January 9th, 2014
The Minnesota State Legislature will consider a revised Uniform Limited Liability Company Act during the 2014 legislative session. The revised LLC Act was reviewed by a committee consisting of Minnesota business attorneys and has been endorsed by the Minnesota State Bar Association. Minnesota’s current LLC Act (§ 322B), which was adopted in 1993, closely mirrors the Minnesota Business Corporations Act (§302A). The revised LLC Act will move away from the corporation model toward a partnership model, which is consistent with a majority of other states’ LLC acts. Important provisions of Minnesota’s current LLC Act would be retained.
The Minnesota Secretary of State’s office will also have a smaller bill with technical improvements and other proposals to streamline operations for consideration this session.
If the revised LLC Act is adopted, nearly 200,000 limited liability companies will be affected.
September 25th, 2013
If your company’s employment application contains an inquiry as to past criminal conduct, it may have to be revised. Effective January 1, 2014, most Minnesota employers may no longer inquire into, nor require disclosure of, a job applicant’s criminal record until the applicant has been selected for an interview or (if there is no interview process for the position) has been given a conditional offer of employment. The new law does not apply to employers who have a statutory obligation to conduct a criminal background check or to consider criminal history in the hiring process. The new law also does not prohibit employers from using an applicant’s criminal history to deny employment. However, the applicant must be vetted, and either an interview or offer extended, before the employer may take the criminal background report into consideration. Employers with questions about this new “Ban the Box” legislation may contact Wendland Utz’ employment law attorney Chris Wendland for more information.
September 12th, 2013
Much of the media attention on the Patient Protection and Affordable Care Act (“ACA”), also commonly referred to as “Obamacare,” has been focused on the obligation of employers with 50 or more full-time employees to provide health insurance. However, small employers also have certain new obligations. Notably, the Fair Labor Standards Act was amended to provide that employers with at least $500,000 of annual gross revenue must provide a “Notice to Employees” informing them about the existence of any healthcare marketplace available in their state and providing other information about the marketplace and the services it provides. Minnesota’s newly-established healthcare marketplace is called MNsure, and required notices must be provided to employees by October 1, 2013. Any employee hired after October 1, 2013, must be provided notice within 14 days of his or her start date. There has also been a great deal of press about the delay in penalties for noncompliance with certain aspects of the ACA, but there has been no indication that this notice requirement will be delayed.
Employers must also advise their employees how they may contact MNsure to request assistance. If an employer offers healthcare coverage, but the employer’s share of the total allowed costs of benefits is less than 60%, the employer must also notify its employees that they may be eligible for a premium tax credit if they purchase a qualified health plan through MNsure. Employers must also notify employees that if they purchase a qualified health plan through MNsure, the employer is not required to continue to supplement their coverage but all or part of their own contributions to the plan may be excludable from income for federal tax purposes. General information regarding these various requirements can be found at http://www.dol.gov/ebsa/newsroom/tr13-02.html.
Employers are not required to use the model notices, and deviations may be helpful in certain circumstances, but are a good place to start in pursuing compliance. If employees use email to distribute employee benefit documents, such as summary plan descriptions, employers may use the same distribution method for the ACA notices. Otherwise, notice may be provided by first-class mail. Some helpful resources are linked below.
General model notices for employers:
Employers with Plans: http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf.
Employers without Plans: http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf.
MNsure specific notices for employers:
Employers with Plans: http://mnsure.org/hix/images/SEE-Notice-employers-offer.pdf.
Employers without Plans: http://mnsure.org/hix/images/SEE-Notice-employers-no-offer.pdf.
If you have any questions regarding your company’s compliance obligations, feel free to contact Chris W. Wendland.
August 13th, 2013
On April 5, 2013, the Occupational Safety and Health Administration (OSHA) indicated for the first time in a letter of interpretation that during an OSHA inspection of non-union work-sites, employees can be represented by an outside union agent. Previously, only a union certified by the National Labor Relations Board could act as an employee representative during an OSHA inspection. Under the new interpretation, an employee may choose a person who is not an employee of the company to act as a “personal representative” in filing complaints on the employee’s behalf, requesting OSHA workplace inspections, participating in conferences to discuss citations, and challenging the abatement period in citations being contested by an employer.
OSHA’s new broad interpretation does not actually define who “a person” affiliated with the union or community representative is. This means that arguably union organizers with no safety training, community activists, or even attorneys could participate in OSHA inspections on behalf of employees. Without expressly stating so, the new policy appears to be an effort to increase union membership by giving unions direct access to employees which they do not represent.
This new interpretation is potentially subject to attack because it is directly contrary to OSHA’s own inspection regulations. Those regulations provide in relevant part:
(b) . . . If there is no authorized representative of employees, or if the Compliant Safety and Health Officer is unable to determine with reasonable certainty who is such representative, he shall consult with a reasonable number of employees concerning matters of safety and health in the workplace.
(c) The representative(s) authorized by employees shall be an employee(s) of the employer. However, if in the judgment of the Compliance Safety and Health Officer, good cause has been shown why accompaniment by a third party who is not an employee of the employer (such as an industrial hygienist or a safety engineer) is reasonably necessary to the conduct of an effective and thorough physical inspection of the workplace, such third party may accompany the Compliance Safety and Health Officer during the inspection.
Additionally, OSHA’s current Field Operations Manual contradicts the new interpretation because it simply provides that if there is no union representative or suitable employee or employees to participate in the walk-around, the investigator should conduct interviews with a reasonable number of employees during the walkaround.
The procedure for selecting a representative is not defined in OSHA’s new interpretation, leaving open many questions including how a non-employee representative is chosen and what powers a non-employee representative would have during an inspection. For instance, it is unclear whether a non-employee representative would be able to participate in manager and supervisor interviews.
This new interpretation also creates the possibility that competitors may gain access to proprietary, confidential, and trade secret information. For example, there is nothing to prevenient a union representative who is an employee at a competitor from being brought into the worksite for the purposes of inspection,
If an employee requests a representative that the employer considers to be inappropriate, the employer has the right to refuse a walkaround inspection on any basis and to require OSHA to get a warrant. This will allow a federal district judge to review the situation. There is some indication that the courts will not be open to this change. In Christopher v. SmithKline Beecham Corp. dba GlaxoSmithKline, 567 U.S. __ (2012), the Supreme Court of the United States declined to give the Department of Labor’s recently-changed interpretation of the application of certain wage and hour laws “controlling deference” because the agency’s new interpretation conflicted with the agency’s position over the prior several decades. The same situation appears to exist here.
It is important to understand that the initial request for a warrant is an ex parte procedure in which the employer is not allowed to participate. However, if the warrant is issued, the employer may move to quash the warrant or oppose efforts to enforce the warrant in federal court. Taking this approach may not win any friends at OSHA, but if the intrusion is severe enough, it may be necessary. It is unclear how the new regulation will improve safety and health in the workplace, but it is plain how the regulation is targeted to stabilizing decreasing private union membership.
July 22nd, 2013
Classifying individual workers as employees versus independent contractors is often a complicated task. But in Minnesota the answer is usually that an individual is an employee. In Minnesota persons working in the construction industry must be classified as employees unless they both meet a strict test and register with the Minnesota Department of Labor and Industry. Failure to comply with this requirement can result in heavy fines to the hiring contractor.
There are certain exemptions to the registration requirement. For example, individuals performing certain services such as landscaping or operating under a license such as architects are exempt.
It has been almost ten months since a new law, which went into effect on September 15, 2012, authorized a two-year pilot program intended to streamline the process of certifying when a person is qualified to operate as an independent contractor in the construction industry. Minn. Stat. § 181.723, as amended (Minnesota Section Laws, Chapter 295). Previously a person who is operating as an independent contractor was required to obtain an independent contractor exemption certificate (ICEC). Under the pilot program, a free, online registration replaces the ICEC process. A contractor with a current ICEC may continue to operate under that certificate until it expires. But when the ICEC expires, the contractor will be required to register under the new system. This pilot program in intended to streamline the process, increase compliance, and make it easier for general and intermediate contractors in the construction industry to determine compliance of their subcontractors. However, the amendment also raises the potential for fines for improperly treating an individual as an independent contractor from $5,000 to $10,000 per violation. And each improper payment can be considered a separate violation. At that rate fines can add up quickly.
Under the revised statute, a Minnesota construction contractor must still meet a nine-factor statutory test to be considered an independent contractor. A Minnesota construction contractor must satisfy every factor to act as an independent contractor. This requires that a contractor meet all of the following requirements:
- Maintain a separate business with the individual’s own office, equipment, materials and other facilities;
- Hold or have applied for a Federal Employer Identification Number or filed business or self-employment income tax returns in the previous year if the individual performed services in the previous year;
- Operate under contracts whereby the contractor performs specific services for specific amounts of money and under which the individual controls the means of performing the services;
- Incur the main expenses related to the services performed under the contract;
- Be responsible for satisfactory completion of the services and liable for failure to complete the services;
- Receive compensation on a per job or competitive bid basis and not on any other basis such as hourly;
- Have the possibility to realize a profit or suffer a loss on the contract;
- Have continuing or recurring business liabilities and obligations; and
- Have his or her business depend on the relationship between business receipts and expenditures.
If it seems difficult to meet this test, that is because these factors are intended to make it difficult to classify any individual working in the construction industry as an independent contractor rather than an employee.
General and intermediate contractors should independently verify that the contractor is registered, licensed, or exempt. Registration can be verified at http://secure.doli.state.mn.us/lookup/licensing.aspx. The general or intermediate contractor is also charged with verifying that the subcontractor meets the nine-factor test. Therefore, the engaging contractor should also verify the registration of a business entity at http://mblsportal.sos.state.mn.us. It is also important to ensure that subcontractors have adequate workers’ compensation insurance coverage which can be done at http://www.inslookup.doli.state.mn.us because under Minnesota law, a contractor whose subcontractor fails to maintain adequate coverage is responsible for paying workers’ compensation benefits to the subcontractor’s employees. If the supposed independent contractor is actually an individual not properly authorized to act as an independent contractor, the engaging contractor must pay for any injuries sustained.
In addition to verifying this information, to further protect itself, the engaging contractor should enter into a written contract for services and obtain invoices and pay the business entity rather than the individual owner of the independent contractor business. It is also advisable to require the independent contractor to ensure compliance with the law and to periodically verify compliance.
It is always important for companies using the services of independent contractors to ensure that they have not unintentionally created an employment relationship. A contract that properly identifies the obligations of the subcontractor, and includes representations from the subcontractor concerning the nine-factor test, can significantly strengthen the likelihood that the relationship will be deemed to be that of an independent contractor. Compliance with the independent contractor law is one important part of the equation.