New “Responsible Contractor” Requirements in Minnesota

Earlier this year, Governor Mark Dayton signed a controversial new bill into law which is known as the “Responsible Contractor” law. The Responsible Contractor law, which purports to “enhance accountability and transparency” in the procurement of public construction contracts, will impose onerous certification requirements upon contractors who bid on those contracts.  

As of January 1, 2015, which is the effective date of the Responsible Contractor law, a contractor that bids on publicly owned or financed construction projects in excess of $50,000 must qualify as a “responsible contractor.” A “responsible contractor” is defined as a contractor or subcontractor that conforms to the responsibility requirements in the solicitation document for its portion of the work on the project and that verifies, in a sworn statement, that it meets the following minimum criteria:

1. The contractor is in compliance with workers’ compensation and unemployment insurance requirements;
2. The contractor is currently registered with the Department of Revenue and, if it has employees, the Department of Employment and Economic Development;
3. The contractor has a valid federal tax identification number or, if an individual, a valid social security number;
4. The contractor has filed a certificate of authority to transact business in Minnesota with the secretary of state if a foreign corporation or cooperative;
5. The contractor is in compliance with Minnesota’s minimum wage and overtime requirements, Minnesota’s prevailing wage and wage payment requirements, and Minnesota’s statutes prohibiting the misrepresentation of employment relationships, and has been for the past three years;
6. The contractor is in compliance with the federal Fair Labor Standards Act and the federal Davis-Bacon Act, and has been for the past three years;
7. The contractor is in compliance with Minnesota’s statutes regarding construction contractor registration, construction codes and licensing requirements, and has been for the past three years;
8. The contractor has not had a certificate of compliance for public contracts revoked or suspended more than twice in the past three years;
9. The contractor has not been issued a monetary sanction from the Minnesota Departments of Administration or Transportation for failure to meet targeted business goals, due to a lack of good faith effort, more than once in the past three years;
10. The contractor is not currently suspended or disbarred by the federal government, the state of Minnesota, or any state department, agency or political subdivision; and
11. All subcontractors that the contractor intends to use on the project have verified, in a sworn statement, that they also meet each of these criteria. 

For each subcontractor added to the project after a contract has been awarded, the contractor must obtain a verification of compliance with these criteria and submit a supplemental verification within fourteen days of retention. Any false statement under oath verifying compliance with these criteria may result in the termination of an already awarded contract. 

For criteria 5 through 9 listed above, violations, suspensions, revocations, or sanctions occurring prior to July 1, 2014 will not be considered in determining whether a contractor meets the minimum criteria. Even so, the Responsible Contractor law has the potential to exclude a number of would be bidders for publicly owned or financed contracts. In light of this new law, contractors bidding on public projects should consult with legal counsel before responding to solicitation documents in order to ensure compliance with the verification requirements discussed above. In addition, even after a contract has been awarded, contractors must be sure that newly added subcontractors satisfy the requirements of the Responsible Contractor law and that supplemental verifications are submitted in timely fashion.