Workers and labor rights activists with Centro de Trabajadores Unidos en Lucha (CTUL) march through downtown Minneapolis to draw attention to wage theft in construction and call on developers to agree to independent monitoring on Aug. 17, 2022. Photo by Max Nesterak/Minnesota Reformer.
Take a seat in the Break Room, our weekly round-up of labor news in Minnesota and beyond. This week: Nearly 1 in 10 Minnesota workers may be misclassified; Midwest Teamsters endorse Kamala Harris; lawsuit challenging captive audience meeting ban proceeds; and state posts highest job growth in over two years.
Nearly 1 in 10 private-sector workers may be misclassified in Minnesota
Approximately 316,000 private-sector workers in Minnesota — or 9.4% of workers — may be misclassified as independent contractors and robbed of critical employment protections like overtime pay, unemployment insurance and workers’ compensation insurance, according to a new analysis by the left-leaning think tank North Star Policy Action.
Based on that analysis, the group estimates workers lost between $2.9 billion and $6.2 billion in 2019 because of payroll fraud, while state government lost between $506 million and $1.3 billion in tax revenue.
“This is an important form of fraud that’s taking place in the state that probably deserves more attention than it currently gets,” North Star Policy Action researcher Aaron Rosenthal told the Attorney General’s task force on misclassification on Friday. “10,073 cars were stolen in Minnesota in 2017 compared to 316,000 people who experienced wage theft.”
Misclassification is poorly policed, according to a recent report by the state Office of the Legislative Auditor, but the extent to which employers commit payroll fraud is hard to measure.
Federal and state agencies use different criteria to determine if workers are independent contractors. Government agencies also don’t widely collect data on those factors, like how much control workers have over their time and the permanence of the worker-employer relationship.
Rosenthal said the estimate is surely an undercount. North Star Policy Action compared Census Bureau data on the number of workers who paid self-employment taxes with data from the Bureau of Economic Analysis data on wage and salary employees. That shows the number of workers who have been classified as self-employed by BEA but didn’t file self-employment taxes. But it misses workers who were paid off the books, as well as those who paid self-employment taxes but may be misclassified, like certain gig workers.
The Office of the Legislative Auditor reviewed records from the Department of Employment and Economic Development’s 2018 random audit of the unemployment insurance program and found 4% of workers were misclassified, although they cautioned the results could not be generalized across the whole economy. The office recommended that state agencies calculate misclassification on an on-going basis.
Economist Kevin Rinz, who was not involved in the analysis, agreed that better data is needed, but said the report sends an important signal about the prevalence of payroll fraud.
“The fact that a reasonable use of what data do exist could suggest that more than 9% of workers are misclassified highlights the importance of collecting the kind of data that would help us understand this issue more clearly,” said Rinz, a senior fellow at the Washington Center for Equitable Growth and an author of the Briefing Book newsletter.
Midwest Teamsters back Harris
Within hours of the International Brotherhood of Teamsters announcing it would not make an endorsement in the presidential election, local and regional Teamsters leaders representing hundreds of thousands of members threw their weight behind Vice President Kamala Harris and Gov. Tim Walz.
Teamsters President Sean O’Brien explained the decision not to endorse in a statement saying neither Donald Trump nor Harris “was able to make serious commitments to our union to ensure the interests of working people are always put before Big Business.”
That ambivalence was answered by full-throated endorsements from nearly a dozen Teamsters locals and joint councils, including Teamsters Joint Council 32, which represents more than 85,000 workers across Minnesota, Wisconsin, Iowa and the Dakotas.
“Walz is our guy,” said Hanna Alstead, political director for Teamsters Joint Council 32, in an interview. “He’s done nothing but support the Teamsters in Minnesota … He’s always been there for us, and this was a no brainer.”
The international’s non-endorsement also elicited sharp rebukes from within the union. Former Teamsters President Jim Hoffa released a statement calling it a “critical error” and “failure of leadership” by O’Brien. The non-endorsement is the latest public episode of political discord in the diverse 1.3 million-member union that represents workers ranging from truck drivers to zookeepers to public defenders.
Democrats have been staunch allies of organized labor, with President Biden calling himself the most pro-labor president in U.S. history. He signed a bill bailing out the Teamsters pension fund to the tune of $36 billion, preventing benefit cuts for about 350,000 Teamster retirees.
Harris and Democrats voted in support of the PRO Act, which would make it easier for workers to unionize and win a labor agreement, while Republicans have blocked its passage. And Biden appointed members to the National Labor Relations Board who have adopted policies making it easier for the Teamsters to unionize Amazon truck drivers.
But most rank-and-file Teamsters support Trump over Harris, according to two internal polls the union released this week ahead of the non-endorsement. The latest poll, conducted by an independent firm, showed 58% of Teamsters surveyed supported a Trump endorsement compared to just 31% for Harris.
O’Brien has attempted to reconcile his members’ support for a candidate hostile to unions with striking overtures to Trump. He was the first Teamsters president to speak at the Republican National Convention earlier this year, but that only seemed to inflame tensions. He received some praise for trying to forge new alliances with Republicans but also harsh criticism from those who argued he was allowing himself and the union to be exploited by Trump seeking working-class credibility.
The latter camp felt vindicated when Trump later praised firing striking workers, which is illegal, in a conversation with billionaire Elon Musk, even as Harris and Biden have both walked picket lines with striking workers. O’Brien responded by saying firing striking workers is “economic terrorism.”
Alstead, the Teamsters Joint Council 32 political director, declined to pass judgment on the general council’s decision not to endorse, while noting O’Brien made clear to local leaders they have the autonomy to make their own endorsement decisions.
“Our jobs are to serve our members’ best interests, and that’s what our executive board is doing by endorsing Harris-Walz,” she said.
Lawsuit challenging captive audience meeting ban allowed to proceed
A lawsuit challenging the constitutionality of Minnesota’s ban on captive audience meetings will proceed after a federal judge denied state leaders’ motion to dismiss the lawsuit for lack of jurisdiction on Monday.
In 2023, Minnesota became one of the first states to ban employers from forcing workers to attend anti-union presentations or other meetings promoting the employers’ religious or political views. The move was celebrated by unions who have long railed against the practice, arguing the meetings are a common union-busting tactic that violate workers’ rights to organize free from coercion.
More than half a dozen other states have enacted similar bans, including New York, Washington and Illinois, while the National Labor Relations Board general counsel issued a memo in 2022 arguing for the practice to be banned nationwide under the National Labor Relations Act.
Business groups say the ban is unconstitutional because it violates their right to free speech and equal protection.
The Minnesota Chapter of Associated Builders and Contractors, the National Federation of Independent Business and Laketown Electric Corporation filed a lawsuit in federal court earlier this year against Minnesota Attorney General Keith Ellison and Department of Labor and Industry Commissioner Nicole Blissenbach.
Gov. Tim Walz was later added as a defendant after he told a group of construction union leaders that employers “go to jail now” for captive audience meetings. (No business owner can actually be imprisoned for making employees sit through an anti-union presentation, although workers are now empowered to sue their employers for damages and attorney’s fees.)
Adam Hanson, president of the Minnesota Chapter of Associated Builders and Contractors, said he was pleased with the decision. A spokesman for Attorney General Keith Ellison said his office was reviewing the decision and considering its options.
Minnesota wages rise far faster than inflation
Wages have risen twice as fast as inflation over the past year, with the average private sector hourly wage increasing 5.9% to $37.74 in Minnesota, according to data from the the Department of Employment and Economic Development. Inflation, as measured by the Consumer Price Index, rose just 2.5% over that time.
The Federal Reserve wrestling down inflation with sustained higher interest rates has allowed workers’ wages to finally catch up from the two years of high inflation beginning in 2021. Wages in August were 15.3% higher than three years ago, while prices rose 15.1% over that time, according to DEED.
DEED also reported on Thursday the strongest month for job growth in over two years, with the state’s economy adding 14,400 jobs in August. The hospitality, education and professional services industries saw the largest growth, while the number of jobs in construction, manufacturing, logging and mining decreased. Overall, the state’s economy has added jobs in nine of the past 12 months.
The Federal Reserve announced a half a percentage point interest rate cut this week to drive more economic growth and head off any weakening in the labor market. Weaker-than-expected job growth in July and rising unemployment fueled fears that the economy could tip toward a recession and increased pressure on the Fed to ease borrowing costs. DEED reported unemployment ticked up a hair to 3.3% in August, but noted it remains nearly a percentage point lower than the national average.
DEED Commissioner Matt Varilek said on a call with reporters that while the jobs report contained many positive signals, they remain focused on expanding the labor force: “Our labor force does need to grow in order to power more hiring and thus more economic growth.”