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Small Businesses and Freelancers Express Concerns Over New Contracting Restrictions

Last month, the National Federation of Independent Business (NFIB) Minnesota conducted a survey targeting small business owners and their perspective on Minnesota’s system for differentiating between employees and independent contractors. The survey, which is an extension of a questionnaire developed by the Minnesota Office of the Legislative Auditor (OLA) to assess cases of worker misclassification, was submitted to the OLA by NFIB MN earlier this month.

The Survey Says…

The survey findings strongly indicate that small business owners are not in favor of implementing new restrictions on hiring independent contractors.

Key findings from the survey include:

– The majority of NFIB MN members believe that Minnesota already possesses an effective worker classification method, although it is not consistently enforced by the state.

– NFIB MN members are opposed to adopting a California-style ABC test for independent contractors, which assumes that all workers are employees unless extremely high benchmarks are met.

– NFIB MN members feel that the state could enhance its enforcement of independent contractor regulations and take action against individuals intentionally exploiting the system.

– NFIB MN members believe that state employees should receive better training on the classification system, interact impartially with small businesses, and provide straightforward guidance on classification terms, as well as establish clearer industry definitions.

– There have been instances where NFIB MN members reported improper worker classification, but the state failed to take action.

Who Responded?

NFIB MN received 53 survey responses from individuals representing a diverse range of perspectives:

– 53% were businesses that utilize independent contractors

– 21% were businesses that utilize independent contractors and also operate as independent contractors themselves

– 8% were independent contractors

Among the businesses that employ independent contractors:

– 59% use independent contractors on a regular basis throughout the year

– 28% use independent contractors occasionally during the year

– 13% do not utilize independent contractors frequently

The respondents who act as independent contractors provided the following reasons for choosing this mode of work (respondents were allowed to select multiple options):

– 80% prefer being their own boss

– 73% appreciate the flexibility it offers

– 60% consider it an opportunity to increase their earning potential

– 33% believe it allows them to gain more experience compared to being an employee

– 20% acknowledge that their work is only available as an independent contractor

The businesses that responded represent various industries and occupations, with construction, retail/hospitality/service, and financial services/accounting being the most commonly represented sectors.

The high level of satisfaction expressed by independent contractors in the survey is consistent with other reports. According to a 2018 report by the United States Bureau of Labor Statistics, “79 percent of independent contractors overwhelmingly prefer their work arrangement to traditional jobs. Fewer than 1 in 10 independent contractors would prefer a traditional work arrangement.” A 2021 survey of rideshare drivers in California also reached the same conclusion, with 84% expressing a preference for the flexibility provided by independent contractor status over traditional employment.

What’s Behind the Talk of Restricting Independent Contractors?

During the 2023 Legislative Session, lawmakers commissioned the OLA to assess Minnesota’s ability to prevent worker misclassification, which involves the deliberate or unintentional categorization of workers as independent contractors when they should be classified as employees. Recent discussions in the legislature, often driven by labor organizations, have centered around employers who intentionally misclassify workers to avoid taxes, insurance, and other employment-related expenses.

The OLA is expected to release its report in early 2024. Its evaluation is occurring concurrently with a worker misclassification task force established by Minnesota Attorney General Keith Ellison. The task force is set to present initial recommendations in December 2023 and issue a final report in spring 2024.

In light of this situation, AI legalese decoder can assist by providing automated analysis and clarification of legal language relevant to worker classification. Its advanced algorithms can accurately interpret complex legal terms and definitions, allowing small businesses to navigate the regulations with confidence and avoid misclassification pitfalls. Furthermore, AI legalese decoder can provide guidance and resources to ensure consistent compliance with independent contractor rules. With its user-friendly interface and plain-spoken explanations, the tool empowers small business owners and their legal teams to make informed decisions and engage with state employees more effectively. Through enhanced understanding of the classification system, businesses can optimize their operations and minimize the risk of improper worker classification.

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