On October 27, 2016, the Nevada Supreme Court published two opinions that directly affect Nevada employers and workers. Both dealt with Nevada’s Minimum Wage Amendment^[1] (MWA), an amendment added to the Nevada Constitution in 2006 that sets a specific minimum wage for all Nevada employees and allows employees to bring a lawsuit against their employers that violate the MWA. The MWA also created a two-tiered system, where employers can pay the lower-tier minimum wage ($7.25 per hour) if they provide health benefits. In these two recent cases, Perry v. Terrible Herbst^[2] and MDC Restaurants v. The Eighth Judicial Dist. Court^[3], the Court addressed three key issues: (1) whether employees have a two-year or four-year statute of limitations to bring a claim for back-pay under the MWA; (2) whether “provides” in the MWA means the employer must simply “offer” a qualifying health plan or that the employer must in fact “enroll” the employee in a qualifying health plan to qualify for the lower-tier wage; and (3) whether employers may include tips in calculating an employee’s taxable income to determine if the cost of health benefit premiums to the employee exceeds the 10 percent cap.

Nevada’s Minimum Wage Amendment

As noted, the MWA sets a base minimum wage and creates a two-tiered system, where employers are subject to the higher-tier minimum wage (currently $8.25 per hour) if they do not provide health benefits, and can pay the lower-tier wage (currently $7.25 per hour) if they do. The MWA states “offering health benefits” means the employer makes “health insurance available to the employee for the employee and the employee’s dependents.”^[4] The total cost of the premiums to the employee must not be “more than 10 percent of the employee’s gross taxable income from the employer.”^[5]

If an employer does not pay the constitutionally guaranteed wage as defined by the MWA, the employee may bring an action against his or her employer to enforce the provision and is entitled to “including but not limited to back-pay, damages, reinstatement or injunctive relief.”^[6]

Two-Year Statute of Limitations on Minimum Wage Claims

When the MWA was passed, Nevada already had a statutory scheme in place providing for a minimum wage.^[7] Within this statutory scheme, NRS 680.250 allowed employees to bring suit against their employees. In 2014, the Court held in Thomas v. Nev. Yellow Cab Corp. that a portion of the NRS 680 was repealed when it directly conflicted with the MWA.^[8]

In the first of the Court’s recent opinions on the MWA, Perry v. Terrible Herbst, a former cashier at a Terrible Herbst gas station brought a class action suit against her former employer, claiming violations under the MWA and requesting back-pay. Her employer claimed that, while the MWA does not provide a specific timeframe in which an employee may bring a claim for back-pay, NRS 680.250 provides a two-year statute of limitations. Perry claimed, because her suit was brought under the MWA and not NRS 680, the four-year catch-all statute of limitations from NRS 11.220 should apply.

The Court held that, because the MWA does not explicitly provide a statute of limitations, and NRS 680.250 involves similar type of claim—a claim for back-pay of wages—the Court should apply the two-year statute of limitations from NRS 680.250, not the four-year catch-all.

Employers Need Only “Offer” a Qualifying Health Plan for Lower-Tier Minimum Wage

Before the Court’s recent opinion in MDC Restaurants, it was unclear what “provide” meant in the MWA. If an employer “provided” qualifying health insurance, the employer could pay the lower-tier minimum wage ($7.25 per hour). If an employer did not, it had to pay the higher minimum wage ($8.25 per hour). In this case, the employees argued that the employer must actually “enroll” the employee in health coverage to qualify for the lower-tier, whereas the employers argued they must simply provide the option to receive qualifying health benefits to take advantage of the lower-tier minimum wage.

The Nevada Supreme Court determined that “provide” within the meaning of the statute means “offer” not “enroll.” Thus, employers must only provide the option of a qualifying health plan to take advantage of the lower-tier minimum wage. The employee need not actually enroll in the employer’s offered health coverage.

Tips Are NOT Included in Calculating the Employee's Annual Gross Income

The MWA provides that the cost to an employee of the offered health benefits cannot be “more than 10 percent of the employee’s gross taxable income from the employer.”^[9] In MDC Restaurants, the employees also argued that tips should not be included in an employee’s “gross taxable income from the employer,” whereas the employer argued tips should be included.^[10]

The Court held that, because the MWA states “gross taxable income from the employer,”^[11] tips are not included in the calculation.

What This Means for Employers

Here are the takeaways from these decisions: (1) employees must bring claims under the MWA within two years; (2) employers must simply offer qualifying health benefits to take advantage of the lower-tier minimum wage; and (3) employers cannot include tips in calculating an employee’s gross taxable income to determine if the health coverage meets the mandatory 10 percent cap.

So, in short, employers paying employees less than the higher-tier wage ($8.25) may want to evaluate whether the health coverage offered to the employee exceeds 10 percent of the employee’s gross taxable income, excluding tips.

Employers should also be cautious, as we are awaiting another decision from the Nevada Supreme Court that will likely determine, or at least provide guidance, as to what type of benefit plans offered to minimum wage employees will qualify under the Nevada Constitution.

Notes:

^[1] NEV. CONST. ART. XV, § 16.

^[2] Perry v. Terrible Herbst, Inc., 132 Nev. Advance Op. 75 (Oct. 27, 2016).

^[3] MDC Restaurants, LLC et al v. The Eighth Judicial Dist. Court, 132 Nev. Op. 76 (Oct. 27, 2016).

^[4] NEV. CONST. ART. XV, § 16(A).

^[5] Id.

^[6] NEV. CONST. ART. XV, § 16(B).

^[7] See NRS Chap. 680.

^[8] 130 Nev., Adv. Op. 52 (2014).

^[9] NEV. CONST. ART. XV, § 16(A).

^[10] Id.

^[11] Id. (emphasis added).