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Businesses Using Freelance Workers or Independent Contractors in Minneapolis Need Written Contract Beginning 2021

On January 1, 2021, the Minneapolis Freelance Worker Protections Ordinance went into effect. The City’s objective with the Ordinance is to prevent wage theft from freelance workers or independent contractors. The Ordinance requires businesses (including digital network-based entities) using freelance workers or independent contractors within the geographical boundaries of the City of Minneapolis to have written contracts. This also includes transportation or delivery services where the transportation or delivery service areas are wholly, or partially, within Minneapolis and that the services in fact require transportation or delivery within Minneapolis.

The Ordinance

A written contract between the parties is required if the agreed-upon compensation for services is either of the following:

  1. $600 or more, or reasonably expected to be $600 or more, either by itself or when aggregated with all contract for services between the same commercial hiring party and freelance worker during the calendar year, or
  2. $200 or more, or reasonably expected to be $200 or more, either by itself or when aggregated with all contracts for services between the same commercial hiring party and freelance worker, for work to be performed within a time period of seven (7) consecutive days.

Minimum Requirement of the Written Contract

The written contract between businesses and freelance workers or independent contractors must include, at a minimum, the following:

  1. The name and address of both the commercial hiring party and the freelance worker;
  2. An itemization of all material services to be provided by the freelance worker;
  3. The compensation for the services, including the rate or rates and method of compensation;
    • If compensation cannot be determined at the time the contract is written or the job is performed, a detailed statement outlining the method of compensation and the party responsible for keeping track of the method (i.e. hours worked) must be in writing;
    • If the freelance worker is responsible for tracking the information needed to determine compensation, they need to provide the commercial hiring party with an invoice outlining the total compensation due and a detailed calculation by which the amount was determined.
    • If the commercial hiring party is responsible for tracking the information needed to determine compensation, they must provide the freelance worker with an earning statement outlining the total compensation to be paid and a detailed calculation by which the amount was determined.
  4. The date on which the commercial hiring party must pay the agreed upon compensation or the mechanism by which the date will be determined.

Professions Excluded From the Ordinance

  1. Sales representative as defined in Minn. Stat. § 325E.37;
  2. Commission salespersons as defined in Minn. Stat. § 181.145, subd. 1;
  3. Attorneys; and
  4. Licensed medical professional, acting within the scope of their license.

Penalty for Non-Compliance

Businesses failing to comply with the Ordinance risk both compensatory damages in the amount due to the freelance worker, but unpaid under the contract, and liquidated damages in an amount up to double the compensatory damages awarded, or $500, whichever is greater. These fines are subject to increase with multiple violations, as well as civil fines levied by the Minneapolis Department of Civil Rights (the department tasked with enforcement authority).

The Ordinance does not address exactly what makes an individual a freelance worker or independent contractor and does not relieve businesses from properly designating individuals as employees or independent contractors. The written contract between the parties, as required by the Ordinance, is not determinative as to the hired individual’s true employment status. Thus, businesses using independent contracts need to ensure they are properly classifying them.  A summary regarding employment classification in Minnesota can be found here.

For more information related to the Ordinance or other employment related issues, please contact Hellmuth & Johnson Employment and Labor Law Attorneys at (952) 941-4005 or (888) 343-3918.

ABOUT THE AUTHOR

Daniel K. Asiedu
Phone: (952) 746-2137
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