The Michigan Attorney General has interpreted a recent law requiring municipal building officials to be “employed” by a municipality to mean that building officials cannot be private independent contractors. The question of whether a worker is an employee is based on the “economic realities” of the arrangement, with consideration of the following factors: (1) control of the worker’s duties; (2) payment of wages; (3) right to hire, fire, and discipline; and (4) performance of the duties as an integral part of the employer’s business toward achieving a common goal. The Attorney General opined that state law does not permit arrangements where a private entity trains and oversees the building official, provides all of the official’s compensation and benefits, and retains authority to fire and replace the individual performing the building-official function. 

In light of the Attorney General’s opinion, municipalities that use a private contractor as the building official face a number of legal risks. For one, the Department of Licensing and Regulatory Affairs could initiate enforcement actions against it. Also, property owners could challenge a building official’s decision if the official is unlawfully employed. 

Municipalities have several options to comply with this new employment requirement. One cost-efficient option is to partner with neighboring communities to share a single building official. So long as the head building official is a municipal employee, the law permits private contractors to perform building-related services like inspections and plan reviews.