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New Minnesota Wage Theft Law Image

New Minnesota Wage Theft Law

Posted by: Cory A. Genelin

The following is an update from Gislason & Hunter LLP’s Employment, Labor and Benefits Practice Group regarding legislation passed by the State of Minnesota at the end of the 2019 Legislative Session.

The Act:

The laws discussed below were passed as Chapter 7 of the 2019 Session Law.

Effective Date:

The civil provisions go into effect July 1, 2019; the criminal provisions go into effect August 1, 2019.

Specific Obligations for Employers:

Initial Notices Upon Hiring

Upon start of work, Section 181.032(d) requires that Employers provide a new Initial Notice (“Initial Notice” is not a label applied by the statute, I’m simply using it as an apt label) including:

(1) The employee’s rates of pay including whether the employee is paid by the hour, shift, day, week, salary, piece, commission, or some other method and how each rate is applied.
(2) Meal and lodging allowances.
(3) Information on paid vacation, sick time, or other paid time off including how it is accrued and how it is used.
(4) The employee’s employment status and whether the employee is exempt from any provision of the Minnesota Fair Labor Standards Act, Chapter 177.  (The statute doesn’t specifically refer to the Federal FLSA, but this is probably implicated under “employment status.” Further, you should be making a determination of exempt/non-exempt under Federal FLSA for every position, so it would be wise to include and exempt/non-exempt indication under Federal FLSA as well.)
(5) A list of possible deductions that can be made from the employee’s pay.
(6) The number of days in your pay periods, your pay day schedule, and the pay day on which the employee will receive the first payment of wages earned.
(7) The legal name of the employer and, if the employer has a different operating name than its legal name, the employer must also include the operating name.
(8) The physical address of the employer’s main office, if the employer has a separate mailing address, that also must be provided.
(9) The employer’s telephone number.

These new Initial Notices must be signed by the employee and a copy of the signed document must be kept by the employer.  The Initial Notices must be in English.  The Initial Notices must include verbiage (that is currently being generated by the Commissioner) that the employee can request the Initial Notice in some other language.  If an employee requests, the employer must provide the Initial Notice in another language.

Finally, if any of the information provided in the Initial Notice changes, then the employer must notify the employee in writing BEFORE the changes take affect.  This provision (181.032 (f)) doesn’t say that the change notice must be signed, but practically speaking, a signature will help prove that the change notice was provided.

As this new provision is written, most of these provisions are things that should already be in a well-written employee handbook.  Also, it looks like the handbook itself would qualify as a notice pursuant to 181.0329(d) if all items were contained in the handbook.  However, because some of this information will be specific to certain employees or at least to certain positions, most employers will find it impractical to ensure that their handbooks are sufficient to satisfy 181.0329(d).  Likewise, if an employer is going to use its handbook as a part (d) notice, it would also be difficult to generate a change notice under part (f).  Unfortunately, the most efficient way to comply will be to generate a new singe form to comply with both (d) and (f); get a copy signed at hiring to satisfy (d) and generate and file a new one to satisfy (f) each time one of the terms changes.

Employer Record Keeping

The list of records required by 177.30(a) has been expanded.  In addition to the previous requirements, Employers must keep a record of:

  • For employees paid at piece rate, the number of pieces completed at each piece rate.
  • A list of the personnel policies provided to each employee, including the date the policies were given to the employee and a brief description of the policies.
  • A copy of the new Initial Notices required by 181.032(d) including written changes to the Initial Notices

These records must be kept for three years and must be kept on site or in a location where they can be retrieved in 72 hours.

The statute also clarifies that in the event of a wage and hour claim, if the records kept by the employer don’t provide enough information to determine the amount of wages due, then the Commissioner of the Department of Labor will make a determination based on what information is available.  That’s not really a change—that was the practice previously—but now it’s in the statute.

Pay Stubs

The law adds to the list of information required to be on each earnings statement under 181.032.  New requirements include

  • In addition to the rate or rates of pay, the basis for that rate, including whether the employee is paid by hour, shift, day, week, salary, piece, commission, or some other method.
  • Any meal and lodging allowances.
  • The physical address of the employer’s main office
  • The employer’s mailing address (if different from that of the main office).
  • The employer’s telephone number.

Payment of Commissions

Under 181.101(a), employee commissions must be paid at least every three months—no more payment of commissions on an annual basis.  There is some ambiguity here because the statute says payments of “commissions earned” must be paid every three months.  So there is an argument to be made if, under your commission agreement, commissions are only “earned” at the end of each calendar year. However, until this statute is enforced and litigated, it is not clear that this is allowed. If it is vitally important to your business that commission be earned and paid annually instead of quarterly, then you should contact an attorney for advice on seeing if a compliant policy can be drafted. The safest route is to convert any annual commission plan to quarterly.

New Civil Penalties

The old 15-day’s-wages cap on penalties for failure to pay wages promptly had been removed. Now, after a demand for payment is served, there is a 10 day grace period.  After 10 days, there is a penalty of 1/15 of the unpaid sum for each day that the payment is late, and there is no cap on the penalty.

There are multiple retaliation provisions throughout the new law but none of them should change what are already best practices—don’t take any adverse employment action against an employee based on the employee’s employment complaints or even threats to make a complaint.

New Crimes

While this is an attention-grabbing provision, none of the new criminal provisions will affect existing best practices.

Under section 609.52 subdivision 1(13), it is now a crime to do any of the following with the intent to defraud:

(i)  fail to pay wages as required by law;
(ii) cause an employee to give a receipt for wages that is greater than what the employee actually received
(iii) cause an employee to give a rebate or refund of wages owed;
(iv) do anything to make it appear that an employee was paid more than the employee was actually paid;

The “employer” or criminal, for any of the above is defined very broadly and would include any human resources professional, payroll technician, or manager who took part in the above with the intent to defraud.  The “with the intent to defraud” language should act as a shield to any criminal liability for innocent mistakes.  So innocent miscalculation of wages, data entry errors, etc. should not be considered criminal acts.

As with any criminal act, there are specific provisions for criminal punishment including fines and imprisonment.

The Commissioner of the Minnesota Department of Labor gets new powers

Under section 175.20, The Commissioner of the Department of Labor may now enter an employer’s premises “without unreasonable delay” to enforce state employment laws and may collect evidence and interview witnesses without a subpoena.  The Commissioner my interview non-management witnesses in private.

Certain fines for noncompliance (including unreasonably delaying the Commissioner’s access to your premises) are increased under section 175.27 Subdivision. 2.

Per section 177.27 Subdivision 11, if the Commissioner finds a violation of law and issues a compliance order to an employer, then the Commissioner must provide a copy of that order to (1) if the employer is subject to a licensing authority, then to that licensing authority; (2) if the employer is a public contractor, then to the contracting authority; and (3) to any of employer’s employees whose interests are affected by the order along with an explanation of how the order was resolved.

This information is general in nature and should not be construed as tax or legal advice.