Minnesota Enacts New “Wage Theft” and Record-Keeping Requirements
The brief legislative special session conducted over the Memorial Day weekend saw the Minnesota Legislature pass a Jobs and Economic Omnibus Bill that contains numerous provisions strengthening and expanding existing wage protections and employer record-keeping requirements under Minnesota law. The new law also expands the enforcement authority of the Minnesota Department of Labor and Industry, increases penalties that may be imposed on employers for non-compliance with wage payment and record-keeping requirements, and makes “wage theft” a crime punishable by up to 20 years in prison and a fine of up to $100,000. The bill has been signed by Governor Walz and takes effect on July 1, 2019.
Timing of Payment of Wages
Minn. Stat. §181.101 requires all employers to pay all wages due an employee at least once every 31 days on a regular pay day designated in advance by the employer regardless of whether the employee requests payment at longer intervals. The new law amends §181.101 to clarify that “wages” includes “salary, earnings and gratuities” earned by an employee, and that this statute creates a “substantive right” to payment in addition to the right to be paid at certain times. In addition, the new law requires that “all commissions earned by an employee” be paid “at least once every three months” on a regular payday.
The amendment to §181.101 also eliminates the cap on the penalty for the failure of an employer to make prompt payment of wages. Under the old version of the 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 on behalf of the employee. As amended, the penalty the DOLI can impose if unpaid wages are not paid within ten days of the commissioner’s demand is not limited by a 15-day cap, but rather extends indefinitely on a daily basis so long as the wages remain unpaid following the 10-day window for the employer to remit the unpaid wages per the commissioner’s demand.
Finally, §181.101 has been amended to include commissions within the scope of the statute. The new law provides that “[i]f payment of commissions is not made within ten days of the demand, the commissioner may charge and collect the commissions earned and a penalty equal to 1/15 of the commission earned by unpaid for each day beyond the ten-day limit.”
New Wage Statement Notice Requirements
The 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.
The employer is required to keep a copy of the written notice provided to each employee that is signed by the employee acknowledging receipt of the same. The notice must be provided to each employee in English, but include text provided by the commissioner that informs employees that they may request, by indicating on the form, the notice be provided in a particular language other than English. If requested, the employer must provide the written notice in the language requested by the employee.
The Minnesota Department of Labor and Industry has a page on its website addressing these and related 2019 amendments to Minnesota’s wage laws, which can be found at https://www.dli.mn.gov/business/employment-practices/wage-theft-legislation-2019-and-summaries. According to the DOLI website, the Department is working on the text that must be included in the written notice advising new employees of their right to request the notice in a language other than English.
Finally, if an employer makes any changes to the information contained in the written notice, the employer must provide the written changes to the employee before the date the changes take effect. In other words, any time a change is made that will alter the information contained in an employee’s individual notice the employee must be provided with an updated notice before the change is implemented. From a practical standpoint this has the potential to create a substantial additional burden for HR and payroll personnel, requiring that an update written notice be prepared and disseminated to the affected employee(s) whenever any number of normal events occur in the tenure of an employee, including the following:
- An annual raise or other adjustment in pay
- A cost of living wage adjustment
- An increase in an employee’s PTO allotment or eligibility as a result of tenure or other criteria
- Any change to the employer’s PTO accrual and/or use policies and practices
- A change in position accompanied by a wage adjustment, including shift differential pay
- The inclusion of an additional deduction, for example if an employee elects to join an employer provided health plan or to receive elective benefits that are paid for in part through deductions from participating employees’ pay
On its face, the amended statute would require the employer to prepare and distribute an updated wage notice statement each time a change of the nature noted above is made and do so before the change goes into effect. For some employers, that could entail the issuance of updated wage statements multiple times a year for individual employees. Although technical compliance with the amended statute is not terribly complicated, it does create an additional administrative burden for employers and their HR/payroll professionals. Any checklists that employers use to ensure that they are properly documenting changes to pay and other components of the statute’s notice requirements should be updated to include preparation and dissemination of the updated wage notice form to the affected employees. Although the amended statute does not state that the written changes provided to the employee be acknowledged and signed by the employee, it would be prudent to require and retain a signed written acknowledgement.
How does this impact our existing employees? Do we need to prepare and provide written notices to all persons we employ as of July 1, 2019, regardless of how long they have been working for us?
Good questions. The amendment to §181.032 does not specifically address whether employers must provide the required written notice to existing employees as of the amendment’s effective date of July 1, 2019. Because this amendment imposes the written notice obligation “[a]t the start of employment” an argument can be made that it does not apply to persons already employed as of the amendment’s effective date. However, it remains unclear how the Department of Labor and Industry will interpret and apply this new obligation with respect to existing employees as of the provision’s effective date. It is possible the Department of Labor and Industry will provide some guidance in this regard before the July 1, 2019 effective date, but time is obviously running short.
The most conservative approach would be to prepare and issue written wage statements containing the required information to all existing employees as of July 1, 2019. That task is obviously easier said than done depending on the size of your workforce and the burdens of pulling together the required information for each individual employee. If that is a task that cannot be reasonably accomplished between now and the amendment’s effective date, you should plan on issuing a written wage statement complying with the amendment’s new requirements for each current employee when there is any change from and after July 1, 2019 in that employee’s rate of pay, PTO entitlement, or other component of the wage statement.
Additional Requirements for Earnings Statements
Minn. Stat. §181.032 has long specified the information that must be included in the earnings statements (or paystubs) provided to each employee at the end of each pay period. The amendment to §181.032 adds some additional requirements which are highlighted in bold below. From and after July 1, 2019, the employee earnings statement (or paystub) must include the following:
- 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 (New);
- Allowances, if any, claimed pursuant to permitted meals and lodging (New);
- 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 (New);
- Telephone number of the employer.
Employer Record-Keeping Requirements
The new law amends the employer record-keeping requirements under Minn. Stat. §177.30 by expanding the list of records employers must retain, delineating where such records must be kept and how quickly they must be made available for inspection by DOLI investigators, and increasing the penalties that may be imposed for record-keeping violations.
As amended, Minn. Stat. §177.30 requires employers to make and keep a record of the following:
- 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 (New);
- 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 (New); 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).
Item 5 encompasses the newly required written wage statement notice and any written changes thereto discussed above. With respect to Item 4, many employers routinely obtain and retain written acknowledgment forms whenever new or modified personnel policies are disseminated to the workforce. It is unclear whether such signed acknowledgment forms will be sufficient to satisfy the requirements of Item 4. It would be prudent to keep and update a rolling list of personnel policies distributed to each individual employee in an effort to demonstrate good faith efforts to comply with this requirement of the amended statute.
In addition to expanding the list of records employers must maintain for three years, the amended §177.30 now provides 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 that allows the employer to comply with this paragraph within 72 hours.”
The amended record-keeping statute does not create a private cause of action for violation of its provisions, but it is not a toothless tiger. Employers found to be in violation of the record-keeping provision can be assessed civil fines and penalties per violation. The amended statute provides that the commissioner may fine an employer up to $1,000 for each failure to maintain records as required under §177.30, 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 177.30,” “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, subd. 1.
Finally, the amendment states that if the records maintained by the employer do not provide sufficient information to determine the exact amount of back wages due an employee, the commissioner may make a determination of wages due based on available evidence. This modification grants the commissioner greater discretion to determine the amount of back wages due an employee where the employer’s records are deficient for that purpose in some respect. This opens the door to increased back wage assessment premised on employee testimony as to the number of hours … or an estimated number of hours … worked without appropriate compensation by the employer, including unpaid or underpaid overtime hours and off-the-clock work hours.
The new law includes additional 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.
DOLI Investigation and Enforcement Authority
The new law increases the authority of the Minnesota Department of Labor and Industry to conduct investigations of potential violations, granting the commissioner’s representative the authority to enter “without unreasonable delay” and inspect places of employment, during normal working hours, and investigate facts, conditions, practices or matters pertaining to the commissioner’s jurisdiction and to carry out the purposes of Chapters 177, 181, 181A, and 184.
The amendment specifically grants the commissioner authority to seek an order from the district court in the county in which the place of employment is located requiring the employer to permit entry for purposes of an investigation whenever the employer refuses to permit entry. The amendment also grants express authority to “collect evidence” and “interview witnesses”, including the right to “interview in private non-management employees regarding the matter under investigation.” The Federal Department of Labor has long taken the position that it has the right to interview non-management employees in private and without an employer representative present. The amendment expressly grants this authority to DOLI investigators under Minnesota state law.
Accompanying the expanded authority to the Minnesota Department of Labor and Industry was an allocation of $3.1 million in new funding over the next two years to enhance the Department’s enforcement of the state’s wage and hour laws.1 According to the DOLI, “[t]his additional funding will allow our agency to add critical staff needed to perform more strategic and targeted workplace enforcement and conduct greater outreach and education for employers, workers and their communities.”
Criminal Penalties for Intentional Wage Theft
In addition to expanding components of existing civil enforcement mechanisms related to Minnesota’s wage and hour laws, the newly enacted legislation expressly criminalizes intentional “wage theft” and provides for punishment of up to 20 years’ incarceration and up to a $100,000 fine for any wage theft in excess of $35,000.
The amendment to the criminal statute, which goes into effect on August 1, 2019, provides that “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 require by law, including any applicable statute, regulation, rule, ordinance, government resolution or policy, contract, or other legal authority, whichever rate of pay 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; or
- 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.
The amended criminal statute defines “Employer” broadly to include “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.” On its face, this definition potentially encompasses employer personnel responsible for the employer’s payroll practices, as well as third-party staffing agencies, payroll administrators, and benefit management organizations that provide services to employers relating to employee pay and benefits practices.
Practical Considerations for Employers
With the July 1, 2019 amendment effective date just around the corner, 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 from and after July 1, 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.
- Modify your new employee checklist to include the preparation and dissemination of the required written wage statement notice, as well as receipt and retention of the signed statement from the new employee.
- For existing employees as of July 1, 2019, prepare to issue a wage statement written notice whenever there is a change in an employee’s pay, PTO, or other aspects of the required statement. 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. For any subsequent change implicating the nine components of the written notice, repeat this process.
- Review the earnings statements (pay stubs) provided to employees to ensure that each of the 11 requirements of the amended statute are properly included. If you utilize a payroll service, make sure that it is aware of the impending changes and taking appropriate steps to comply with the new law from and after July 1, 2019. It would be prudent to obtain and review a sample earnings statement (pay stub) from the payroll service so that you can satisfy yourself that the modified statement complies with the new law.
- Review and modify as necessary your record-keeping practices to account for the additional requirements imposed by the new law, particularly the obligation to maintain 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.”In addition to obtaining and retaining standard employee acknowledgment forms when new or modified personnel policies are disseminated, it would be prudent to create and keep 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 or similar organizations to fill temporary or temp-to-hire positions should coordinate with the staffing agencies to ensure compliance with the requirements of the new Minnesota law in this area.
- For employers who compensate employees on a commission basis, review your commission plans, policies and practices to ensure that earned commissions are paid on a timely basis in accordance with the amended Minnesota law.
- Consider conducting a comprehensive review of your pay and record-keeping practices for compliance with Minnesota and federal law.
- Pay attention to the Minnesota Department of Labor and Industry website for guidance and updates on these new changes, as well as the availability of the DOLI text that must be included in the new wage statement written notice advising employees of their right to request a copy of the notice in a language other than English.
1 See https://www.dli.mn.gov/business/employment-practices/wage-theft-legislation-2019-and-summaries.