industry in Minnesota, be extra careful. Construction includes commercial and residential improvement but excludes most landscaping services.

A collection of trade groups challenged the law, arguing that it was unconstitutionally vague and that its penalties (compensatory damages plus up to $10,000 per violation) were excessive. They sought a preliminary injunction to suspend the law while they could mount a more substantive challenge.

A district court denied the motion, and then last month the Eighth Circuit Court of Appeals affirmed. The new test therefore remains in place. The Eighth Circuit expressed skepticism about each of the trade groups’ arguments and ruled that they were unlikely to succeed on the merits.

This case is a reminder that the independent contractor tests vary widely. There are different tests for different laws in different states and even within different industries.

Companies using independent contractors should check the laws of their state and industry before assuming that their contract will be sufficient to support contractor status.

A miss here could be painful. Like the sting of a rusty patched bumblebee. If that kind even stings. But for today, let’s assume it stings. And stings hard.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Beware of Bright Shiny Objects: Home Health Care Company Gets Whacked in Misclassification Claim

Alabama jewelry store owner Slater Jones owns a two-carat diamond. That might not seem surprising, but stay with me here. Jones keeps the diamond in his eye. Literally, in his eye.

You see, Jones lost his right eye to illness. Rather than living with a boring old prosthetic eye that looks like, well, an eye, Jones engaged eye prosthetic expert John Lin to create a custom artificial eye from a diamond.

Having a diamond for an eye may seem a bit gaudy, but I guess if you’re in the jewelry business, you may as well just go for it.

Those in the home health care business, on the other hand, should not just go for it — especially if “it” is classifying in-home health aides as independent contractors.

In a settlement finalized earlier this month, California Attorney General Rob Bonta secured a $9.5 million settlement against the individual owners of a home health care company for misclassifying its workers in violation of California law. In this case, the owners appears to have operated the home health agency as a d/b/a without having incorporated. Oopsie. The settlement included another $1.5 million against a different incorporated home health care entity and its family of owners.

The settlement also prohibited all of the defendants from classifying their aides as independent contractors in the future.

We have seen a lot of recent cases brought against home health care companies that classify their workers as independent contractors. This settlement is a stern warning that home health care companies choosing that model need to be extremely cautious.

Because this case was brought by the State, some of the protections we often recommend, like individual arbitration agreements with class action waivers, provide no protection. This case and the settlement also serve as a reminder that individuals can be held liable for intentional misclassification.

The claims brought against the agencies focused largely on California’s Unfair Competition Law (UCL). Misclassification allegations under the UCL typically claim that the wrongdoer gained an improper advantage in the marketplace by unlawfully classifying employees as independent contractors.

Treating in-home aides as contractors may seem like a bright shiny object worth pursuing. But that sparkle you see is no diamond. It’s just the gleam in the eye of the State Attorney General, preparing to count the cash from another misclassification settlement.

Classify wisely, my friends.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Not Buying It? New Jersey DOL Might Back Off From Tougher IC Test

If you’re a frequent online shopper and reading this post from Japan, you’re probably familiar with the online Japanese flea market app Mercari. What I mean is, I never heard of it either.

Mercari, though, made big news last month when it took the controversial step of banning the sale of prenatal photos on its website. Why would anyone buy someone else’s prenatal photo? For scamming purposes, apparently. And that’s what led Mercari to take action.

The practice of “ninshin sagi” (a phrase that autocorrect vehemently tried to reject) means pregnancy fraud. It occurs when a woman tries to blackmail a male partner into paying money for a supposed pregnancy or to get an abortion. Mercari wants no part in the scheme, so if you want to buy photos of someone else’s uterus, you’ll have to look elsewhere.

New Jersey lawmakers are also saying to look elsewhere, but their ire is aimed at the NJ Department of Labor. As we discussed here, the NJ DOL issued a proposed rule that would change the state’s test for determining independent contractor status. The public comment period for the rule has closed, and now the NJ DOL needs to consider each comment and decide what to do.

Several NJ lawmakers, however, are urging the DOL to back off, and the sentiment is bipartisan. The proposed rule, they say, is not consistent with the current state of NJ court decisions or the NJ statute. (I agree!)

There is no timetable for the NJ DOL to issue a final rule. Or the NJ DOL may abandon its effort to adopt the rule. It’s also possible that lawmakers would enact legislation to block the proposed rule.

Companies with independent contractors in NJ should keep an eye on what happens here. The proposed rule would make NJ’s current ABC Test much stricter and harder to meet, thereby making it very difficult to maintain independent contractor status in NJ.

But at least in New Jersey you can still buy online uterus pics.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Just Like the Dress: Why Balancing Tests for Worker Classification Can Be So Unpredictable

Remember the dress that broke the internet?

In 2015, this image was widely circulated on Facebook, with some people seeing the dress as white and gold, others seeing it as blue and black. Whichever camp you are in, you probably cannot understand how anyone could possibly think the dress is the other set of colors.

You can read more here if you want a refresher. But essentially it all comes down to neuroscience and differences in how people perceive color.

The core takeaway, though, was that two people could view the same object and reach opposite conclusions.

And so it goes with independent contractor misclassification disputes. A recent Fourth Circuit decision highlights the problem with the tools we use to assess whether a worker is properly classified. When a balancing test is used, different fact-finders can view the same evidence and reach opposite conclusions. And that’s exactly what happened here.

The case, Chavez-DeRemer vs. Medical Staffing of America d/b/a Steadfast, involved a staffing firm that provided independent contractor nurses to hospitals and medical clinics, as needed. The DOL launched an investigation in 2018, alleging that 1,100 nurses should have been classified by Steadfast as its employees under the Fair Labor Standards Act (FLSA). The DOL filed a lawsuit in federal court in Norfolk. After a bench trial, the judge ruled that under the FLSA’s six-factor Economic Realities Test, the nurses were employees. The judge awarded more than $9 million in damages.

Steadfast appealed. Last week, in a 2-1 decision, the Fourth Circuit affirmed. Two judges agreed with the trial court, finding that the evidence supported employee status under the Economic Realities Test.

The dissenting judge disagreed vehemently. As in, how-can-you-possibly-think-the-dress-is-blue-and-black vehemently. The dissenting judge excoriated the majority for cherry-picking facts and ignoring the realities of the relationship.

All three judges, of course, were evaluating the same facts and the same record. All three judges were applying the same six-factor Economic Realities Test. Yet, they reached very different conclusions.

If this is depressing, it should be. It shows how unpredictable balancing tests can be.

The outcome is an important reminder of how important it is, when building independent contractor relationships, to consider every relevant factor and to nudge as many factors as possible to the independent contractor side of the scale.

There is no way to predict which facts a judge will find most persuasive and no way to predict how a judge will weigh the factors, especially since it is pretty much inevitable that there will be at least some factions on each side of the scale.

I see the dress as white and gold. I can’t understand how anyone would think it’s black and blue. Those people are insane.

Actually they’re not insane. (Well maybe they’re insane.)

In the Medical Staffing case, the dissenting judge couldn’t see how the other two judges could have possibly reached the conclusion that the nurses were misclassified. Businesses using independent contractor models need to be prepared that no matter how supportable they think their classification decision is, a judge or agency might reach the opposite conclusion, even from the same facts.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Bee Aware: New Law Increases Fines for Worker Misclassification in Colorado

When police in Spain pulled over a 70-year-old van driver for not wearing a seatbelt and driving erratically, they thought it would be a routine stop. The man had other ideas. After being asked to take and retake a breathalyzer test, the man threatened to kill the police officers, which is generally a thing you should not do when pulled over.

The man, who I should now mention was a beekeeper, went to the back of the van and released swarms of bees, which proceeded to attack the policemen, stinging them several times. The policemen fled to a nearby restaurant, and the beekeeper casually drove away. He was later arrested, bee that as it may.

The policemen that day didn’t know what they were getting into when they pulled over the van driver. But businesses in Colorado who misclassify workers as independent contractors should now bee on notice that they may get stung — financially — for their misdeeds.

Colorado has amended its wage and hour laws to add a mandatory fine for willful or repeated misclassification of employees as non-employees. Under the new law, an employer found to have misclassified an employee as a nonemployee must pay a fine in the following amounts, in addition to any other relief that may be awarded:

  • For a willful violation, $5,000;
  • For a violation not remedied within 60 days after the division’s finding, $10,000;
  • For a second or subsequent willful violation within 5 years, $25,000; or
  • For a second or subsequent willful violation not remedied within 60 days after the division’s finding, $50,000.

Colo. Rev. Stat. 8-4-113(1)(a)(I.5).

Misclassifying workers as independent contractors has always carried the risk that you’re not complying with employment laws. As states continue to crack down on the misclassification, we can expect to see more laws with mandatory fines, on top of the usual risk of backpay awards.

Businesses using independent contractors in Colorado and other states with fines should pay extra attention. The fines do not vary by size of the engagement, and they are per-violation fines.

Bee careful out there.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Rubbish? Ninth Circuit Upholds California’s ABC Test, Rejects Constitutional Challenge

(AI image generators are fun!)

In 1959, residents of São Paulo, Brazil, elected Cacareco to city counsel. Cacareco was a five-year and female and lived at the Sao Paulo zoo. She was a big girl, known to eat 70 pounds of vegetables a day. Cacareco was a rhinoceros.

Cacareco, which means “rubbish,” got on the ballot through a student prank. Her success is generally attributed to residents’ frustration with city officials over local conditions, which included unpaved streets and open sewers. Said one local, “Better to elect a rhino than an ass.”

Back in the U.S., businesses in California have been calling the state’s independent contractor test “rubbish” since it went into effect in 2020. A group of truckers, called the Owner-Operator Independent Drivers Association (OOIDA) mounted one of the more persistent challenges to the law, known as AB 5, and that challenge finally resulted in a Ninth Circuit Court of Appeals decision earlier this month.

Unfortunately for the OOIDA and its owner-operator trucker members, the Ninth Circuit upheld the constitutionality of AB5 and rejected the truckers’ challenge to the law.

The truckers had argued that AB 5 violates the dormant Commerce Clause because it imposes a substantial burden on interstate commerce, which outweighs its putative benefits. the truckers also- argued that the law’s business-to-business exception violates the dormant Commerce Clause because it discriminates against interstate commerce and violates the Equal Protection Clause because it treats interstate and intrastate drivers differently. the truckers argued that there is no rational basis to support this alleged disparate treatment.

The Ninth Circuit saw things differently. In an unpublished opinion, the court rejected each argument and upheld the law.

The ABC Test appears here to stay, and the chances of getting it overturned now seem about as likely as electing a rhinoceros to the California State Assembly.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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What Animals! New Jersey Proposes to Toughen Independent Contractor Test

In medieval Europe, it was not uncommon to put animals on trial for various crimes. In France, Italy, Switzerland, and elsewhere, courts tried pigs, dogs, rats, grasshoppers, and snails for crimes against people, property, and God. 

Examples include cases brought against vermin who dared to ransack stores of grain and prosecutions for pigs having maimed or killed people.

There’s a whole book about the practice, Chronological List of the Prosecution of Animals from the Ninth to the Twentieth Century, by E.P. Evans. I typed the name of the book in the search bar at Amazon. Apparently it is not available, and the site instead recommended that I purchase a DVD of Ransom, starring Mel Gibson. (?)

No, thank you.

I also say no, thank you to New Jersey Department of Labor and Workforce Development (NJ DLWD), which has proposed new independent contractor classification regulations.

The regulations would re-interpret NJ’s ABC Test in a way that would make it much harder to maintain IC status. The regulations would apply to the NJ Wage Payment Law, the Unemployment Compensation Law, and the Earned Sick Leave Law.

For years New Jersey has used an ABC Test, but with the standard version of part B, unlike California and Massachusetts, which have a strict version of part B.

To satisfy a standard ABC Test, like in NJ, the party engaging the contractor must prove (all three):

  1. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
  2. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
  3. The individual is customarily engaged in an independently established trade, occupation, profession or business.

The regulations would largely re-interpret part B to make it more like the strict version, which can be met only if the work is performed “outside the course of the business for which such service is performed.”

The regulation would essentially eviscerate the second option — that the work is performed outside of all the places of business of the enterprise for which such service is performed — and make it nearly impossible to satisfy this alternative.

For example, under the regulations, the retaining party’s “place of business” could include any place where the work is typically performed, even customer’s homes.

The regulations would also make parts A and C harder to meet. In part A, for example, the regulations would declare that control exerted to make sure a contractor follows the law is relevant control that can convert the worker to an employee. But control exerted to ensure compliance with a law is control imposed by the government, which passed the law, not by the company retaining the contractor. This re-imagining of part A would be inconsistent with a multitude of court decisions that have addressed this issue.

I say no, thank you, because the regulation is not consistent with New Jersey law and is not consistent with how other courts around the country have interpreted the ABC factors. The NJ DLWD is supposed to apply the law, not change it. The NJ DLWD is not a legislative body and is not a court.

Nonetheless, it seems like there’s a good chance this will pass.

A 60-day public comment period began with the publication of the proposed rule on May 5. Companies that will be impacted by the rule should consider submitting comments. Page 1 of the proposed regulations explains how.

Misclassification in New Jersey is serious business. The state has been aggressive about pursuing legal action against companies that systemically misclassify workers as ICs. (But so far, no cases against pigs, dogs, rats, grasshoppers or snails. I think.)

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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DOL Softens Its Bite on Independent Contractor Rule

This is Louie. He’s 11 weeks old. He has the teeth of a shark. If you play with him and there’s no toy in his mouth, your arm is the toy. Or your foot. Or sometimes your face. In my house, we all look like we just played with a blender. But he’s awfully cute.

Late last week, the Department of Labor (DOL) made some news that won’t bite companies in the face.

Read more here.

Originally published 5/5/25 as a BakerHostetler alert.

A Parliament of Owls? Senate Committee Seeks Support for Portable Benefits Bill for Contractors

I found this guy while running in the neighborhood

When animals flock together, we use strange collective names to describe them. You’ve heard of a flock of seagulls, a pod of whales, and a murder of crows. But did you know the collective nouns for apes, hippos, and wildebeests?

Fortunately, this wildlife writer does. It’s a shrewdness of apes, a bloat of hippopotamuses, and a confusion of wildebeests.

My favorite, though, is a parliament of owls. The phrase was apparently coined by CS Lewis in the 1950s and stuck. Good for the owls! I wish for them to form a strong government and pass wise laws.

When independent contractors flock together, we don’t really have a good word for that. Contractors generally can’t flock together for employee benefit plans since they’re not employees, even though some states have enacted portable benefits laws as models for what may be viable on a national level.

One impediment to companies providing contractors with benefits is that doing so can be evidence of an employment relationship. Companies are perversely incentivized not to help contractors remain self-sufficient because companies don’t want to risk misclassification claims.

That could change with a national portable benefits bill.

There has been interest for a long time among trade associations and small business groups to allow portable healthcare and retirement benefits for independent contractors. A recently released white paper by Sen. Bill Cassidy, Chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, advocates for a national portable benefits bill.

The white paper proposes various options for providing affordable health care options for independent contractors, including association health plans, health reimbursement arrangements, pooled employer plans, and single employee pension IRAs. For these programs to work, Congress would have to ensure that a company’s participation in such plans is not a factor in determining whether the contractor receiving such benefits is misclassified.

The concept of portable benefits for contractors is one that should have bipartisan support. The main obstacle to such a bill is likely the desire by some for contractors to receive all of the benefits of employees, and so this concept (for them) is only half a loaf.

Once upon a time, we used to have a Congress that would consider half a loaf to be better than no loaf at all. My hope is that legislators will find a way to make this concept work.

It would be wise. Something that a parliament of owls could probably get done.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Turtle in Your Pants? Here’s a Whole Bunch of Ways Misclassification Can Cost You

A man was detained at Newark International Airport earlier this month for concealing a live turtle in his pants.

The turtle was detected as the man passed through TSA screening. When questioned about the bulge in his groin area, the man said he was just happy to see the TSA agent. No, that’s not what happened at all. Instead, the man reached into his pants and pulled out a 5-inch long red-ear slide turtle.

It is unclear whether the turtle was a pet and whether the man was charged. But he did miss his flight. So let this be a lesson to all of us.

Meanwhile, in California, an in-home healthcare agency learned the hard way that it was concealing a much larger problem. And this problem cost it $2.3 million in fines.

As explained in this news release from the Department of Industrial Relations (DIR), the agency had been classifying its in-home healthcare aides as independent contractors, not employees.

After receiving a complaint, the DIR investigated and found that under California law, the aides should have been treated as employees. The Labor Commissioner issued citations under a relatively new section of the California Labor Code, making this the first enforcement action in which the civil penalties for misclassification were collected as damages for the affected workers, rather than as a penalty paid to the state. (How generous, California!)

This enforcement action is an important reminder of three things.

First, when the work performed is within the company’s normal course of business, the workers are probably going to be deemed employees under California’s ABC Test (unless one of several exceptions applies). California law makes it very difficult to retain solo workers as independent contractors if you retain them to perform a core business function.

Second, in-home health care is an industry in which misclassification maybe widespread, especially when applying California law. The business of in-home healthcare is to provide in-home healthcare. It’s difficult to say that those who do the work are not employees.

Finally, this action illustrates the breadth and depth of penalties a company can face for misclassifying its workers. The $2.3 million in penalties here included:

  • $422,033 in unpaid minimum wages* 
  • $424,809 in unpaid overtime wages* 
  • $165,162 in meal and rest period premiums*
  • $27,400 in wage statement penalties
  • $108,094 in waiting time penalties for delayed final wages
  • $550,000 in penalties for willful worker misclassification
  • $81,673 in penalties for no workers’ compensation insurance for the misclassified employees
  • $422,033 in liquidated damages
  • $18,950 for other civil penalties

When a company treats its workers as contractors, it’s not following the laws that would apply to employees. If, by law, the workers were misclassified, then there are a whole lot of employment laws that the company was almost certainly not following. That makes for a lot of damages.

The advice here is the same as always. Companies using indepednent contractors should be proactive in evaluating these relationships and whether they can survive a legal challenge. There are almost always things that a company can do to better solidify its workers’ status as independent contractors. The best time to act is before an investigation or lawsuit begins.

Complacency is no defense. The fact that you’ve been doing it this way for years and haven’t been sued only means that you haven’t been sued yet.

In other words, if there’s a turtle in your pants, there’s a good chance you get caught at some point, so you better have a good explanation prepared in advance.

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© 2025 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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