Minnesota Independent Contractors Exemption Certificate

Effective January 1, 2009, a new Minnesota law requires individuals working as independent contractors in the residential and commercial construction industry to obtain an Independent Contractor Exemption Certificate (ICEC). The purpose of the ICEC is to prevent Minnesota employers from misclassifying employees as independent contractors. Independent contractors do not receive the same benefits and protections that are available to employees.

Generally, independent contractors who are individuals and have incorporated or formed an LLC are exempt from the ICEC requirement. However, forming a business entity does not create an exemption from current factors that are used to distinguish between independent contractors and employees. If you are in the construction industry and would like the protections incorporating or forming an LLC can provide, including exemption from the ICEC requirement, click here.

Nine Factor Test

According to the Independent Contractor Exemption Certificate FAQ published by the Minnesota Department of Labor & Industry, individuals must meet all nine of these conditions to be considered an independent contractor:

Copy verbatim from Minnesota Department of Labor and Industry site:

1. Maintain a separate business with their own office, equipment, materials and other facilities.
2. Hold or have applied for a federal employer identification number (FEIN), or provide proof of filing of individual taxes for services provided the previous year.
3. Operate under contracts to perform specific services for specific amounts of money and under which they control the means of performing the services.
4. Incur the main expenses related to the services that the individual performs under contract.
5. Is responsible for the satisfactory completion of services and is liable for failure of completion.
6. Receive compensation for services under a contract on a commission or per-job competitive bid basis and not any other basis.
7. May realize a profit or suffer a loss under contracts to perform services.
8. Has continuing or recurring business liabilities or obligations.
9. The success or failure of the individual¿s business depends on the relationship of business receipts to expenditures.