Small Businesses, Freelancers Oppose New Contracting Restrictions
Last month, NFIB Minnesota asked small business owners to participate in a short survey on our state’s system for determining which workers are employees or independent contractors.
The NFIB survey builds on a questionnaire created by the Minnesota Office of the Legislative Auditor (OLA) created to assess the extent of worker misclassification. NFIB MN submitted our findings to the OLA earlier this month.
The Survey Says…
Overwhelmingly, small business owners said they do not want new restrictions on hiring independent contractors.
Key findings from the survey include:
– Most NFIB MN members believe Minnesota already has an effective method for classifying workers, but it’s not always consistently enforced by the state.
– NFIB MN members DO NOT want a California-style ABC test for independent contractors, which presumes that all workers are employees unless very high thresholds are met.
– NFIB MN members believe the state could do more to consistently enforce independent contractor rules and crack down on bad actors who deliberately cheat the system.
– NFIB MN members believe state employees should be better trained on the classification system and more impartial in their dealings with small businesses, the state should provide classification guidance in plainspoken terms, and there should be clearer industry definitions.
– NFIB MN members mentioned a failure by the state to take action after they filed a report of improper worker classification.
NFIB MN received 53 survey responses from a wide range of perspectives:
– 53% were businesses that utilize independent contractors
– 21% are businesses that utilize independent contractors and act as an IC
– 8% are independent contractors
Of the businesses that utilize independent contractors:
– 59% utilize them regularly throughout the year
– 28% utilize them occasionally during the year
– 13% do not utilize them very often
The respondents who act as an independent contractor gave the following reasons for choosing that mode of work (respondents were allowed to make multiple selections):
– 80% said they want to be their own boss
– 73% said it provides them with greater flexibility
– 60% said it allows them to increase their earning potential
– 33% said it allows them to gain more experience than they would as an employee
– 20% said their work is only available as an independent contractor
Responding businesses represent a wide range of industries/occupations, with construction, retail/hospitality/service, and financial services/accounting being the most common.
The responses showing a high rate of satisfaction from independent contractors are consistent with other reports. A 2018 report from the United States Bureau of Labor Statistics found:
“Independent contractors overwhelmingly prefer their work arrangement (79 percent) to traditional jobs. Fewer than 1 in 10 independent contractors would prefer a traditional work arrangement.”
A 2021 survey of rideshare drivers in California came to the same conclusion: 84% prefer the flexibility of working as an independent contractor to a traditional employment arrangement.
What’s Behind Talk of Restricting Independent Contractors?
During the 2023 Legislative Session, lawmakers tasked the OLA with evaluating Minnesota’s ability to prevent worker misclassification. That is the practice of knowingly or unknowingly treating a worker as an independent contractor when they should be classified as an employee.
Discussion at the Legislature in recent years, often driven by labor organizations, has focused on employers who deliberately misclassify workers to avoid taxes, insurance, and other costs associated with employment.
The OLA is due to release its report in early 2024. Its evaluation is running parallel to a worker misclassification task force created by Minnesota Attorney General Keith Ellison, which is set to make initial recommendations in December 2023 and issue a final report in spring 2024.
You can read more about NFIB MN’s concerns with the task force, which includes only one independent contractor, here: Minnesota AG Ellison launches task force on “worker misclassification” – NFIB.