Perspectives

In the construction industry, where flexibility and specialized skills are heavily sought after, the classification of workers as independent contractors has long been a common practice. Independent contractors bring a range of talents and expertise to construction projects, offering unique advantages for both employers and workers.

However, recent developments in labor regulations have brought about significant changes in how independent contractors are classified, particularly in the construction sector. It is crucial for all stakeholders involved to stay informed and adapt to these new requirements to ensure compliance with the law.

The reclassification of independent contractors have significant implications for construction projects. From compliance with wage and hour laws to eligibility for certain benefits, the changes affect how construction businesses operate and engage with their workforce.

The New (Old) Regulations

Beginning March 11, a new Department of Labor rule will change how employers determine if a worker is an independent contractor of employee. The federal rule, first proposed in October 2022 and published in the Federal Register January 10, will reverse a rule made late in former President, Donald Trump’s term.

The 2021 shift by the former President’s administration altered worker classifications to focus on two factors: the nature and degree of control over work, and opportunity for profits or loss. Under the new framework-a return to the standard before the 2021 alteration-six nonexhaustive factors will determine a worker’s employment status.

The Six Major Factors When Determining Employment Status:

• Worker’s opportunity for profit or loss
• Investments made by the worker and the employer
• Degree of permanence of the work relationship
• Nature and degree of control over performance of the work
• Extent to which the work performed is an integral part of the employer’s business
• Use of the worker’s skill and initiative

There are Mixed Reviews

Construction employer groups balked at the change-calling the final rule’s standard “ambiguous and difficult to interpret”. (Associated Builders and Contractors).

Labor groups, on the other hand, applauded the update.

“Simply put, this rule will ensure the basic rights of all workers, consistent with the Fair Labor Standards Act.” (United Association of Union Plumbers and Pipefitters.)

Acting Secretary of Labor Julie Su said the final rule would ensure a level playing field for workers, particularly vulnerable workers who are misclassified and lose out on minimum wage, overtime pay, and other protections under the FLSA. Worker misclassification is prevalent in the construction industry: an estimated 1.1 million to 2.1 million workers are misclassified or paid off the books. (Century Foundation)

Final Thoughts

Employers, and especially employers who utilize the work of specialty and independent contractors, should conduct thorough audits of the employees and their current classification. Failing to comply with federal and state labor laws often leads to costly consequences such as legal penalties, back pay claims, and damages. Additionally, proper employee classification contributes to a fair and equitable workplace, building trust between employers and their workforce.

Employers would benefit from consulting with a lawyer will versed in employment law to assist in their audit of worker classifications. The attorneys at Wagner, Falconer & Judd stay up-to-date on the various laws that impact the classification of employees by state. Learn more about our services and get started today-that way you’ll be ready for the next employment law updates!

The onslaught of new employment related laws in Minnesota has kept our phone lines pretty busy! Many of the new laws took effect January 1-but employers are still scrambling to determine how the law applies to them. So let’s address some of the common questions we’re getting:

What exactly IS earned sick and safe time?

ESST (Earned Sick and Safe Time) is paid leave employers must provide to employees in Minnesota that can be used for certain reasons, including when an employee is sick, to care for a sick family member or to seek assistance if an employee or their family member has experienced domestic abuse, sexual assault, or stalking. ESST must be paid at the same hourly rate an employee earns when they are working.

Who is eligible?

An employee is eligible for ESST if they:

• work at least 80 hours in a year for an employer in MN
• are not an independent contractor

Temporary and part-time employees are eligible for ESST.

How do you accrue and use ESST?

• Employees can accrue at least one hour of ESST for every 30 hours worked, unless an employer front loads ESST hours as allowed by law.
• ESST begins accruing on the first day of work and employees are allowed to use ESST as it accrues.
• Employers must allow an employee to accrue at least 48 hours of ESST to the net year up to a maximum accrual of at least 80 ESST hours.
• Employers can require documentation from employees with ESST used for more than three consecutive days.

What can you use ESST for?

ESST can be used for reasons that include:

• The mental or physical illness, treatment or preventative care of an employee or their family member;
• Absence due to domestic abuse, sexual assault or stalking of an employee or their family member;
• Closure of an employee’s workplace due to weather or public emergency or closure of their family member’s school or care facility due to weather or public emergency.

In 2024 consulting with an employment law attorney is not just a precautionary measure, it’s a strategic business decision to safeguard the interests of both employers and employees. As you navigate the complex and ever-changing laws, a proactive approach to legal compliance becomes paramount in fostering a workplace that values the well-being of its workforce.

Wagner, Falconer & Judd offers a number of ways to partner with us for all your business needs. Reach out to us today for a consultation, or visit our Support Services page to learn more about our offerings.