Minnesota’s wage theft law, which largely went into effect on July 1, 2019, created new documentation and recordkeeping requirements for employers, including a required written notice that must be distributed to employees and additional earnings statement requirements. This new law also increased the civil penalties applicable to employers that commit recordkeeping violations and created criminal penalties for “wage theft.” The criminal provisions of the law went into effect on August 1, 2019.
During the month that the wage theft law has been in effect, many employers have struggled to understand what they must do to comply with the law. The Minnesota Department of Labor and Industry (DLI), a key enforcement agency, continues to develop its interpretation of the notice and earnings statement requirements of the law, and has published updates to its Frequently Asked Questions on the its website. The DLI’s updates to its Frequently Asked Questions, combined with positions DLI representatives have taken during live presentations related to the law, have clarified some of the more challenging compliance questions facing employers. Below we identify these issues.
The Notice Obligation: Perhaps the most significant new obligation under the wage theft law is the employer’s obligation to provide a written notice to employees before their employment begins. We previously detailed the notice requirements in our July 11 Insight.
Many employers have questioned how the obligation to provide this written notice applies to particular workers.
- Seasonal and Temporary Employees: The DLI has clarified that the wage theft law’s notice requirements apply to all employees, including temporary and seasonal employees. If a seasonal or temporary employee’s employment ends and that same employee is subsequently rehired for similar seasonal or temporary work at a later date, the rehired employee must receive a new notice.
- Staffing Workers/Joint Employers: If an individual is considered jointly employed by a staffing agency and its client, both businesses are obligated to provide a wage theft notice, which they can do jointly.
- Independent Contractors: The wage theft law’s requirements do not apply to non-employees, such as independent contractors. This does not provide any relief for an employer with employees it has misclassified as independent contractors. In such a situation, the employer could face recordkeeping penalties for failure to provide the required notice.
- Employees Who Occasionally Work In Minnesota: Many employers have asked for clarification regarding whether the wage theft law applies to employees who occasionally work in Minnesota (anywhere from a few days a year to a few months at a time). The DLI has not directly addressed this question, and instead has repeatedly indicated, “[e]mployment covered by the wage and hour provisions of Minn. Stat., Chapters 181 or 177, would be covered by the new Wage Theft Law.” The definition of “employee” within Chapter 177, however, does not address how much work an employee must perform within Minnesota for the law to apply and Chapter 181 does not define the term employee. As a result, employers should proceed with caution when approaching the issue of whether employees who perform some work in Minnesota should receive the required notice.
- Inclusion of Bonuses in the Required Employee Notice: The DLI has clarified that not all bonuses must be included in the required notice to employees, nor do all bonuses require a written change notification to employees based on whether the bonus is “discretionary” or “non-discretionary.” While it is helpful to know that the DLI does not view every potential bonus payment as an event triggering the need for a written change notification, it is unclear, beyond the specific examples provided in the DLI’s FAQs, what bonuses DLI will consider to be “discretionary” and “non-discretionary.”
Earnings Statement Requirements: The wage theft law requires employers to, among other things, include the “rate or rates of pay and basis thereof, including whether the employee is paid by hour, shift, day week, salary, piece, commission, or other method” on each employee’s earnings statements.
The DLI initially took the position that the language “and basis thereof” meant that an employer must identify, on the earnings statement, whether the rate or rates of pay were “established by the employer” or “required by a collective bargaining agreement” or “required by law.” The DLI has revised its position and this language is no longer required. That said, the wage theft law continues to require that earnings statements include language indicating whether the rates reflected are determined by “hour, shift, day week, salary, piece, commission, or other method.”
The law also added requirements that employers include their legal name, any allowances taken for meals and lodging, the employer’s physical address and a mailing address (if different), and the employer’s telephone number on earnings statements. Employers should take steps to ensure that employees’ earnings statements comply with these new requirements.
TAKE ACTION NOW: Criminal Penalties are effective August 1, 2019
While the law and the civil penalties went into effect on July 1, 2019, on August 1, 2019, the criminal provisions of Minnesota’s recently enacted wage theft law became effective.1 As of August 1, Minnesota law will explicitly recognize wage theft as criminal theft, with potential criminal penalties of imprisonment of up to 20 years and up to a $100,000 fine for any wage theft in excess of an aggregate amount of $35,000.