Labor & Employment Law Daily Wrap Up, STATE-LAW CLAIMS—D. Minn.: Trade association denied TRO in challenge to Minnesota’s new independent contractor test, (Mar 7, 2025)

By Ronald Miller, J.D.

The statute, taken as a whole, sufficiently specifies how to classify independent contractors under the amended 14-part test.

Trade associations representing building and construction contractors in Minnesota were denied a temporary restraining order against enforcement of Minnesota Statute § 181.723. The statute replaced a former nine-part test for classifying construction workers as independent contractors with a new 14-part test. A federal district court in Minnesota concluded that the trade associations failed to show a likelihood of success on any of their claims that the statute is unconstitutionally vague, violates the Excessive Fines Clause of the U.S. Constitution, is preempted by the NLRA, or violates procedural due process. Further, the court ruled that the plaintiffs failed to show that their members will suffer irreparable harm (Minnesota Chapter of Associated Builders and Contractors, Inc. v. Blissenbach, No. 25-550 (JRT/JFD) (D. Minn. Mar. 5, 2025)).

The plaintiffs in this action are trade associations representing the interest of construction-related firms in Minnesota, plus a firm providing commercial construction services.

Independent contractor test. Minnesota Statutes § 181.723, subd. 4 governs whether construction workers can be classified as independent contractors. In May 2024, the Minnesota Legislature amended § 181.723, subd. 4 to change the nine-part test for classifying independent contractors to a fourteen-part test. In addition to the change in the classification test, civil penalties were added.

Under the former and current version of the statute, the Department of Labor and Industry (DLI) and the Attorney General have enforcement authority. There also is a private right of action, through which a misclassified individual may seek compensatory damages.

The trade associations filed their complaint on February 25, 2025, alleging that the statute is unconstitutionally vague both facially and as applied, violates the Excessive Fines Clause of the U.S. Constitution, is preempted by the National Labor Relations Act, and violates procedural due process. They moved for a temporary restraining order and a preliminary injunction.

Likelihood of success on the merits. As an initial matter, the court observed that its most important duty in a preliminary injunction analysis is to decide whether the plaintiff is likely to succeed on the merits. When a party seeks to enjoin a duly enacted state statute, the court must “make a threshold finding that a party is likely to prevail on the merits.”

Civil penalties. Before evaluating the plaintiffs’ likelihood of success, the court first had to address a separate threshold issue: whether the statute can be considered criminal in nature. Several of plaintiffs’ likelihood-of-success arguments were dependent on this question. The statute itself only contemplates civil fines, but the parties acknowledge that there is some possibility of criminal prosecution from violations of the statute.

The court first evaluated whether the legislature expressly or impliedly considered the statute’s penalties to be civil or criminal. Here, the legislature provided only for monetary civil penalties imposed by the DLI that are appealable through administrative proceedings. Nothing on the face of the statute suggests that it was meant to impose anything besides civil penalties. Because the statute clearly labels the penalties as civil the court will evaluate the statute as only imposing civil penalties.

Unconstitutionally vague. The trade associations first alleged that the statute is unconstitutional facially and as applied because it fails to define material terms and allows for arbitrary and inconsistent enforcement. The court construed their challenge as a facial challenge. To determine if a statute is unconstitutionally vague, courts must consider whether the statute provides adequate notice of the prohibited conduct and whether it lends itself to arbitrary enforcement.

The statute taken as a whole sufficiently specifies how to classify independent contractors under the amended fourteen-part test.

First, the court found it difficult understand how the plaintiffs can argue that they have no understanding of what “main expenses and costs” are. At issue is only the addition of “costs.” “Main expenses” was in the prior nine-part classification test and Minnesota appellate courts determined that the scope of main expenses comes directly from the contract.

Further, the plaintiffs pointed to perceived ambiguities to support their argument that the statute will be arbitrarily enforced. But the alleged vagueness is the “flexibility and reasonable breadth” that is constitutionally acceptable. Moreover, any penalties are subject to an extensive administrative appeals process that prevents arbitrary enforcement by curbing DLI’s discretionary power.

Because the plaintiffs did not establish that the statute fails to provide adequate notice or will be arbitrarily enforced, they failed to show a likelihood of success based on vagueness.

Excessive fines. Next the trade associations alleged that the statute imposed unconstitutionally excessive fines in violation of the Eighth Amendment. Under the Excessive Fines Clause, the Eighth Amendment prohibits fines that are “grossly disproportional” to the gravity of the offense.

Here, the court determined that the plaintiffs’ Excessive Fines claim is unlikely to be successful because the statute imposes only civil penalties, no fines have been imposed, and the fact that the fines are discretionary and specifically tailored to the violation render any general Excessive Fines challenges difficult to substantiate. Finally, a fine is only excessive if it is “grossly disproportional” to the prohibited conduct. Section 14.045 requires the fine imposed to be directly proportional to the conduct.

Garmonpreemption. The trade associations also alleged that the statute was preempted by the NLRA under Garmon and Machinists. Garmon preemption would preempt state laws that conflict and those that “arguably conflict” with the NLRA. Here, the court failed to see how the fact that the NLRA imposes reporting requirements on employers with respect to collective bargaining has any bearing on the classification of construction workers as independent contractors arguably preempts the statute’s reporting requirement. Accordingly, the plaintiffs failed to show a likelihood of success under Garmon preemption.

Machinistspreemption. Machinists preemption preempts state laws that regulate areas that Congress intended to leave open to the “free play of economic forces.” The trade associations argued that because the NLRA excluded independent contractors from the collective bargaining requirements, Congress intended to leave regulation of independent contractors to economic forces. But the classification of independent contractors was never left to market forces, observed the court. Instead, the NLRA, in excluding independent contractors, also established a method for classifying them. Because Congress did not leave the classification of independent contractors to market forces, the plaintiffs failed to demonstrate a likelihood of success under Machinists preemption as well.

Procedural due process. Finally, the trade associations alleged that the statute violates procedural due process because it deprives the members of protected interests in avoiding imprisonment, in avoiding adverse state action, and in property (money) without due process. However, the court determined that the claim amounted to nothing more than conclusory allegations.

The case is No. 25-550 (JRT/JFD).

Judge: Tunheim, J.

Attorneys: Kurt J. Erickson (Littler Mendelson) for Minnesota Chapter of Associated Builders and Contractors, Inc., Builders Association of Minnesota, and J&M Consulting, LLC. Janine Wetzel Kimble, Minnesota Attorney General’s Office for Nicole Blissenbach and Keith Ellison.

Companies: Minnesota Chapter of Associated Builders and Contractors, Inc.; Builders Association of Minnesota; J&M Consulting, LLC

Cases: StateLawClaims EmployeeStatus Labor WageHour CoverageLiability MinnesotaNews