Almost every operator we talk to has at least one person on the roster who is paid by invoice. The delivery driver. The weekend trimmer. The person who runs the socials. The logic is always the same, and it is always reasonable: they set their own hours, it is a few hours a week, and everyone agreed to it.
Agreement is not the test. It never was. And in Minnesota the cost of getting it wrong is now high enough that it deserves an hour of your attention this week.
What the state can actually charge you
Minnesota Statutes § 181.722 and § 181.723 govern how workers get classified and what happens when they are classified wrong. The Department of Labor and Industry can assess:
Up to $10,000 for each violation of the statute's prohibited activities
Up to $10,000 for each employee who was misclassified
$1,000 per day for obstructing a DLI investigation
Read that second line again. It is per worker, not per audit. Four drivers on 1099s is not one problem. It is four.
DLI can also demand the records you are required to retain, assess the penalties directly, and pursue compensatory damages on behalf of the workers themselves. That last piece matters, because compensatory damages are where back overtime, unpaid employer-side payroll taxes, and unreimbursed expenses land.
The part that surprises owners
Personal liability. Owners, officers, and agents can be held individually liable when they knew — or could have known with the exercise of reasonable diligence — that workers were misclassified.
"Reasonable diligence" is a low bar to clear in the state's favor. It does not require anyone to prove you intended to cut corners. It asks whether a person running your business, paying attention, would have caught it. If your bookkeeper flagged it once and nothing changed, that question answers itself.
Which test applies to you
There is a common misreading worth clearing up. Minnesota adopted a strict multi-factor independent contractor test in § 181.723, subdivision 4, and it took effect for building construction and improvement services performed on or after March 1, 2025. It is demanding: a written contract signed and dated by both sides, compensation on a commission or per-job or competitive-bid basis, the contractor owning or renting their own equipment, serving multiple customers, and carrying responsibility for completing the work.
That specific test is construction-specific. If you run a dispensary or a cultivation site, it does not automatically govern you — but do not exhale yet. The prohibited activities and penalties in § 181.722 apply broadly, and the multi-factor tests that do govern your industry ask most of the same questions. The construction test is best read as a preview of how the state thinks about this now.
Where cannabis operators are most exposed
Three roles account for most of what we see:
Delivery. A driver in your branded vehicle, on your schedule, following your route, carrying your product, with no other customers. That is an employee in nearly every framework anyone has written.
Harvest and trim crews. Seasonal does not mean contract. Short duration is not one of the factors.
The "consultant" who became staff. Someone started on a real project engagement two years ago and now attends your Monday meeting. The paperwork never caught up to the reality.
What to do before anyone asks
Pull your vendor list and highlight every human being on it. For each one, answer honestly: who controls how the work gets done, who supplies the tools, could this person work for your competitor next week, and is there a signed written agreement that matches what actually happens day to day.
Where the answers point to employee, fix it going forward first — reclassification is far cheaper as a decision you made than as a finding someone handed you. Then get advice on the look-back period, because there usually is one.
This is exactly the kind of question our clients bring us before it becomes expensive. If you want a second set of eyes on your roster, that conversation is free and it takes about twenty minutes.
Roll With Paid. is not a law firm and does not provide legal or tax advice. Penalty amounts and statutory tests change; confirm current requirements with the Minnesota Department of Labor and Industry or your counsel before acting.
