ST. LOUIS, Mo. — A major legal challenge to Minnesota’s updated contractor classification rules has hit a roadblock, as the 8th U.S. Circuit Court of Appeals affirmed a lower court ruling that denied a preliminary injunction against the 2024 law.
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The trade groups — Associated Builders and Contractors (Minnesota Chapter), Builders Association of Minnesota, and J&M Consulting — had argued that the statute’s new 14-factor test for determining independent-contractor status in the construction sector is overly complex and unconstitutionally vague. They also challenged the law’s penalty structure under the Eighth Amendment’s Excessive Fines Clause.
But in an opinion filed Oct. 24, the appellate panel held that the organizations were unlikely to prove either claim, leaving the enforcement framework in place while litigation continues.
The updated statute expanded Minnesota’s former 9-part standard and added new rules governing contracts, invoicing, payment structure, expense responsibility, and the potential for profit or loss — all elements aimed at curbing worker misclassification.
Trade groups argued that several new requirements impose immediate operational burdens. Their complaint cited routine industry scenarios where written contracts aren’t executed within 30 days or subcontractors are paid without issuing invoices — actions that could trigger costly reclassification into full employee status.
“If those contracts are not signed within 30 days, then all of the subcontractors’ employees become employees of the prime contractor,” said Thomas Revnew, shareholder at Littler Mendelson P.C., who represented the plaintiffs. “In that instance… all of the employees for the subcontractor are entitled to the wages and the benefits that are offered by the general contractor.”
Revnew added that this shift also creates financial obligations for unemployment insurance, workers’ compensation, Social Security and Medicare contributions — “just because they didn’t have a contract signed within 30 days.”
The state countered that industry stakeholders knew exactly what was coming.
“Several of the words that they challenge as vague were in the statute last year, some of them have been in the statute since 1996,” said Minnesota Assistant Attorney General Janine Kimble, noting that trade groups even testified before lawmakers during the 2024 amendment process.
Kimble also emphasized timing: the complaint wasn’t filed until February 2025 — nearly nine months after passage — undermining claims of urgent or irreparable harm. “That is a substantial delay,” she argued.
Writing for the panel, Judge Duane Benton stated that the act’s terminology is clear enough that “people of ordinary intelligence have a reasonable opportunity to understand the meaning of these words and phrases.” Any confusion, Benton wrote, doesn’t “doom” the law.
On the excessive fines claim, the judges noted that no penalties have yet been issued, making it impossible to measure proportionality. “Without either an offense or penalty to compare, this court cannot conduct a proportionality test,” Benton wrote.
While the decision doesn’t end the lawsuit, it signals an uphill battle for the plaintiffs — and confirms that Minnesota’s enforcement efforts can move forward.
The ruling also sends a message across the construction industry: states have growing authority to demand clearer proof that workers operate as legitimate independent businesses, not labor-cost loopholes.
Compliance experts say contractors should now invest in written agreements, entity-based invoicing, and clear expense allocation to avoid penalties up to:
• $10,000 per misclassification
• $1,000 per violation for non-cooperation
The broader case continues, but for now, Minnesota’s stricter rules remain fully intact.
Originally reported by Laura Brown in Finance - Commerce
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