Employee vs. Independent Contractor Test in Minnesota

Are you trying to figure out if a person working for you is an “independent contractor” vs. “employee” under Minnesota law? This brief article explains the basic test to use and provides additional resources.

The Benefits of Calling All Workers “Independent Contractors”

Obviously, Minnesota employers would like to categorize everyone as independent contractors so

  1. employers don’t have to pay unemployment if they fire the person,
  2. employers don’t have to pay worker’s compensation if the person is injured, and
  3. employers don’t have to pay half of the Social Security / FICA tax for each paycheck.

There are many other benefits for employers categorizing workers as “independent contractors.” In short, independent contractors in Minnesota do not benefit from the Minnesota laws protecting employee rights.

Employee vs. Independent Contractor Test in Minnesota

Minnesota state law does not let employers simply choose whether a worker is an employee or independent contractor.

The test for determining whether a worker is an employee or independent contractor is simple to apply when the answer is obvious. But if a worker seems somewhat like an employee and somewhat like an independent contractor, the test can be more challenging.

The Simple Five-Factor Test for Employee vs. Independent Contractor

In short, the employee vs. independent contractor test in Minnesota weighs a number of factors. When a question arises about whether a particular relationship is that of employer-employee or that of two entities contracting independently, a five-factor test has developed through case law that generally allows an employer or employee to make some judgments concerning the appropriate characterization. This test involves analyzing the following five factors.

  1. The right to control the means and manner of performance
  2. The mode of payment
  3. The furnishing of tools and materials
  4. Control over the premises where the work was done
  5. The right of discharge

Source: Guhlke v. Roberts Truck Lines, 128 N.W.2d 324 (1964).

Attempting to apply this test can reveal how challenging it is in a real world environment. If you are not sure, ask an attorney to analyze the situation for you. Failure to properly characterize a worker can result in serious legal consequences for you and your business.

Other Employee vs. Independent Contractor Resources for Minnesota

Here are two of the best resources in Minnesota on the topic. Here is the state’s explanation of how to determine whether a person is an employee or independent contractor: Minnesota Department of Labor and Industry: Determining independent contractor or employee status.

Here is a more comprehensive explanation of how to determine whether a person is an employee or independent contractor: Bench and Bar of Minnesota: Independent Contractor or Employee?

IRS Test for Employee vs. Independent Contractor

The IRS has its own test to determine whether someone is an employee or independent contractor. Learn more here: IRS Test for Employee vs. Independent Contractor.