Labor committee advances bill to measure worker misclassification, sends SF2360 to Taxes

The Minnesota Senate Labor Committee on March 27 approved an author’s amendment and recommended Senate File 2360, a bill that would direct state agencies to measure the prevalence and fiscal impact of worker misclassification and to report on it on a recurring basis.

The bill’s sponsor described misclassification fraud as the illegal treatment of employees as independent contractors. “Misclassification fraud is when an employer illegally treats a worker as an independent contractor, when they should be an employee,” the sponsor said, adding that employees misclassified in that way lose minimum wage, overtime, unemployment insurance, workers’ compensation and other protections.

The measure would require a biannual report estimating the number of workers affected, the fiscal cost to workers and taxpayers, and prevalence by industry. The sponsor said the bill would allow the Department of Labor and Industry to contract with external experts to carry out the study and develop the report. “Just being able to have the experts at the table who can help us get the numbers that we’re trying to get, is the reason why there’s the bill explicitly allows the Department of Labor and Industry to contract with those folks,” the sponsor said.

The sponsor referenced prior work by an attorney general’s task force and Office of the Legislative Auditor (OLA) findings: the sponsor noted a 2007 OLA estimate that cited misclassification and referenced a 2024 audit showing the problem was growing. The bill includes a placeholder appropriation and a fiscal note was submitted, the sponsor said.

Sen. Dornick and other senators asked about the third-party contract and whether the study could distinguish inadvertent misclassification from deliberate fraud. The sponsor said state agencies already conduct outreach and education for small businesses and expressed openness to continued conversation on separating mistakes from intentional misclassification in enforcement or penalties, but the bill’s core requirement is to measure and report the problem.

After adopting the author’s amendment A1, the committee approved a motion recommending passage of SF2360 as amended and referred the bill to the Taxes Committee.

Votes at a glance

- Adopt A1 (author's) amendment to SF2360 — mover: sponsor (recorded in transcript as the presenter); outcome: approved (voice vote). - Recommend passage of SF2360 as amended and refer to Taxes Committee — mover: sponsor; outcome: approved (voice vote).

Background and next steps

Supporters said the bill implements recommendations of the attorney general’s task force on misclassification and responds to audits that found the problem sizable and growing; it is designed to produce a recurring, data-driven estimate of prevalence and fiscal impact so agencies and lawmakers can consider enforcement and policy responses. The bill moves next to the Taxes Committee for further consideration.