Minnesota’s 2025 Labor Law Update: What Workers and Employers Need to Know

As we move further into 2025, Minnesota continues to reshape the workplace landscape with new labor laws aimed at boosting financial security and clarifying worker classification—especially in construction. Two major developments stand out: the upcoming Minnesota Secure Choice Retirement Program and the revamped Independent Contractor Classification rules. While these changes are designed to provide long-term benefits, they also come with new responsibilities for employers. Whether you're running a small construction business or clocking in as a full-time employee, here's a plain-language look at what’s changing, why it matters, and how it might affect you. 

Minnesota Secure Choice Retirement Program

Helping workers save for the future—whether or not their employer offers a retirement plan.

What it is:
A state-facilitated retirement savings plan designed for private-sector employees who don’t currently have access to one through their employer.

Who it affects:
Employers with five or more employees, who have been in business at least one year, and do not offer a qualified retirement plan.

Major details:

• Automatic enrollment in a Roth IRA unless the employee opts for a Traditional IRA.
• Employer responsibilities: Must either enroll employees in the state program or certify an exemption if they already provide a qualified plan.
• Program launch: Originally set for January 1, 2025, but delayed to Q3–Q4 of 2025.
• Non-compliance penalties: Still pending, but employers could face fines for failure to register or comply once the program is live.

Benefits:

• Promotes retirement savings for under-covered workers.
• Reduces the burden on small businesses to create their own retirement plans.

Challenges:

• Adds administrative tasks for employers.
• Might require education and communication for workers unfamiliar with IRAs or retirement planning. 

New Independent Contractor Test for Construction Industry

A stricter standard to determine who’s truly self-employed.

What’s changing:

The test to classify someone as an independent contractor in construction has expanded from 9 to 14 specific factors.

Effective Date:
March 1, 2025

Applies to:
Construction workers offering commercial or residential building/improvement services.

Key updates in the 14-factor test:

• Must operate as a separate business from the hiring entity.
• Must own or lease tools, equipment, or office space used in the work.
• Must perform similar services for multiple clients or the public.
• Must provide proper tax documentation (W-9, 1099, tax returns).
• Must have required licenses, insurance, and contracts.
• Must be paid per-job or commission basis, not hourly or salaried.
• Contracts must outline services, compensation, and control of work.

Penalties for misclassification:

• Up to $10,000 per misclassified worker.
• Up to $10,000 per violation of classification laws.
• $1,000 fines per instance of obstructing investigations.
• Personal liability for owners or agents who knowingly break the rules.

Benefits:

• Protects workers from being misclassified and denied benefits.
• Promotes fair competition in the construction sector.

Challenges:

• High risk of penalties for employers unfamiliar with the new requirements.
• Could impact small contractors or gig workers who previously operated with less oversight. 

Why It Matters in 2025

These laws reflect Minnesota’s broader goal: to create a more secure and equitable work environment—especially for vulnerable workers in industries with little formal structure. With an aging population and a large portion of the workforce still without retirement benefits, the Secure Choice program addresses a real need. On the flip side, tightening the rules on contractor classification aims to close loopholes that sometimes left workers unprotected.

For Workers:

• You’ll have more access to retirement savings without needing your employer to create a plan from scratch.
• If you're in construction, you’ll be less likely to be misclassified, giving you better access to benefits and protections.

For Employers:

• These laws may introduce new compliance hurdles, especially for small or mid-sized businesses.
• But they also help standardize practices, which can reduce confusion and potential legal exposure in the long run.

Final Thoughts

As Minnesota steps into a new era of labor regulation, both employers and workers should take time to understand what’s required and how to prepare. From retirement security to fair classification, these updates offer both opportunity and responsibility. Staying informed and taking proactive steps now can help avoid headaches (and fines) down the line. 

Important Note to Consider

This content is intended for informational purposes only. Although we strive to present accurate and up-to-date information, we cannot guarantee that it is completely free from errors or omissions. We encourage users to verify any important details independently and not rely solely on the information provided here.