The City of Minneapolis determined that many freelance workers (independent contractors) need legal and economic protections since they are not covered by employment laws. The City, therefore, enacted the Minneapolis Freelance Worker Protections Ordinance (the “Ordinance”). This Ordinance, effective January 1, 2021, requires companies to enter into written agreements with most freelance workers.
The Ordinance contains provisions applicable to a commercial hiring party, and other requirements applicable to an individual hiring party.
Commercial Hiring Party
A commercial hiring party means any person or entity regularly engaged in business or commercial activity, including a digital network-based entity, who retains a freelance worker to provide any service as part of that business or commercial activity. A commercial hiring party that retains freelance workers to perform work in the City of Minneapolis must have a written contract with each worker if the worker will perform a minimum of:
- $600 worth of work within a one year period; or
- $200 of work within one week.
The Ordinance applies to a commercial hiring party that retains a freelance worker not only when the worker provides services directly to that company. It also applies to a freelance worker who provides services through a digital network to a third party. “Retains” means to enter into a contract through which the freelance worker provides services either to the hiring party or to a third party (such as a digital platform). For example, if food is delivered in the City of Minneapolis via a digital network, the digital network must have a written agreement with the driver.
The written agreement must be signed by the freelance worker and contain the following minimum elements:
- The name and address of the hiring party and the worker;
- An itemization of all material services to be provided by the worker;
- The compensation for the services, including the rate or rates and method of compensation; and
- The date on which the hiring party must pay the agreed-upon compensation or the mechanism by which the date will be determined.
Where the parties are not able to specify the total compensation prior to performance, the written contract must describe the method by which the total compensation will be determined and identify which party is responsible for maintaining the information necessary to determine the compensation (such as tracking the number of hours worked, the applicable project or other method by which the freelance worker is paid).
If the commercial hiring party is responsible for tracking the information necessary to determine the compensation, the commercial hiring party must 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.
When the independent contractor/freelance worker is responsible for keeping track of this information, they must provide the commercial hiring party with an invoice stating the total compensation amount and a detailed calculation by which the amount was determined.
If the contract does not specify the date or mechanism for when payment becomes due, payment must be made no later than 30 days after the completion of services.
Individual Hiring Party
Individual hiring party means any person who retains a freelance worker to provide any service in the City of Minneapolis when the person is acting in a personal capacity and not as part of or on behalf of a business or commercial activity. These provisions could apply to painters, handymen, cleaning persons, nannies, groundskeepers, and other freelancers who perform services for an individual. The Ordinance applies if the compensation is $600 or more, either by itself or when aggregated with all contracts for services between the same individual hiring party and freelance worker during the calendar year, for work performed in the City of Minneapolis.
Individual hiring parties and freelance workers performing services in the City of Minneapolis are required to have a written contract only if the freelance worker requests a written contract. The freelance worker must present a proposed written contract to the individual hiring party before the work begins. The written contract should include the same information described above for a commercial hiring party and both parties must sign the contract.
The Ordinance does not obligate an individual hiring party to retain the services of a freelance worker who has proposed a written contract, nor does it require either party to enter into a contract if the parties are unable to agree upon the terms.
The Minneapolis Department of Civil Rights investigates and enforces the Ordinance. It is a violation of the Ordinance for a hiring party to fail or refuse to pay the agreed-upon compensation or require the freelance worker to accept as a condition of timely payment less compensation after the work has commenced. If a hiring party is found to have violated the Ordinance, a freelance worker may be able to recover compensatory damages in the amount of the unpaid sum and liquidated damages up to double the compensatory damage award. There are also additional civil fines, fines for repeat violations and the City’s Department of Civil Rights can seek reimbursement for investigation costs.
If a commercial hiring party fails to create a written contract, it is subject to a fine of up to $250 for each violation, if the freelance worker can establish they requested a written contract and made the hiring party aware of the requirement that the contract be in writing.
A freelance worker who passes only incidentally through the City in the performance of the contract is not covered by this Ordinance.
No Effect on Contract Validity
The Ordinance provides that it is a defense to any alleged violation under the Ordinance that the freelance worker has not completed the services contracted for, unless the failure to complete such services was caused by the hiring party’s failure to cooperate in good faith with the freelance worker. The hiring party cannot withhold timely payments for completed services because of a dispute over whether other services had been completed.
The Ordinance makes clear that the existence of a written contract that complies with the Ordinance is not be construed as evidence that an individual is properly classified as an independent contractor.
Any commercial hiring party which uses an independent contractor to perform any services in the City of Minneapolis should review their written contract to ensure that it contains the above-described elements. If no contract exists, the company should immediately prepare such a contract.
If you have any questions as to whether this Ordinance applies to a particular freelance worker or any other questions concerning the requirements of this new Ordinance, you can contact a Larkin Hoffman labor and employment law attorney.