Builders ask Eighth Circuit to ax Minnesota law on misclassifying construction workers

(CN) — Minnesota builders urged the Eighth Circuit Tuesday to block a state law they claim creates too many hurdles in defining independent contractors.

The law, amended by the Legislature in 2024, is aimed at keeping construction workers from being misclassified, since contractors don’t get the higher wages, benefits and job protections given to employees.

But trade associations representing residential and commercial contractors in Minnesota sued the state in federal court, arguing the regulation could hurt the industry because it requires everyone — from general contractors to sub-subcontractors — to comply with a 14-factor test that defines independent contractors.

“If any one of the factors is missed at the time the services are provided, the statute is violated, and there are economic and criminal consequences set forth,” Thomas Revnew of Littler Mendelson, the attorney representing the contractor associations, told the appellate judges at the St. Paul-based court Tuesday.

“To give you an example, if a contract is not signed within 30 days of the work being conducted, all of the subcontractor’s employees become employees of the prime contractor. Then, all of the employees of the subcontractor are entitled to the wages and benefits that are offered by the general contractor,” Revnew said.

The general contractor must also make employer contributions for unemployment, workers’ compensation, Social Security and Medicare, he added.

U.S. Circuit Judge Duane Benton, a George W. Bush appointee, asked whether the statute was criminal or civil.

Assistant Minnesota Attorney General Janine Kimble, representing the state, said it is civil.

Benton said, “What about the fact that the statute feeds into other statutes that clearly have a criminal penalty?”

Kimble replied that fines assessed for violations are administered by the Department of Labor and Industry.

Revnew argued the statute is criminal in nature because a violation is a misdemeanor, which falls under a separate criminal statute.

The associations argue the statute is unconstitutionally vague and the civil penalties provision and potential for criminal penalties violate the Eighth Amendment’s bar on excessive fines. They are appealing a March 5 Minnesota federal court ruling denying their motion for a preliminary injunction.

In a brief filed by Minnesota Attorney General Keith Ellison, the state argues the associations lack standing because they cannot establish injury since the statute only went into effect March 1. The state also argues the law is not unconstitutionally vague, and the district court correctly held the appellants are unlikely to succeed on their excessive fines claim because there has been no fine to evaluate.

U.S. Circuit Judge L. Steven Grasz, a Donald Trump appointee, asked Kimble whether the contractors have an argument for standing because the statute will force them to change how they operate.

“Isn’t their argument that the statute criminalizes, in some cases, past practice of the entire industry?” he asked. “That seems to me to be a pretty straightforward issue in establishing standing. You may disagree with that argument, but I don’t see how that undermines standing.”

Kimble said, “I do think a fair reading is that the trade associations’ members may have to change their behavior.”

The Eighth Circuit panel, hearing Tuesday’s argument in St. Louis, also included appellate U.S. Circuit Judge Jonathan Kobes, a Donald Trump appointee.

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