Minnesota Employers Should Prepare for Wage Theft Provisions Coming July 1, 2019; Other Workforce Mandates Not Passed

Faegre Baker Daniels
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Minnesota employers should familiarize themselves and prepare to comply with new record-keeping and written notice requirements of the wage theft provisions that are set to go into effect on July 1, 2019 and that will likely increase the frequency of Minnesota Department of Labor and Industry (DLI) investigations and litigation. The business community must be mindful of the enhanced penalties and should consider performing regular compliance checks to avoid burdensome fines and penalties.

During the 2019 legislative session, Minnesota legislators from the Democrat majority in the House and Democrat minority in the Senate prioritized passing several workforce mandate initiatives. The Republican-controlled Senate did not support most of this legislation. Like many controversial policy provisions, most of these employer mandates did not pass because a compromise on the state’s budget took center stage.

However, legislators in the House and Senate were ultimately able to find common ground on adding new “wage theft” provisions to Minnesota law as part of the Omnibus Jobs bill, which was signed into law by Gov. Tim Walz shortly after it passed during a one-day special session. Prior to the passage of this law [Chapter 7], which includes numerous new notice and record-keeping requirements for Minnesota employers, there was no law explicitly prohibiting wage theft in the state of Minnesota.

Wage Theft Prohibition Passes

Cracking down on wage theft had bipartisan support in both the House and Senate, but the two bodies differed in their approach to address the issue. The final compromise included language from both the House and Senate bills as well as language agreed upon in conference committee. The new law makes it a crime for an employer to practice wage theft with an intent to defraud the employee.

Here is a summary of some of the key provisions of the law, which applies to all Minnesota employers:

  • Requires written notice to employees upon commencement of employment. At the start of employment, employers are required to provide all employees with a written notice containing specified information, including:
    • The rate and basis of pay, including whether the employee is paid by the hour, shift, day, week, salary, piece, commission or other method, and the specified application of any additional rates (such as a shift differential)
    • Vacation, sick and other paid time off accruals and terms of use
    • Allowances, if any, claimed pursuant to permitted meals and lodging
    • Employment status, including whether the employee is exempt from minimum wage, overtime and other provisions of Chapter 177, and on what basis
    • Any pay deductions that may be made from the employee’s pay
    • The number of days in the standard pay period, the regularly scheduled payday and the payday on which the employee will receive the first payment of wages earned
    • Certain identifying employer information, including the legal name of the employer and the operating name of the employer if different from the legal name, the physical address of the employer’s main office or principal place of business, and a mailing address if different, and the telephone number of the employer.
  • This notice must be in English and signed by the employee and retained by the employer. The notice also must include text (to be provided by Minnesota Department of Labor and Industry (DLI) commissioner) that informs employees that they may request, by indicating on the form, the notice be provided in a particular language and, if requested, the employer must provide the notice in the language requested by the employee.
  • The employer must also provide the written notice to an employee whenever anything in the original written notice changes prior to the date the changes take effect. The law does not specifically address whether the wage notice may be provided electronically or signed by the employee electronically, but under the Minnesota Electronic Transactions Act, electronic notices and signatures should be permissible under the new law.
  • Requires additional information on earnings statements. At the end of each pay period, employers are now required to provide each employee with an earnings statement containing specified information, including the basis of pay (hourly, salary, piece rate, commission, etc.), any allowances for meals or lodging, and the physical address and phone number of the employer, covering that pay period.
  • Requires additional employer record-keeping. In addition to retaining copies of the newly required signed wage notices given to employees, the new law amends Minnesota Statutes § 177.30 to require Minnesota employers to retain records of the number of pieces completed at each piece rate for any employee paid at a piece rate (in addition to the current law’s requirement for employers to retain records of each employee’s name, address, occupation, rate of pay, total pay per pay period and hours worked).

    Minnesota employers must also now keep a list of personnel policies given to employees, including the date the policies were given to the employee and a brief description of the policies. These records must be kept for a minimum of three years on the employer’s premises, with enhanced requirements relating to public works projects, and the records must be readily available for inspection by the DLI commissioner upon demand. Unlike the new wage notice requirement, the law does not appear to limit the additional record-keeping requirements – including maintaining a list of personnel policies given to employees, a brief description of these policies and the date the policies were given to the employee – to new employees.

  • Clarifies and changes timing of payment of wages. The law amends current state statute and specifies that all wages (including salary, earnings and gratuities) – other than commissions – be paid at least once every 31 days, and that all commissions earned by an employee be paid at least once every three months. The law removes the 15-day cap on penalties for late payment of wages, and now explicitly includes commissions in the types of wages that may be demanded for payment. If payment of commissions is not made within 10 days of a demand for payment, the DLI commissioner may charge and collect the commission earned and a penalty equal to one-fifteenth of the commissions earned but unpaid for each day beyond the 10-day limit.
  • Penalizes retaliation against employees who report wage theft. Employers are prohibited from retaliating against an employee for asserting rights or remedies under the new wage theft law. This includes filing a complaint with the DLI or informing the employer of the employee’s intention to file a complaint. In addition to any other remedies provided by law, an employer who is found to retaliate is liable for a civil penalty of $700 to $3,000 per violation.
  • Provides attorney general enforcement. The law provides that the attorney general may enforce Chapter 177 in addition to enforcement by DLI.
  • Expands the DLI enforcement. The law amends current state statute to allow the DLI commissioner to enter and inspect places of employment during normal working hours and investigate facts, conditions, and practices or matters the DLI commissioner deems appropriate to enforce the laws. The DLI commissioner or authorized representative has broad powers to investigate violations, including issuing subpoenas.
  • Creates a new maximum fine for repeat offenses. If an employer fails to submit or deliver records as requested by the DLI commissioner, the law creates a new maximum fine of $5,000 for repeat violations.
  • Adds wage theft to the list of theft crimes eligible for enhanced penalties (up to a felony) as well as aggregation of offenses. The new law allows for the imposition of a felony or gross misdemeanor sentence for wage theft crimes. Also, the value of the money, property or services received by the defendant in violation of the law within any six-month period may be aggregated and the defendant will be charged accordingly.

The civil components of the new law, including the notice and record-keeping requirements described above, go into effect July 1, 2019. The criminal provisions – those that amend Minnesota Statutes § 609.52 – become effective August 1, 2019 and apply to all wage theft crimes committed on or after that date.

How Minnesota Employers Should Prepare

DLI has issued some limited guidance for employers, and it is expected that DLI will issue additional informal guidance for employers and employees in the future, but this guidance may not be issued before July 1, 2019, and may not resolve all questions employers may have. In any event, Minnesota employers should take immediate steps to ensure compliance with the law beginning July 1, including:

  • Create the form of the required wage notice, including all of the required information, and provide a wage notice to all new employees hired after July 1, 2019, and to all current employees if any of the information required to be included in the wage notice changes (with such notices being provided prior to the date any change takes effect).
  • Create or revise a policy acknowledgement form, such as the employee handbook acknowledgement, that satisfies the new law’s requirements (i.e., includes a list of the policies that are included in the employee handbook, and a brief description of the policies). If personnel policies are maintained electronically, such as on the employer’s intranet, then the employer should consider creating an annual acknowledgment form that includes a list of all of the policies (including a short description of each policy) and have employees acknowledge that they have received access to the policies.
  • Ensure earnings statements/pay stubs comply with the new law.
  • Employers that contract with professional employer organizations or payroll vendors should contact those providers to ensure information provided to employees complies with the new law.

Several Employment-Related Laws Did Not Pass

The following are employment-related bills considered by the Minnesota legislature in 2019 that did not pass:

  1. Paid Family Leave
    Paid Family Leave was a House-led proposal mandating up to 12 weeks of medical leave per year with partial wage replacement and/or up to 12 weeks of family leave per year for maternity, paternity, bonding and caregiving purposes. A summary of the proposal can be found here.
  2. Safe and Sick Time
    This was another House-led proposal that would have allowed employees to earn a minimum of one hour of paid earned sick and safe time for every 30 hours worked. This time could be used for illness or preventative care of the employee or family members, absences related to domestic abuse or sexual assault, closure of the employee’s workplace and certain other situations. A summary of the proposal can be found here. The House Democrats’ proposals of earned sick and safe time and paid family leave were passed through the House but failed to pass into law because the companion bills did not make it through the Senate.
  3. Sexual Harassment Standard
    Currently, the legal standard for discriminatory sexual harassment in the state comes from the 1986 U.S. Supreme Court ruling that says behavior must be so “severe or pervasive” as to alter the conditions of employment and create a hostile working environment in order to be actionable. This year, the House and Senate both sought to amend the definition of “sexual harassment” in the Minnesota Human Rights Act (MHRA), but the two bodies had differing approaches.

    The House Democrats’ proposal would amend the MHRA to clarify that harassing conduct or communication does not need to be “severe or pervasive” in order to be actionable and qualify as discriminatory sexual harassment. A summary of the proposal can be found here. The bill passed off the House floor, but the language did not make it into the final Omnibus Judiciary and Public Safety bill.

    The Senate introduced a separate bill that clarifies its interpretation and application of the law in regard to sexual harassment as defined in the MHRA. The Senate proposal upholds the severe or pervasive standard, and additionally amends state statute to reaffirm sexual harassment must be objectively and subjectively harassing. It clarifies that “severe or pervasive” includes a single significant instance of harassment as well as a series of instances of harassment. It also provides protections to employers when they exercise reasonable care to prevent sexual harassment. A summary of the proposal can be found here. The bill did not pass off the Senate floor and there was no House companion.

    The two bodies could not come to a compromise on amending the definition, and as a result, no new language was passed regarding the sexual harassment standard this year. However, because changing the definition of sexual harassment has bipartisan support, the bills may come back next year. If either of the proposals pass, employers would assume increased risk and should be prepared for increasing sexual harassment litigation. Also, to mitigate their risk, employers should be cognizant of their duty to exercise reasonable care to prevent or correct sexual harassment.

  4. Preemption of Local Mandates
    While the House focused its efforts on passing workforce mandates, Senate Republicans proposed state preemption of local workplace related ordinances. The Senate proposal would prohibit local governments from adopting or enforcing any ordinances requiring employers to pay higher than the state’s minimum wage rate, requiring paid or unpaid leave, regulating the hours or scheduling of work time that an employer provides an employee, or requiring an employer to provide an employee a particular benefit or term of employment. A summary of the proposal can be found here. The House did not hold a hearing on the bill and Senate attempts to include it in the final Omnibus Jobs bill were unsuccessful.

Looking Ahead to 2020

In 2020, if there is a Republican-controlled Senate, it is likely to oppose the workforce mandate proposals that did not pass in 2019 (at least in the form in which they were introduced this year).

The outcome of the November 2020 election is important because Minnesota is currently the only state with a legislature divided by party. If Republicans lose control of the Senate, then paid family leave and earned sick and safe time proposals – perhaps with some modifications to the versions of the bills introduced this year – are likely to pass into law during the 2020 legislative session.

Even if Republicans hold onto the Senate majority, the business community should be aware that paid family leave, earned sick and safe time, preemption and the sexual harassment standard will likely continue to be hot topics at the Minnesota legislature. Also, regardless of who controls the House and Senate, any attempt to preempt local governments from imposing workplace mandates through local ordinance is unlikely to become law while Gov. Walz is in office.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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