The Minneapolis Freelance Worker Protections Ordinance
The City of Minneapolis has enacted the Minneapolis Freelance Worker Protections Ordinance (“MFWPO” or “Ordinance”) to protect freelance workers and to “eliminate and prevent theft of freelance workers’ earned income.” The Ordinance amends existing wage theft protections for employees and will be codified at Title 2, Chapter 40, Article VI of the Minneapolis Code of Ordinances. The Ordinance does not become effective until January 1, 2021.
The MFWPO defines “freelance worker” as “any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is retained as an independent contractor by a hiring party to provide services in exchange for compensation.” The definition does not include any person who is a sales representative as defined in Minn. Stat. Section 325E.37; any person who is a commissioned salesperson as defined in Minn. Stat. Section 181.145, Subd. 1; any person authorized to practice law; or any person who is a licensed medical professional.
The Ordinance applies whenever a “commercial hiring party” retains the services of a freelance worker to perform services within the City of Minneapolis and the agreed-upon consideration is expected to be $600 or more over the course of a year or $200 over the course of seven consecutive days. “Commercial hiring party” essentially means a person or entity engaged in a business or commercial activity. (Less stringent protections also apply to individuals who are not businesses and choose to sign a written contract with a freelancer to provide services.)
Requirements for a Written Contract
Pursuant to the Ordinance, any business engaging an independent contractor to work in Minneapolis “shall reduce the contract to writing and obtain the freelance worker’s signature or written assent” and provide the freelance worker with a copy of the contract. The written contract must include 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; and
(4) the date on which the business must pay the compensation or the mechanism by which the date will be determined.
If the business is responsible for tracking the information necessary to determine the total compensation, the business shall provide the freelance worker with an earnings statement setting forth the total compensation being paid and a detailed calculation by which the amount was determined.
Penalties for Non-Compliance
If the contract does not specify the date for payment of compensation payment shall be made no later than 30 days after the completion of services. It is a violation of the Ordinance for a business to fail or refuse to pay at least the agreed-upon compensation within the agreed-upon time or within 30 days of completion if no deadline for payment is otherwise established. Violation of the Ordinance can result in an award of compensatory damages (the amount owed but unpaid) along with liquidated damages in the amount of double the compensatory damages. A second or subsequent violation may also result in a civil fine of up to $1,000 for each violation. The Ordinance is to be enforced by the Minneapolis Office of Civil Rights. The Ordinance also provides protections against retaliation and prohibits a hiring party from demanding that a freelancer accept less compensation than agreed upon once work has started.
No Impact on Legal Classification of Workers
The Ordinance does not affect the underlying legal question of whether any particular freelance worker is properly classified as an independent contractor and the existence of a written contract pursuant to the ordinance shall not be construed as evidence that the individual is an employee or independent contractor for the purposes of any other law.
Context of the New Ordinance
The MFWPO reflects a number of intersecting trends in Minnesota and across the country. These trends include cities and local governments taking a more activist role in regulating issues related to employment such as paid sick leave, minimum wage and other issues; a perceived concern about “wage theft”; and increased attention to the need for protection of independent contractors, freelance workers and participants in the gig economy. In passing the Ordinance, the City Council noted that 35% of Americans now derived some share of their income from freelance work and that Minneapolis is the 13th largest freelance market in the country.
Take-Aways for Companies Doing Business in Minneapolis
Any business hiring independent contractors to perform services in Minneapolis should have a signed written contract in place with that service provider that is compliant with the Ordinance. The penalty for non-payment under the City’s ordinance is more severe than potential penalties under existing state law so companies should be mindful of this when considering whether to refuse to pay an independent contractor for any reason.
Contracts with outside vendors are sometimes run through a purchasing or operations department, not Human Resources. In light of current trends, however, larger enterprises may want to consider more involvement by Human Resources and payroll departments to help keep track of all freelance workers (not just “employees”) and expected dates of payment. Finally, businesses should always be careful to make sure that contractors are properly classified or whether they should be treated instead as employees.
If you have questions about hiring an independent contractor; require a written independent contractor agreement, or are involved in a payment dispute with an independent contractor, contact one of the business and employment law attorneys at Trepanier MacGillis Battina P.A.
About the Author: Trepanier MacGillis Battina P.A. is a Minnesota business law firm located in Minneapolis, Minnesota. Their business law attorneys can be reached at 612.455.0500.