(CN) — A coalition of Minnesota builders is asking the Eighth Circuit Court of Appeals to strike down a state law that they say places excessive burdens on contractors and unfairly exposes them to steep financial and criminal penalties if subcontractors are not classified correctly.
The law, passed by the Legislature in 2024 and effective March 1, 2025, aims to prevent the misclassification of construction workers as independent contractors rather than employees — a practice that denies them higher wages, benefits, and workplace protections.
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However, trade associations representing both residential and commercial builders argue the statute goes too far. They contend it creates “impossible compliance standards” by requiring every contractor in the chain — from general contractors to sub-subcontractors — to meet a 14-factor test defining independent contractor status.
“If any one of the factors is missed at the time the services are provided, the statute is violated, and there are economic and criminal consequences set forth,” said attorney Thomas Revnew of Littler Mendelson, representing the contractor associations.
Revnew illustrated the stakes with a scenario:
“To give you an example, if a contract is not signed within 30 days of the work being conducted, all of the subcontractor’s employees become employees of the prime contractor. Then, all of the employees of the subcontractor are entitled to the wages and benefits that are offered by the general contractor.”
That would also require general contractors to pay into unemployment insurance, workers’ compensation, Social Security, and Medicare, effectively reshaping how construction firms operate in the state.
The Eighth Circuit panel pressed state officials on whether the statute should be viewed as civil or criminal in nature.
U.S. Circuit Judge Duane Benton, a George W. Bush appointee, noted that although the state describes the law as civil, it “feeds into other statutes that clearly have a criminal penalty.”
Assistant Minnesota Attorney General Janine Kimble countered that fines are administered through the Department of Labor and Industry, but Revnew maintained that violations amount to misdemeanors, which fall under criminal statutes.
The contractor associations claim the law is unconstitutionally vague and that its penalties — both civil fines and potential criminal exposure — violate the Eighth Amendment’s ban on excessive fines.
They are appealing a March 5 Minnesota federal court ruling that denied their request for a preliminary injunction blocking the law.
Minnesota Attorney General Keith Ellison, defending the statute, argues the associations lack standing because they cannot prove harm; the law only took effect this spring and no fines have yet been assessed. The state further argues the law is neither vague nor unconstitutional, and the lower court correctly found that the excessive fines claim is premature.
U.S. Circuit Judge L. Steven Grasz, appointed by Donald Trump, questioned whether the state was underestimating the law’s impact on contractors.
“Isn’t their argument that the statute criminalizes, in some cases, past practice of the entire industry?” Grasz asked. “That seems to me to be a pretty straightforward issue in establishing standing.”
Kimble acknowledged the law requires contractors to change long-standing practices, stating:
“I do think a fair reading is that the trade associations’ members may have to change their behavior.”
The three-judge panel — which also included U.S. Circuit Judge Jonathan Kobes, another Trump appointee — heard arguments Tuesday in St. Louis. A decision could set an important precedent for how states regulate worker classification in construction, a sector where disputes over independent contractor status are common nationwide.
Originally reported by Rox Laird in Court House News Service.
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