Don’t Hire an Unregistered Subcontractor After 9-15-2012!

Tuesday, August 14, 2012 @ 03:08 PM
Author: Peter Brehm

As of 9-15-2012, subcontractors in the State of Minnesota may have to register with the state, or they will deemed to be employees. The law replaces the old exemption certificate process with a (purportedly) simplified online registration. Hiring an unregistered contractor to perform subcontracted work will reclassify the worker as an employee of the party hiring them. That means increased workers compensation, unemployment compensation, state and federal withholding, FICA, penalties and interest on these and general liability premium increases. Further, there is a $2,000 penalty for violating the registration law. This reclassification is a bright-line test to state and federal authorities, and will increase the likelihood of a successful audit because proof requires only the absence of registration.

The following people and entities must register:

1. Individuals or business entities;
2. That performs commercial or residential building construction or improvement services;
3. Do not have a current license, certificate or registration issued by DLI;
4. Do not have a current independent contractor exemption certificate;
5. Do not have an employee of a business performing construction services; and
6. Are not exempt from licensing under Minnesota Statutes 326B.805, subd. 6 (5) or excluded from registration requirements under Minnesota Statutes 181.723, subd. 4a.

If you are a subcontractor, and you don’t know if you have to register, the DOLI has a site that can help you, you can read the Summer 2012 CCLD Review, or you can call our offices. To register, you can go the DOLI’s web site here.

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