Covered vs. noncovered employment
Covered employment is when an employee performs a service for a person or organization in return for compensation in the form of covered wages. Wages paid to employees in covered employment are used as a basis in establishing an unemployment insurance benefit account, if an employee becomes unemployed by no fault of their own.
Covered employment includes, but is not limited* to:
- Services performed by an individual who is an employee under the law of employer-employee
- Services performed by an officer of a corporation who owns less than 25 percent of the corporation
- Services performed in the employ of any agency, instrumentality, or political subdivision of Minnesota
Employers with covered employment are required to pay state unemployment insurance tax on the taxable wages paid to employees or reimburse unemployment insurance benefits collected by former employees.
*For a complete listing of covered employment, reference: Minnesota Law, §268.035 Subd.12
Noncovered employment is when an employer pays wages and according to Minnesota Unemployment Insurance Law does not have to pay unemployment insurance tax on those wages.
Noncovered employment includes, but is not limited* to:
- Services performed by a sole proprietor or a member of a partnership
- Services performed for a sole proprietor by his or her parent, spouse, or child under the age of 18
- Services performed for a corporation by an officer who owns 25 percent or more of the corporation
- Services performed for a limited liability company by a member who owns 25 percent or more of the limited liability company directly or indirectly through another legal entity such as a subsidiary or holding company, and
- Services performed for a church, convention or association of churches, or any other religious organization that is supervised, controlled or principally supported by a church, if the employer is operated primarily for religious purposes.
NOTE: For information about voluntarily electing coverage for noncovered employees, reference the Elect Coverage for Noncovered Employees section of this handbook.
*For a complete listing of noncovered employment, reference Minnesota Law, §268.035 Subd.20
This handbook is based on current UI legislation; statements are intended for general information and do not have the effect of law. The Minnesota Unemployment Insurance Law - MN Statutes 268.001 to 268.23 and Administrative Rules 3310 and 3315 - can be accessed through our website at www.uimn.org by clicking Employers & Agents, Help and Support, then the UI Law link.