House Jobs Committee examines economic costs and enforcement of employee misclassification

SAINT PAUL, Minn. – Today, the House Workforce, Labor, and Economic Development Finance & Policy Committee, chaired by Rep. Dave Pinto (DFL – Saint Paul), devoted a hearing to a deep dive on the misclassification of workers, its impact on Minnesotans, and enforcement efforts. Worker misclassification is the illegal practice of treating employees as independent contractors to sidestep paying wages and benefits, including overtime pay, unemployment insurance, access to workers’ compensation coverage, and the right to organize. The practice also cheats taxpayers when employers avoid paying payroll taxes, which also gives them an unfair advantage when submitting bids for contracts.

“When businesses rely on the predatory practice of misclassification to deny workers the pay and benefits they deserve while also dodging taxes and other payments that responsible employers pay, that’s fraud, plain and simple,” Rep. Pinto said. “Businesses that engage in this behavior are stealing from their own employees and from Minnesota taxpayers, and they deserve to be held accountable. House DFLers are committed to leveling the playing field by strengthening enforcement against those who cheat workers and rig the system to their own benefit.”

In 2024, under DFL leadership, lawmakers enacted a sweeping package of legislation authored by Rep. Emma Greenman (DFL – Minneapolis) to crack down on businesses that misclassify workers as independent contractors. The bill empowered the Department of Labor and Industry to levy civil penalties of up to $10,000, while creating a multi-agency Intergovernmental Misclassification Enforcement and Education Partnership to strengthen coordination across governmental entities to detect, investigate, and deter the practice.

In 2025, the Legislature took further action to fund enforcement within DLI, collect data on misclassification’s impact on the Workforce Development Fund and Unemployment Insurance Trust Fund, and enhance requirements on construction businesses that purportedly only utilize independent contractors to avoid paying for workers’ compensation insurance using audits of UI data, audits of tax filings, publicly available data, and other research.

During today’s hearing, officials with the Attorney General’s office provided updates from their Advisory Task Force on Worker Misclassification. Officials from DLI also provided updates on enforcement efforts, which highlighted increases in wage claims, investigations, and efforts to inform and educate employers, as well as their progress in developing an impact report about how misclassification fraud impacts workers, government programs, and tax collections.

Lawmakers also heard from representatives of organized labor, including Ben Baglio from the Minnesota Nurses Association, who discussed an emerging concept with smartphone apps being used to hire health care workers that sidestep existing regulatory frameworks and licensure. Matt Wohlers from Braxton Construction – a framing and trim contractor – spoke about how reputable contractors are losing bids to businesses that commit employment fraud.

Additional information, including a complete agenda and documents from the hearing, is available on the committee webpage. Video of the hearing is available on House Public Information Services’ YouTube channel.