Don’t forget that Minnesota’s minimum wage rates increase January 1, 2020 to $10 for large employers and $8.15 for others.  Updated posters (which employers must post where employees can see them) can be found here.  Keep in mind that this is a state minimum wage.

If employers are doing business in Minneapolis, it has its own minimum wage ordinance which trumps the state rates as the wages are higher; those wage rates can be found here and increase next in July 2020.  St. Paul has its own ordinance as well, which begins its phase-in (to $15) starting January 1, 2020; those rates can be found here.

On September 12, 2019, three City of Minneapolis Council members shared a draft ordinance, the Minneapolis Freelance Worker Protections Ordinance. As it is just in the draft stages, I won’t go into great detail here, but to point it out.  For those Minnesota employers who rely on independent contractors – the development of this potential ordinance is one to follow.  The City is seeking feedback from freelancers in surveys and meetings.  However, the draft ordinance seeks to essentially expand the current Minneapolis Wage Theft Ordinance to independent contractors (also called “freelancers”).  The ordinance, as currently proposed, includes requirements such as:

  • If requested by the freelancer, a written contract including:
    • Name and address
    • Itemization of all services
    • Compensation for the services (rates and method)
    • Date payment is due or mechanism for how it will be determined
  • If a freelancer requests a written contract, work cannot begin until a contract is agreed upon (or the employer decides not to use that person’s services).
  • Timely payment pursuant to the contract (or 30 days if no date is specified)

Again, this is just in the development stages,  but employers should at least be aware that this is looming.

Just as soon as Minnesota employers start to understand the new Minnesota Wage Theft Law (enacted July 1, 2019), the City of Minneapolis has passed its own ordinance, the Minneapolis Wage Theft Prevention Ordinance, effective January 1, 2020.  Employers located in Minneapolis and employers located outside of Minneapolis but who have employees who work at least 80 hours per year in the City, must adhere to the Ordinance.

What Is Different Between the State Law and Minneapolis Ordinance?

The Ordinance requires more than the state law to largely incorporate information about the Minneapolis Sick and Safe Time Ordinance:

  • The Employee Notice must be given to ALL employees – not just new hires (as with the State law)
  • Employee Notice and earnings statements must include information about Sick and Safe Time:
    • Hours of leave the employee receives
    • Type of year used to determine accrual and carryover
    • Earliest date SST may begin (no more than 90 days from date of hire)
  • Employee notice must also require:
    • Employee’s date of hire
    • Overtime pay rates, number of hours to work to be eligible (typically 40 or 48)
    • If position involves gratuities, a statement that tip sharing or pooling is voluntary
  • An explanation of sick and safe time rules and employee’s signature of approval
  • Posters must be posted in English and other language (if applicable) and distributed to employees

Employers who fall under this ordinance should be sure that their time off policies are compliant and they are ready to roll out the employee notice and posters by January 1, 2020.  It is no small task – do not procrastinate and underestimate the work needed!  Also, looking into my crystal ball, I would not be surprised to see St. Paul (and then Duluth) follow suit as is common with such ordinances.

For anyone that thought something looked different on my blog, you are right!  Effective November 1, 2019, our firm (formerly Seaton, Peters & Revnew) is now Peters, Revnew, Kappenman & Anderson, P.A. following the retirement of founding shareholder Doug Seaton.  Doug has gone on to found the Upper Midwest Law Center, a non-profit public interest law firm.  It was a pleasure to work with Doug over the past 13 years and I wish him the best!

Except or Non-Exempt?  That is the question (which should not be answered by eenie-meenie-miney-mo)!  The U.S. Department of Labor (“DOL”) issued its Final Rule today (September 24, 2019) regarding the overtime exceptions under the so-called “white collar” exemptions.  As you may recall, the DOL previously issued a final rule in May 2016, but that rule was declared invalid, and the appeal held in abeyance pending this new Final Rule.  Accordingly, today the DOL has rescinded the 2016 final rule, which you can read more about here.

What’s New?  Effective January 1, 2020:

  • SALARY THRESHOLD. The salary threshold will be increased from $455 to $685 per week ($35,568 annualized).  The salary threshold for highly compensated employees (“HCE”) is raised from $100k to $107,432 per year.
  • MINIMUM GUARANTEE. A minimum guarantee plus extras is acceptable, so long as the employee also is guaranteed $684/wk.
    • For example, an inside salesperson makes a guarantee of $684/wk plus 1% commissions
    • An employee may be paid $684/wk plus additional compensation based on hours worked beyond a normal workweek, based on any basis (flat sum, bonus, straight-time hourly, time and one-half or any other basis) and may include paid time off.
  • NON-DISCRETIONARY BONUSES INCLUDED UP TO $3,556.80. Employers may now use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary level (i.e. no greater than $3,556.80), so long as it is paid at least annually.
    • If the employee does not earn enough bonus and incentive payments, however, to retain the salary threshold, an employer must make a “catch-up” payment within one pay period of the 52-week period (up to 10%) in order to retain the exemption.
    • In this case, the catch-up payment does not count toward compensation for the year it was paid, but the prior years’ salary amount (that it is applied to).
    • The 52-week period may be any consistent period (i.e. a calendar year, fiscal year, anniversary of date of hire).
    • If an employee does not work a full 52-week period due to being a new hire, or terminated, the employee may qualify if the employee receives a pro rata portion of the $3,556.80, based on the number of weeks employed.
  • COMPUTING EARNINGS ON HOURLY, DAILY, SHIFT BASIS. Earnings may be computed on an hourly, daily, or shift basis if the employee is guaranteed $684/wk and a, “reasonable relationship exists between the guaranteed amount and the amount actually earned.”  This test will be met if the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly, daily or shift rate for the employee’s normal scheduled workweek.  There are other nuances to this method, so be sure to understand the rule fully before using this method.
  • COMPUTING EARNINGS ON A FEE BASIS. Earnings may be computed on a fee basis, if the fee payment is at a rate that would amount to at least $684/wk (i.e. being paid $350 to create a widget that took 20 hours to complete as 40 hours of that work would amount to $700/wk).

Additionally, the DOL noted its intention to update the salary levels and HCE levels more regularly in the future (via notice and comment rulemaking).  There is no automatic threshold increase at this time.  Also note, the DOL did not change or alter the duties test at all.

What Should Employers Do?

  • CONDUCT AN INTERNAL AUDIT. Now is the time for an end-of-year internal wage and hour audit – start now so that any changes can be made prior to January 1, 2020 (give yourself at least 4-6 weeks for an audit to collect job descriptions,  analyze organizational charts, talk to supervisors about actual duties, update job descriptions, etc.).  The issuance of the final rule is the perfect time to review each exempt employee’s job duties and pay, and verify (or correct) whether the employee is properly classified before January 1, 2020.
    • Keep in mind that any communications that you have internally and all internal wage and hour audit work done without counsel to assist, is not privileged, and thus, may be discoverable. Thus, if someone concludes or sends an email, or creates an analysis that concludes an employee should be non-exempt, and it is ultimately decided the person is going to remain exempt, and that employee, or another challenges that exemption in the future, all of those documents are potentially discoverable by the then-plaintiff who will certainly point to those communications in support of a willful violation (which allows them to go back 3 years instead of 2 for backpay).
    • Remember that the salary threshold is just one component of determining whether an employee is exempt from overtime, so when auditing, you must address all three components. An employee must also meet: (1) the duties test (the duties must primarily involve executive, administrative, or professional duties as defined by the regulations); (2) the salary basis test (paid a fixed salary regardless of variations in quality or quantity of work – including hours worked); and (3) the salary level test (paid at least $685/wk).
  • CONDUCT PERFORMANCE REVIEWS OR MERIT INCREASES TO BE EFFECTIVE JANUARY 1, 2020. To the extent possible, conduct performance reviews at the end of the year so that any necessary changes (whether an employee is moved to hourly or given enough of an increase to remain exempt) can be made by January 1.
  • UPDATE YOUR EMPLOYEE HANDBOOK.  The beginning of the year is also the perfect time to roll out a new or revised employee handbook.  Review your handbook to determine whether any definitions of “salaried” or “exempt” are consistent with the new rule.  Review your overtime policies and be sure you are compliant with other 2019 changes, and any vacation/sick/PTO is compliant with any applicable sick and safe leave laws or ordinances.

Finally, this does not change Minnesota’s FLSA and any other state laws, which may be more restrictive (for example, Minnesota does not recognize the computer employee exemption).  Recall that the higher standard (whichever is more employee favorable) applies.

Employers who are required to submit the 2017 and 2018 Component 2 EEO-1 data (wage data) can now do so via the EEOC’s portal here.  In addition, the EEOC has released a FAQ that may answer many employer questions such as filing requirements, summary compensation data, hours worked, multi-establishment reporting, acquisitions and mergers, spinoffs, professional employer organizations, the online filing system, confidentiality and data security.

Not to be outdone by the State of Minnesota’s Wage Theft Law, the City of Minneapolis is proposing its own wage theft ordinance, which “compliments” its Minimum Wage and Sick and Safe Time ordinances. The new wage theft ordinance would allow the City to investigate wage theft complaints on its turf. On July 29, 2019, there is a public hearing on the proposed ordinance, which is expected to pass at the August 9, 2019 City Council meeting.

What is Expected?

  • Pre-hire notice will include information about the safe and sick leave laws, tipping, and overtime.
  • Changes to notice information must be signed by employee before the change goes into effect (unlike state),
  • Pay stubs will also need to include local workplace information.
  • A new poster will need to be displayed.
  • There will be a presumption of retaliation if any action is taken against an employee within 90 days who has begun an action of alleged wage theft.
  • Wage theft will prohibit city contracts, with a list of employers published.

Expected Differences with State Wage Theft Law:

  • Ordinance will not limit wage theft “with the intent to defraud” (that language is removed).
  • Any changes to the information in the notice (like wage change) must be signed by the employee before it takes effect.
  • Employer will need to provide the prehire notice to ALL employees (not just new employees) as of the effective date, if they have not already been provided all the information.

 

Effective July 3, 2019, the City of Minneapolis’ revised rules implementing the Sick & Safe Time Ordinance Rules go into effect.  Notably, non-resident employers (employers located outside of Minneapolis but who have employees performing work in Minneapolis) are now subject to enforcement. If non-resident employers provided employees with a paid time off program or paid leave plan that was available for uses including illness, and the employer is adopting that plan now to comply with the Sick and Safe Time Ordinance, the employer may deduct an employee’s actual use of the paid time off or leave since July 1, 2017 from the amount of accrual required under the Ordinance.

In other words, all employees who work more than 80 hours in Minneapolis are entitled to accrued sick and safe time based on the hours worked in the City since July 1, 2017. However, if a non-resident employer did not have a time off policy that complied with the Ordinance during that time, but is now adapting its plan to comply, it may take credit for an employee’s actual use of paid leave since July 1, 2017 required under the Ordinance.

Note: Hours spent traveling through Minneapolis do not count towards the 80 hours for coverage. However, stopping to make deliveries or perform other duties is covered work. Attendance at a convention, educational class, training, or similar activities is not covered if the individual performs no other work in the City (suggesting if they do perform some work in the City, such time would be included).

The City reminds employers as follows in their press release today:

“Employers are reminded that they may comply with the ordinance either by (1) crediting covered employees with Sick and Safe time at a rate of 1 hour per 30 hours worked in the City, capped at 48 per year and 80 overall, or (2) front-loading a lump sum of 48 hours for the first year of the employee’s employment and 80 hours at the beginning of every year thereafter (also capped at 80 hours overall). Employers may therefore comply with the ordinance without individual historical calculations at this time by crediting each covered employee with 80 hours of accrued Sick and Safe time. Employers are permitted to choose different methods of compliance (accrual or frontloading) for different employees.”

Employers looking for more information can also read the City’s Sick & Safe time FAQ here.

Employers (wherever located) with employees working in Minneapolis – don’t forget that the minimum wage increases today, July 1, 2019, to $11/hr for small businesses and $12.25 for large businesses.

Quick Facts – Reminders:

  • Small business = 100 or fewer employees.
  • Large business = more than 100 employees.
  • An “employee” is someone who works at least 2 hours in Minneapolis in a workweek (even if the employer is located elsewhere).
  • Tips/gratuities don’t count towards minimum wage.
  • Employees under 20 may be paid 85% of minimum wage for the first 90 days of employment, but only if they are in a city-approved training and apprenticeship program.
  • Next increase is July 1, 2020.

Effective today, Minnesota employers must follow the new so-called “Wage Theft Law” (it is actually just a bunch of amendments to existing law). This is primarily a change in recordkeeping and employee notices, creating an administrative burden likely to cause many in HR to want to raise the white surrender flag. While I’m not a big fan of government model documents, like the FMLA paperwork, this is another document that I do think employers will benefit from using the model notice – you can get it here. But beware – even though the State is providing this notice, it notes the notice must be completed “properly”. In other words, make sure you dot your “i’s”, cross your “t’s”, and fill in all the blanks with the correct information.  The new employee notice must be provided to all new hires as of today, July 1, 2019 and a copy must be kept in the employee’s personnel file. Also, employers must be prepared to provide the information to the Minnesota Department of Labor and Industry (MNDOLI) within 72 hours of demand.

Employee Notice – Possible Pitfalls – What Can Go Wrong?

  • Make sure all the blanks are completed, even write “N/A” if, for example, the employee does not have a different mailing address.  This confirms you read and answered the question.
  • Make sure the information is correct – if they negotiate for a different wage rate at the last minute, be sure it is in there at the right rate.
  • Leave benefits available – be sure to clarify when benefits start (when the employee is eligible).
  • Deductions – what the state is looking for is unclear and may be unduly burdensome.  If you list everything you can think of you may leave out things.  Accordingly, since this says “may” consider just: “usual and customary taxes and withholdings and authorized deductions”.
  • Be sure the employee signs it before they start work!
  • Keep the second page with the notice to confirm they were provided the notice in multiple languages.
  • As the information changes (i.e. rates of pay, deductions, vacation time, etc.) new notice must be given (for just the changed information).  And yes, it is going to be an administrative nightmare.  Every time something on the form changes, the employee needs a new notice with respect to that item only.  Best practices (if possible) would be to have the employee sign the notice, though they do not need to.

Earnings Statements – New Information Required – Check With Your Payroll Provider

Information provided on employee’s payroll (pay stubs or earnings statements) must now include the following information – your payroll provider should be aware:

  • Employee’s rates of pay and basis for such rates (i.e per hour, shift, day, week, salary, piece, commission or other method).
  • Allowances claimed for permitted meals and lodging.
  • Employer’s telephone contact information.
  • Physical address of employer’s main office or principal place of business and mailing address (if different).
  • Unchanged (you should already be providing):
    • Name
    • Wages paid (gross and net after deductions)
    • Hours Worked
    • Deductions made
    • Benefits accrued
    • Pay period start and end date
    • Employer’s legal and operating name

Other Records that Must Now Be Kept By Employers:

  • Hours worked each work day and workweek – including, for all employees paid at a piece rate, the number of pieces completed at each piece rate.
  • A list of personnel policies with brief descriptions of each, including the date provided (suggest a list of documents and having the employee sign it – consider attaching your handbook’s table of contents).
  • A copy of the new notice that is required to be provided and signed by each employee at the start of employment and a copy of any written changes to the notice that were provided to each employee.

Remedies and Penalties for Noncompliance Are No Joke: 

  • If the employer’s records do not provide sufficient information for MNDOLI to determine the exact amount of back wages due – the Department may decide for you the wages due based on the evidence provided.
  • Employers have a “substantive right” to the payment of commissions and wages, and to be paid on a regular payday.
  • Employers cannot retaliate against an employee for exercising their substantive rights.
  • The Department has enforcement authority to enter and inspect records, and interview non-management employees in private (without an employer representative).
  • The Department can order an employer to pay a penalty for each day payment is not made in compliance with an order.
  • Many other penalties… (see the summary here).
  • Criminal sanctions for wage theft – up to 20 years imprisonment and a fine of up to $100,000 if value of wages stolen is more than $35,000.  The lesser criminal sanctions is imprisonment not more than 1 year and fine of not more than $3,000 for wage theft more than $500 but less than $,1000.  The rest is somewhere in between.

In all, the changes are designed to give employees clear information up front about their wages and deductions.  However, in reality, it’s just creating a lot more paperwork for HR and potential penalties and fines for not having kept the proper information (think about technical I-9 violations – they add up quick!).