Minnesota Wage Theft Law: Must-Knows and Must-Dos
09.24.2019 Written by: Henningson & Snoxell, Ltd.
In May of this year, legislation was passed investing $3.1 million in new funding to the Department of Labor and Industry’s efforts to enforce state wage and hour laws over the next two years. The new wage theft law contains several different provisions that can be overwhelming for employers to boil down to understand exactly what they need to do to comply.
Unlike other labor laws, the MN Wage Theft Law covers ALL EMPLOYERS. It does not matter whether an employer is a one-man shop in Lismore, Minnesota or a 300 non-profit organization in Maple Grove, Minnesota. With DLI’s increased funding for enforcement activities, it is critical that employers are in compliance.
If you have not started efforts to comply with the administrative provisions such as providing the Employee Notice, you are behind the ball as it went into effect on July 1, 2019. The criminal provisions go into effect on August 1, 2019 for all crimes committed on or after that date.
Below is an overview of the major measures employers should be implementing:
Written Notice (Minn. Stat. §181.032)
This is perhaps one of the most daunting tasks for employers because it imposes an ongoing requirement for employers to provide a written notice to each employee at the start of their employment containing the following specific information:
Rate of pay
Deductions from employee’s pay
Legal name of employer and operating name of employer
Address of main office / principal place of business and mailing address
Paid time off (PTO)
How PTO will accrue
Terms for use of PTO
Employers will be required to provide this notice to all new employees and keep a signed copy of the notice for each employee. The notice must be provided in English with text from the DLI stating that the employee may request the notice be provided to them in another language. The Minnesota Department of Labor and Industry posted a sample Employee Notice form on its website. It is in the process of translating the notice into the 12 most common languages spoken in Minnesota and it will post samples of the same on its website when they are available. This will be especially helpful to employers since they are required to provide the written notice in another language if an employee requests it. Utilization of the form provided by the MN Department of Labor and Industry will not only help an employer ensure they are complying with the requirements, but also ease the administrative burden of creating the form internally and translating it for employees.
If an employee’s wage or other information that is provided on the form is subsequently revised, the employer needs to ensure that they provide employees with a notice in writing regarding any changes to the information in the statement prior to the date such changes take effect. For example, if an employee is promoted to an exempt position, the employer would be required to provide the employee with a written notice of the change prior to the change taking effect.
This notice would also need to include the DLI language informing the employee of the right to request the notice be provided in a particular language. Employers should make sure to obtain the employee’s signature on the updated notice documenting the employee’s acknowledgment of the revised notice.
Be sure to maintain a copy of all signed written notices provided to employees.
Current Employees: While the law does not require that employers provide notice to their current employees, it may be worthwhile to do so now while you have some time to work on your system versus creating a system at open enrollment time when you have to send Employee Notices to all employees who changed their deductions for new plan years.
Employee Classifications: Anytime you start evaluating an employee’s status regarding exempt v. non-exempt, it can be tricky. It also brings up concerns regarding proper classification of employees versus independent contractors. Having an experienced employment law attorney assist you with reviewing your employee classifications will help to alleviate headaches and ensure you not only properly classify employees and independent contractors, but also that the information on the Employee Notice is correct.
Policies: Unfortunately, not all companies have a written PTO policy providing the critical information to complete the section on PTO, sick time, etc. If you do not have a PTO policy in place, it is best to determine what it is you want to do and to have your human resource professional start drafting a policy. An experienced employment law attorney can help you craft your policy as well.
Open Enrollment: As noted above, employee deductions and the amount of the deduction must be provided in the Employee Notice. At open enrollment periods, employee deductions may change depending upon the employee’s elections. Be sure to update the Employee Notice and provide employees for signature with the updated deductions BEFORE they go into effect. This may require some extra work with your benefits brokers to ensure that open enrollment meetings are held well enough in advance that employees can make their elections and turn them into the employer promptly. Unfortunately, there will always be stragglers who forget or are making changes and are out of the office. Be sure to follow-up with all employees to ensure that you have their enrollment forms and can make the appropriate changes to their deductions both in your payroll system and on the Employee Notice in time to provide the advance notice of the change in deductions.
Earning Statements / Paystubs (Minn. Stat. §181.032)
In addition to the new employee notice employers are required to provide, employers must revise the paystubs or earning statements provided to employees in order to include certain required information. It is prudent that employers review the format of the current paystubs or earning statements they provide to employees now and make revisions quickly in order to comply with the new rule.
Here is a checklist of the items that are required to be on all employee paystubs or earnings statements:
☐ Name of the employee.
☐ Total hours worked by the employee in the pay period.
☐ Total amount of gross pay earned by employee in the pay period.
☐ Net amount of pay after all deductions are made.
☐ List of deductions made from the employee’s pay.
☐ Date pay period ended.
☐ Employer’s legal name and operating name.
☐ Employee’s rate or rates of pay and basis thereof, including whether the employee is paid by the hour, shift, day, week, salary, piece, commission or other method.
☐ Allowances claimed for permitted meals and lodging.
☐ Employer’s telephone contact.
☐ Physical address of employer’s main office or principal place of business and a mailing address, if different.
Record Keeping Requirements (Minn. Stat. §177.30)
While businesses and human resource professionals are no stranger to the record keeping game, the new requirements regarding personnel policy tracking may trip up even the most experienced record keeper. Working with counsel to think through the requirements and come up with an implementation game plan to ensure compliance will be critical.
Hours and pieces completed
Employers who have individuals who are paid on a piece rate must now make sure they are not only keeping track of an employee’s hours worked each day and each workweek, but also now they must keep track of the number of pieces completed at each piece rate. It is critical to understand that the commissioner now has the authority to make a determination of wages due based on available evidence if the records maintained by the employer do not provide sufficient information to determine the exact amount of back wages due an employee.
Employee Notice Retention
As noted above, employers must implement the new employee notice system to provide to new employees and employees when any of the pieces of information in the notice are going to change. It is critical that employers create a system to store and be able to quickly and easily retrieve said notices in the event the commissioner issues a demand to inspect the these and other required records the employer retains. (Commissioner inspections will be discussed in more detail on the next page.)
Perhaps no other task is more daunting than the requirement to now maintain a list of personnel policies with a brief description of each policy provided to each employee and the date the policies were given to the employee.
Some employers may already have systems in place to keep track of such activities. However, one-man shops and small business owners who are tasked with wearing all of the hats, this may seem overwhelming. From a compliance standpoint, the most important piece will be documentation and organization. Like the Employee Notice and other records employers are required to retain and have available for inspection, the personnel policy tracking system must be organized in such a way that they can be quickly pulled together to provide to the commissioner for inspection.
While it is not required in the statute, it would be good practice for employers to have employees sign acknowledgments when they receive new policies, including when they are hired. Such an acknowledgment can include a statement that the employee had an opportunity to review the new policy and ask any questions they may have had. This will be helpful down the road if you are ever disciplining an employee and they said they did not know the policy existed. It provides the employer with yet another piece of documentation to substantiate its efforts to ensure employees know and understand its workplace policies.
Commissioner Inspections (Minn. Stat. § 175.20)
All of the records an employer is required to keep including those mentioned above must be available for inspection by the commissioner of the Department of Labor and Industry upon demand. The revisions to the existing law provide the commissioner or an authorized representative to enter without unreasonable delay and inspect places of employment during normal working hours. (emphasis added) The new language of the statute gives the commissioner more expansive authority to implement the revised statutes including the ability to apply for an inspection order from the district court should an employer refuse to permit the commissioner to enter. The commissioner also has the power to collect evidence and interview witnesses while onsite, including non-management employees.
When the commissioner is carrying out the purposes of the various statutes both existing and new, an employer may be required to submit photocopies, certified copies, or originals of employment records. Failure to submit and deliver the records as required may result in steep penalties including up to $1,000 for each failure to submit or deliver records as required and up to $5,000 for each repeated failure. The threat of such large fines reinforces the need for not only compliance with the record keeping requirements, but also well-organized record keeping systems to enable an employer to quickly and thoroughly respond to commissioner demands for records. While the commissioner has the discretion to determine the size of the fine, it is best to be on the preventative side and ensure that you have the right systems in place to ensure peace of mind that your records are complete and can be quickly and easily accessed and collected should you be required to submit them to the commissioner.
Creating and maintaining a well-organized record keeping system is a daunting task. If you have not been complying with the existing record keeping requirements, the new requirements may further intimidate you to even start as it seems too complicated. Experienced employment law attorneys can help you identify the record keeping requirements your organization must comply with at the federal, state, and local level. If you are a federal contractor, you may also have additional record keeping requirements.
An attorney can work with you to create records retention policies to guide you through setting up your system. The policies will not only ensure you are complying with the requisite laws, but also to have written documentation of your policies for retention and destruction. In litigation cases, this policy (and a strict adherence to it) could help protect from potential spoliation claims. It can limit the discoverable data available for discovery in litigation.
CRIMINAL CONSEQUENCES (Minn. Stat. § 181.1721, 609.52)
Perhaps the most concerning portion of the Wage Theft Law is that providing for employers to be charged with misdemeanors and the empowerment of the Attorney General to enforce the Labor Standards and Wages chapter of the Minnesota Statutes.
The statute defines the crime of wage theft as occurring when an employer, with intent to defraud:
• Fails to pay an employee all wages, salary, gratuities, earnings or commissions at the employee’s rate or rates of pay or at the rate or rates required by law, whichever is greater.
• Directly or indirectly causes any employee to give a receipt for wages for a greater amount than that actually paid to the employee for services rendered.
• Directly or indirectly demands or receives from any employee any rebate or refund from the wages owed the employee under contract of employment with the employer.
• Makes or attempts to make it appear in any manner the wages paid to any employee were greater than the amount actually paid to the employee.
Intent to defraud
While there is no guidance yet as to exactly what the bar for “with intent to defraud” will be in regards to wage cases, it may be helpful to look to the various definitions already provided in Minnesota statutes for guidance. The first piece is the intent. Minn. Stat. 609.02, Subd. 9 (4) states that “with intent to” means “the actor either has a purpose to do the thing or cause the result specified or believes that the act, if successful, will cause that result.”
In other words, if you as an employer intentionally short an employee’s paycheck, alter the employee’s hours worked or wages, or do some other act in order to avoid paying the employee what they are due, you would likely be guilty of wage theft. If you accidentally enter the person’s hourly rate as $1.00 instead of $10.00 and you do not catch it, you are still on the hook for the full amount due, but you did not intentionally short the individual and thus you would not be guilty of wage theft simply for a clerical error.
The crime of “wage theft” and the criminal sanctions for committing “wage theft” could be quite substantial.
Value of wages stolen exceed $35,000
• Imprisonment for not more than 20 years; and/or
• Payment of a fine of not more than $100,000.
Value of wages stolen exceeds $5,000
• Imprisonment for not more than 10 years; and/or
• Payment of a fine of not more than $20,000.
Value of wages stolen is more than $1,000 but less than $5,000
• Imprisonment for not more than 5 years; and/or
• Payment of a fine of not more than $10,000.
Value of wages stolen is more than $500 but less than $1,000
• Imprisonment for not more than 1 year; and/or
• Payment of a fine of not more than $3,000.
If you made it to this section, congratulations. You are likely confused and anxiety-ridden over how to ensure you comply with everything to avoid being fined or put in jail.
The next step is to identify who in your organization will be responsible for implementing the necessary measures to comply and visiting with them to strategize on the resources needed to accomplish this task. The attorneys at Henningson & Snoxell, Ltd. are here to serve as a resource for that person to help them think through the facets of this legislation as well as any additional local record keeping or reporting laws your organization must comply with. We can help you create the necessary procedural infrastructure to achieve and maintain compliance. While we can’t do the heavy lifting of on-site implementation, we can help carry the load on the front end to figure out the most efficient and cost-effective methods for compliance.