ST. PAUL — The Minnesota House will vote on a bill to establish a centralized electronic payroll reporting portal and database for contractors working on state-funded projects.
While electronic payroll reporting is already required in Minnesota for projects fully or partially funded by tax dollars, the bill by Rep. Dave Pinto, DFL-St. Paul, aims to improve reporting efficiency by consolidating different payroll reporting systems into a single one overseen by the state.
The bill’s proposed portal, accessible via the Internet, would provide contractors and subcontractors a place to submit payroll reports, which would be stored in a database for public or state use.
“This bill does not create any new reporting mandate,” said coauthor Rep. Cedrick Frazier, DFL-New Hope, during a May 5 meeting of the House Ways and Means Committee. “What this bill does is modernize the process.”
The portal and database are meant for projects owned by the state and the Metropolitan Council, but local governments would also have the opportunity to opt into the system for projects that are not funded by the state.
Illinois, New Jersey and New York have adopted similar legislation.
Currently, project owners such as school districts, local governments and state agencies are responsible for managing payroll reports submitted while a project is underway and for years after its completion, Frazier said. They must also respond to data requests for those reports.
Pinto’s legislation would eliminate those administrative burdens and add consistency and compliance across each jurisdiction, according to Frazier. More importantly, it would strengthen oversight, he said.
“Certified payroll reporting is one of the most effective tools we have to protect public dollars by preventing wage theft, worker misclassification, tax fraud and insurance fraud on publicly funded projects,” Frazier said.
A study conducted by the Midwest Economic Policy Institute in 2021 found construction contractors in the Upper Midwest to be significant perpetrators of wage theft. In Minnesota’s construction industry, $136 million in income taxes, unemployment insurance and workers’ compensation premiums is lost annually to wage theft, according to the study.
Roughly 30,100 construction workers in the state, or 23% of the workforce, are misclassified or paid off the books, the study said. Misclassified workers earn 36% less in wages and benefits, restricting their access to minimum wage, overtime pay and unemployment and workers’ compensation insurance.
A report from the Hennepin and Ramsey County Attorneys’ offices found that, in those two counties alone, 4,872 construction workers were victims of wage theft in 2022. The report estimated that more than $3 million is stolen from workers every year.
In 2027, the bill would allocate almost $2 million from the state’s general fund to create and maintain the electronic portal and database. Ongoing maintenance would cost the state about $1.4 million per year, according to the bill.
Rep. Jim Nash, R-Waconia, acknowledged that discussions with agencies like the Associated General Contractors of Minnesota and the Associated Builders and Contractors Minnesota chapter were still needed to nail down how the legislation will actually work.
“We are 98% of the way there,” Frazier said about the progress of the bill.
“Sometimes the last 2% is the percent that matters the most,” Nash responded.
Report for Minnesota is a project of the University of Minnesota’s Hubbard School of Journalism and Mass Communication to support local news across the state.
