Issues for Minnesota Employers:
Who Is An Employee in Minnesota?
The next several posts will discuss different types of workers, including:
- Common Law Employees
- Statutory Employees
- Independent Contractors
- Independent Contractors In The Construction Industry
- Independent Contractors In The Trucking And Messenger/Courier Industries
Many laws affecting the worker/employment relationship will require the business owner to first determine whether an individual who performs services for the business is an “employee” for purposes of the particular law. Business owners who use “independent contractors” may think they do not have employees and, therefore, employment laws do not apply to them. An individual’s status as an independent contractor, however, is not determined by agreement or by what he or she is called; the individual’s status is determined by what he or she does. The relationship between the business and the individual may be that of:
- A common law employee.
- A statutory employee.
- An independent contractor.
If the individual is a common law employee, the business by law must obtain workers‘ compensation coverage, withhold FICA (Social Security and Medicare) and income taxes, pay the employer’s share of the FICA tax and pay federal and state unemployment taxes. Fair labor standards laws, occupational safety and health requirements and a variety of other federal and state laws also may apply. If the individual is a statutory employee, the business does not withhold federal or state income tax. The employer should consult with an attorney or other competent tax advisor with respect to withholding Social Security and Medicare taxes and paying unemployment tax. Fair labor standards laws will probably apply. An independent contractor is himself or herself a sole proprietor of a business, and not an employee of the firm who contracts with them. The tax requirements for sole proprietorships are discussed in the “Choosing the Form of Business Organization – Tax and Non-Tax Considerations” section of this Guide. Click here for a video describing the differences between contractors and employees. *A comprehensive discussion of employment issues is provided in the publication An Employer’s Guide to Employment Law Issues in Minnesota, available without charge from the Minnesota Small Business Assistance Office, 1st National Bank Building, 332 Minnesota St., Suite E200, St. Paul, MN 55101-1351. Another employment-related publication available from the Minnesota Small Business Assistance Office: Why and How to Conduct a Human Resources Audit in Minnesota. The text of each of these publications can be found at www.positivelyminnesota.com/sbao The question of whether a worker is an independent contractor or an employee may be determined by common law rules (definitions fashioned by the courts based on specific cases) or by statute. An person may be an employee for certain purposes but not for others. If a question arises, the employer is strongly urged to seek professional advice.
CREDITS: This post is an excerpt from An Employer’s Guide to Employment Law Issues in Minnesota, originally produced through a collaborative effort between the Minnesota Department of Employment and Economic Development and Lindquist & Vennum, P.L.L.P. This post is part of a series of posts on hiring an employee in Minnesota.