Minnesota wage-theft law starts, critics warn of unintended consequences | Finance & Commerce

A new state law that holds contractors and developers responsible for subcontractor wage violations on their jobsites goes into effect Tuesday.

The Construction Worker Wage Protection Act, part of the omnibus jobs and labor bill that was signed into law during the 2023 legislative session, “gives workers hope in collecting their unpaid wages for the work that has already been performed,” according to the North Central States Regional Council of Carpenters.

The carpenters union, which lobbied for the law, said it will enable construction workers who are victims of wage theft to collect unpaid wages from contractors and developers “who will be responsible for the wages owed employees by the subcontractors they choose to perform the work.”

Illinois is the only other Midwestern state with a similar law, according to the carpenters.

Minnesota's new requirements come four years after the state passed one of the nation's toughest wage-theft laws. Even so, recent studies show that wage theft continues to be “widespread,” the carpenters say

“The numbers of victimized workers being exploited for profit must not be tolerated,” Adam Duininck, director of government relations for the carpenters' union, said in a statement. “Contractors and developers who continue to exploit construction workers by hiring unethical subcontractors for the purpose of evading taxes and increasing their profits are going to be subject to enforcement by the Minnesota Department of Labor and Industry. There will be consequences, and we believe that this liability will send a clear message to contractors and project owners that they are going to be held accountable for their worksites.”

Though labor unions hail the measure as a big win for workers, critics say it will have unintended consequences for general contractors and emerging subcontractors trying to get a foothold in the industry, as Finance & Commerce previously reported.

Tim Worke, CEO of the Associated General Contractors of Minnesota, told Finance & Commerce in May that the law will require general contractors, rather than the state, to police the industry. Worke also said it will place additional burdens on small subcontractors.

“The general contractor, in practicality, is going to require its subs to produce payment bonds or other secured interest tools so that their risk is protected,” which will be burdensome for small subcontractors, Worke said.

Two years ago, workers filed a wage-theft-related class action lawsuit against a local framing contractor. The lawsuit alleges that the contractor failed to pay overtime wages to workers who put in 50 to 60 hours a week while working for the defendant on a large apartment project in the Twin Cities.

In the past 3½ years, the Twin Cities has seen at least nine cases where “construction labor brokers have been charged criminally for labor trafficking, sexual assault, wage theft, theft by swindle, and more,” Merle Payne, co-director of the Centro de Trabajadores Unidos en la Lucha (CTUL), a Minneapolis-based worker advocacy group, said in a recent interview.

Speaking in general terms, Payne said labor brokers often misclassify workers as independent contractors or pay them in cash in order to avoid paying workers' compensation.

RELATED:

Framing contractor charged with insurance fraud

New wage violation rules head to Walz