The Minnesota Legislature has recently passed a Jobs and Economic Omnibus Bill that contains provisions that expands employee protections and creates new record-keeping requirements for employers.The new law also expands the enforcement authority of the Minnesota Department of Labor and Industry (“DLI”), increases penalties that may be imposed on employers for compliance with the new requirements, and makes “wage theft” a crime punishable by up to 20 years in prison and a fine of up to $100,000. The new law takes effect on July 1, 2019.
Timing of Payment of Wages
Minnesota Statute § 181.101 requires all employers to pay all wages earned by an employee at least once every 31 days on a regular payday designated in advance by the employer, even if the employee requests a longer interval. The new law amends § 181.101 to clarify that “wages” includes “salary, earnings and gratuities” earned by an employee.
The madmen also requires that all “commissions earned by an employee” be paid “at least once every three months” on a regular payday.
Finally, the amendment to § 181.101 eliminates the cap on the penalty for the failure of an employer to make prompt payment of wages. Under the prior law, the penalty consisted of the employee’s average daily earnings up to a maximum of 15 days for each day that wages remain unpaid within ten days of the commissioner’s demand for payment. As amended, the penalty DLI can impose if unpaid wages are not paid within ten days of the commissioner’s demand is not capped, but extends indefinitely on a daily basis so long as the wages remain unpaid after the 10-day window to pay upon demand.
Additional requirements for pay stubs
The amended Minn. Stat. § 181.032 adds in additional information that must in included on an employee’s pay stub. Below is the list of items required on a paystub, the new requirements are in bold:
- Name of the employee;
- Total hours worked by the employee in the pay period;
- 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, if any, claimed pursuant to permitted meals and lodging;
- Total amount of gross pay earned by the employee during the pay period;
- List of deductions made from the employee’s pay;
- Net amount of pay after all deductions are made;
- Date pay period ends;
- Employer’s legal name and the operating name of the employer if different from the legal name;
- Physical address of the employer’s main office or principal place of business, and a mailing address if different;
- Telephone number of the employer
New Wage Statement Notice Requirements
The new law amends Minn. Stat. § 181.032 to require employers to provide a written notice to all new employees at the start of employment containing the following information:
- The 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, and the specific application of any additional rates;
- Allowances, if any, claimed pursuant to permitted meals and lodging;
- The employee’s employment status and whether the employee is exempt from minimum wage, overtime, and other provisions of chapter 177, and on what basis;
- A list of deductions that may be made from the employee’s pay;
- The number of days in the pay period, the regularly scheduled pay day, and the pay day on which the employee will receive the first payment of wages earned;
- 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.
Employers are required to keep a copy of the notice signed by each employee. All employers must provide the notice to employees in English, however, the notice must include a statement, in multiple languages, that informs the employees that they may request the notice be provided to them in another language. If requested, the employer must provide the notice in another language. A sample notice form created by the DLI can be found here:
However, please note that the DLI is still creating the text in languages other than English.
In addition, employers are required to provide employees, in writing any changes to the information in the notice before the date the changes take effect. There is no question that this will be extremely burdensome for HR and payroll personnel, requiring a notice at any time a number of normal, and often annual events happen such as:
- An annual raise or adjustment in pay
- Cost of living adjustment to wages
- An increase in an employee’s PTO allotment or eligibility as a result of tenure
- Any change to allowances for meals or lodging
- Any change due to the employees address, telephone number, or name, such as a marriage or divorce
- Inclusion of an additional deduction, for example if the employee elects to join an employer sponsored health plan or receive elective benefits through deductions from pay
Again, this form is to be issued before the change goes into effect. An employer may need to create an updated wage statements multiple time per year for multiple employees. While the new statute does not require that the employee sign and acknowledge receipt, it would be prudent to require and retain a written signed acknowledgment for record keeping purposes.
New Record-Keeping Requirements
The new law amends the employer record-keeping requirements under Minn. Stat. §177.30. The law expands the list of records to retain, delineates where those records must be kept, and identifies how expeditiously the records must be made available for inspection from the DLI. In addition, the penalties for record keeping were expanded greatly.
Minn. Stat. §177.30 now requires employers to make a keep a record of the following (additions in bold):
- The name, address, and occupation of each employee;
- The rate of pay, and the amount paid each pay period to each employee;
- The hours worked each day and each workweek by the employee, including for all employees paid at piece rate, the number of pieces completed at each piece rate;
- A list of the personnel policies provided to the employee, including the date the policies were given to the employee and a brief description of the policies; and
- A copy of the notice provided to each employee as required by section 181.032, paragraph (d), including any written changes to the notice under section 181.032, paragraph (f).
With regards to item 4, while many employers routinely update personnel policies and keep signed acknowledgments on file, this record keeping requirement requires one additional step which is keeping a list of those policies with the dates provided with a brief description. It seems this requirement is most easily complied with my creating a rolling list of policies and recording what date that those were distributed to each employee. As to item 5, this is referring to the wage statement, as previously described in this memorandum.
In addition to maintaining records for three years, Minn. Stat. § 177.30 now requires that these records “must be readily available for inspection by the commissioner upon demand” and either “kept at the place where employees are working or kept in a manner which allows the employer to comply with this paragraph within 72 hours.”
In addition to expansion of inspection opportunities, the penalties have also risen.
Employers found to be in violation of the record-keeping provision can be assessed civil fines and penalties of up to $1,000 for each failure to maintain records and up to $5,000 for each repeated failure. In addition, an employer who “repeatedly fails to make, keep and preserve records as required by section 177.20,” “falsifies any record,” and/or “refuses to make records available” as required by law can be criminally charged with a misdemeanor under Minn. Stat. §177.32(1). This means that those employees or business owners responsible for this statute can be individually held criminally liable for failure to comply.
Clarification of Remedies application, increase in penalties for repeated violations
The new law clarifies that the commissioner may order the employer to:
- Pay wages or commissions owed to an employee.
- Pay an amount equal to the wages or commissions owed as liquidated damages.
- Pay compensatory damages incurred by an employee.
- Cease and desist in the violative practice.
- Pay a civil penalty for repeated or willful violations.
If the employers records do not provide sufficient information to determine the exact amount of back wages due to an employee, the commissioner may make a determination of wages due based on available evidence. This grants the commissioner great discretion to consider the employee’s testimony of number of hours worked or – even scarier—their estimation of hours worked in order to determine appropriate compensation including unpaid or underpaid overtime and off-the-clock hours worked.
The commissioner may also now order an employer to pay a penalty equal to either the employee’s average daily wages earned or an amount equal to 1/15 of the commissions earned for each day payment is not made in accordance with the commissioner’s order.
- Penalize an employer up to $5,000 for each repeated failure to submit or deliver records to the commissioner as required by law.
- Penalize an employer up to $5,000 for each repeated failure to keep and maintain records as required by law.
The new law includes protections against retaliation for employees who assert rights or remedies under the Minnesota Fair Labor Standards Act and certain provisions of Chapter 181.The new retaliation provision states:
An employer must not retaliate against an employee for asserting rights or remedies under this section, sections 177.21 to 177.44, 181.01 to 181.723, or 181.79, including, but not limited to, filing a complaint with the department or telling the employer of the employee’s intention to file a complaint.In addition to any other remedies provided by law, an employer who violates this subdivision is liable for a civil penalty of not less than $700 nor more than $3,000 per violation.
DLI Investigation and Enforcement Authority
In addition the enforcement referenced above, the new law grants broad authority to the DLI to come into a workplace to review documents and conduct a nearly unfettered investigation into potential violations of Chapters 177, 181, 181A, or 184 of the Minnesota Statutes. The commissioner has the ability to enter a workplace “without unreasonable delay” to inspect an employer, and to investigate facts, conditions, practices, or matters pertaining to the commissioner’s jurisdiction. The commissioner has broad authority to issue subpoenas, collect evidence, interview witnesses, including, in private, non-management employees regarding the matter under investigation. While the Federal Department of Labor has long taken the position that they are able to take in private interviews of employees, this is a newly granted right at the state level.
Not only will the DLI have greater authority to investigate, but this law also provides the resources to do so. $3.1 million dollars in new funding over the next two years will be devoted to additional enforcement of state wage and hour laws. Wage and hour laws cannot be taken lightly.
Criminal Penalties for Intentional Wage Theft
In addition to expanding civil enforcement and penalties, the new legislation also criminalizes intentional “wage theft” which can be a felony charge with punishment of up to twenty years’ incarceration a fine of up to $100,000 for any “wage theft” in excess of $35,000.
The crime of “wage theft” occurs 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 that the wages paid to any employee were greater than the amount actually paid to the employee.
“Employer” is defined as “any individual, partnership, association, corporation, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee.” This definition appears to encompass any individual personnel responsible for payroll practices as well as staffing agencies and any third party administrators that provide payroll services to an employer.
With the July 1, 2019 effective date quickly approaching, employers should take a number of actions as soon as reasonably possible to ensure they are prepared for and operating in compliance with these new requirements, including the following:
- Prepare a template wage statement written notice to be used in preparing the written statements that must be provided to all new employees who start work on or after July 1, 2019. Again, the DLI has issued a template but has yet finalized the alternative language portion.
- Modify your new employee checklist to include the preparation and dissemination of the required notice. As a best practice have the employee sign a copy of the notice proving that they have received it. Maintain this copy for your records.
- For existing employees as of July 1, 2019, to be prudent, prepare a notice for each employee. In the alternative and, at a minimum, prepare to issue a written notice whenever there is a change to the information required by the notice.Before any change is put into effect, provide the employee with the written notice, obtain the employee’s signature on the notice form acknowledging his or her receipt of the same, and retain the signed notice form.
- Review your paystubs provided to employees to ensure that each of the requirements of the amended statute are properly included.
- Review and modify as necessary your record-keeping practices to account for the additional requirements imposed by the new law. I recommend creating and keeping up-to-date a form for each employee identifying the policy disseminated, the date of dissemination of the policy to the employee, and a brief description of the policy.
- Employers who utilize staffing agencies, professional employer association, a payroll service, or similar vendors/organizations should coordinate with those vendors and agencies to ensure that they are aware of and complying with the new law.
- For employers who compensate employees on a commission basis, review your commission plans, policies and practices to ensure that earned commissions are paid under the newly enacted deadlines.
- Pay attention to the DLI website for guidance and updates on these new changes, as well as the availability of the DLI text regarding alternative languages.
we can help!
If you have any questions about the content of this article or are looking for assistance ensuring that you are compliant with Minnesota’s new Wage Theft law, please contact Labor & Employment attorney Lida Bannink at 651-351-2116, or email at firstname.lastname@example.org.