Tag: Independent Contractor

Unemployment for Independent Contractors in Minnesota is tricky. Independent contracting cases are strange because the laws in Minnesota keeps changing.  Even worse, the rules change based on a worker’s occupation.

As you might expect, employers do not want to call you an employee because they will owe thousands of dollars in unemployment taxes and payroll taxes. One way employers try to get through this process is by conveniently calling a worker a contractor.

The reason this issue is such a big deal is that it impacts whether a worker is eligible for unemployment benefits. So, I wanted to quickly work through a few rules to consider.

Unemployment Rules for Independent Contractors

The first rule is simple:  independent contractors do not get unemployment benefits in Minnesota.  For this reason, workers who are trying to seek this benefit should be arguing why they were an employee.

MN independent contractors are governed by dozens of statutes, rules and law cases. As a result, pinpointing the right law and rule is critical.

Which Law Applies?

You must assume all of the laws apply and be prepared for the reasons that help your case. Generally, a worker will need to be prepared for the following issues:

• Use of office, equipment, and materials,
• Tax return process,
• Contracts (verbal and written) used,
• Expenses related to the service or work,
• Responsibility and satisfaction of work completed,
• Payment process (commissions, bid process, or other wage methods),
• Profits and losses, and
• Recurring business liabilities.

Even more important, workers need to be prepared to combat what their employer might say too.

Contractor Audits

At first glance, the rules for defining a contractor are crazy, strange and all over the board.  Luckily, you can help yourself by looking for two things:

• Is an auditor asking you questions, or
• Are you being informed about filing an appeal?

Unfortunately, the Work Force Center, auditors, and field agents are not necessarily on your side. Thus, prepare accordingly.

Minnesota Laws for Independent Contractors

Every employee and employer relationship is different.  Some people believe they are following rules and guidelines defined by the IRS.  Other employees have written contracts and some workers make verbal agreements.

In other words, protect yourself before the situation gets more challenging.

In Minnesota, two terms do not go together:  independent contractor and unemployment in Minnesota.

That being said, the meaning or definition of an independent contractor is certainly not black or white.  

As a result, there are a lot of people appealing their benefits.  Here is why…

Where to begin?

First, the term “independent contractor” is a term used by the IRS.  The IRS cares most about whether or not workers are classified as independent contractors.  

Quite frankly, employers have more to lose than workers when trying to figure out whether a worker fits the IRS definition of an “independent contractor” or an “employee.”  For this one reason, applicants requesting benefits might be required to defend themselves in an appeal for benefits.

Why does the IRS care so much about your job classification?  The IRS cares about the definition used by your former or current “employer” because the IRS wants to assess tax liability to the right party.  

Thus, IRS cares and the Minnesota unemployment office care too.

A Simple Unemployment Law applicable to all Independent Contractors in MN

Second, lets reference a very simple unemployment law applicable to independent contractors in Minnesota.  The law in Minnesota says a person seeking unemployment benefits is automatically ineligible if they are an independent contractor.  Because this is true, there really isn’t any point in claiming or filing for benefits.

On the other hand, just because a document or a person classified you as an independent contractor doesn’t mean you are automatically ineligible for unemployment.  If this is your situation, then for heaven’s sake, start helping your cause to make sure you are properly classified.  

But wait, you still don’t know if you are an Independent Contractor or an Employee

It is the experience of this law office that people claiming unemployment benefits do not find out they are ineligible until their former employer identified them as an independent contractor.

Often, this law office hears the following:

• “I was pushed into the role of being a contractor”
• “They just told me I had to be an independent contractor”
• “Even though they said I was an independent contractor, they still treated me like an employee”
• “I never filed any documents with the IRS”
• “Sometimes I was independent and sometimes I was an employee”
• “This is the first I have ever heard of this”
• “My employer is trying to get away with something, but I don’t know what”
• “I’m a what?”

Again, these are all very common responses to people, workers, and applicants appealing for unemployment benefits in Minnesota.  

Thus, do not feel like you are alone or taking on an untamed beast that has never been defeated.  Instead, these types of appeals happen all the time.

Minnesota Statutes for Unemployment Benefits and Contractors:

Brace yourself, things are about to get very technical.  In Minnesota, the statute doesn’t explicitly define independent versus employee.  Instead, the laws in Minnesota first try to determine whether your job was “employment” or not “employment.”  The rule is Minnesota statute 268.035.

As you can see, Minnesota statute 268.035 states “employment” does NOT include services from an independent contractor.  

Often, employers will use a contract or form to prove why a person was an independent contractor.  However, just because a document classified another person as an independent contractor doesn’t mean they were correctly identified.  For this reason, issues regarding an independent contractor and unemployment benefits are regularly scrutinized by the unemployment office.

Minnesota Case Law for Unemployment and Independent Contractors:

In a case called Kirkov v. Helpful Hands Transportation, Inc, the Minnesota Court of Appeals used five factors to determine whether a worker was independent or not and if they could collect unemployment benefits from Minnesota.  

The five factors were as follows:  did the worker have (1) the right to control the means and manner of performance; (2) what was the mode of payment; (3) who furnished material or tools; (4) who controlled the premises where the work is done; and (5) was there a right to discharge.

If you are thinking to yourself the list of factors didn’t help you much, then you would wouldn’t be to far off.  Again,  the issue regarding an independent contractor and unemployment in Minnesota is a confusing issue and is fact specific.  

In other words, your situation is going to be different situations previously decided by an unemployment law judge.  Thus, you need to have a game plan.

Final Thoughts on Independent Contractors collecting benefits in Minnesota

The bottom line is this – if you are trying to collect or defend your right to unemployment benefits and your case involves whether or not your role was independent, seek help from a professional.  

Unfortunately, the classification of workers and their titles has exceeded common sense and there is a lot at stake for both workers and their employers.