Minneapolis Wage Theft Prevention Ordinance to Take Effect January 1, 2020

Just six months after Minnesota’s state-wide wage theft law went into effect, Minneapolis employers need to be prepared for a few additional requirements in the local version. The Minneapolis Wage Theft Prevention Ordinance will take effect starting on January 1, 2020. It applies to all employers located in the city, plus those who have employees working at least 80 hours per year in the city.

The city ordinance requires an employer to pay all wages—including salary, gratuities, earnings, and commissions—“on a regularly scheduled payday” identified to the employee in a pre-hire notice. That pre-hire notice must also include information such as the start date of employment, overtime policy, and a statement that the sharing of gratuities is voluntary (if applicable to the position). Any change to the information in that notice requires a new written notice signed by the employee before the changes go into effect. That notice must be both conspicuously posted at any workplace in Minneapolis, and also personally provided to new employees when they start work.

An important difference between the statewide law and the city ordinance is that the required pre-hire notice also must include extensive information about the Minneapolis Sick and Safe Time Ordinance. This includes the method by which the employee accrues sick time, the date when the employee is entitled to use sick time, and the date when the employer’s year ends for the purpose of sick time accrual.

Another difference between the Minneapolis ordinance and the state law: if any of the information required in the pre-hire notice has not already been given to any current employees, Minneapolis employers must give that notice to those employees as of January 1, 2020.

Minneapolis employers should familiarize themselves with the entire ordinance, which can be read here.

Takeaway: Minneapolis employers must prepare to comply with the city’s wage theft ordinance, which has additional requirements on top of the statewide law enacted earlier this year.

Final DOL Overtime Rule to Take Effect January 1, 2020

On September 24, 2019, the U.S. Department of Labor (“DOL”) announced a final rule increasing the salary threshold for exempt employees under the Fair Labor Standards Act (“FLSA”).  The DOL estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the final rule, which will take effect on January 1, 2020.

The final rule raises the earnings thresholds necessary to exempt executive, administrative and professional employees from the FLSA’s minimum wage and overtime requirements. In the final rule, the DOL is: 1) raising the standard salary level to $35,568 per year or $684 per week (currently $23,660 per year or $455 per week); 2) raising the total annual compensation requirement for highly compensated employees to $107,432 (currently $100,000); 3) allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid annually to satisfy up to 10% of the standard salary level; and 4) revising the special salary levels for workers in U.S. territories and the motion picture industry.

Find more information on the final rule here and view the final rule text here.

Takeaway: The DOL’s announcement leaves employers with just over 90 days to come into compliance with the final rule. As a result, employers will need to make decisions about employees whose salaries are currently below the new threshold.  Employers will need to either raise salaries for currently exempt employees or reclassify these employees as non-exempt and eligible for overtime.

Minnesota’s New Wage Theft Law Takes Effect July 1, 2019

Employers should be reminded that on July 1, 2019, many provisions of the new Minnesota Wage Theft Law will go into effect. The new law includes requirements regarding the timing of wage payments, written wage notices, earning statements, and recordkeeping.

With regard to the timing of wage payments, the Wage Theft Law requires employers to pay all wages, now defined to include salary, earnings, and gratuities, at least every 31 days and all earned commissions at least every three months on a regular pay day.

The new law also requires employers to provide employees “at the start of their employment” a wage notice that details, among other things, the employee’s rate of pay, the terms for use and accrual of any type of PTO, and a list of deductions that may be made from the employee’s pay. Employers must retain a signed copy of the notice for each employee. Employees should also be advised in writing of changes to the information in the notice before the change goes into effect.  Importantly, employers are required to provide wage notices to employees hired, or employees whose wage arrangements change, on or after July 1, 2019.

Earning statements must now include additional specific information, a list of which can be found here.  Many employers may already be providing this information in their earning statements, but all employers should verify that the required information is included.

Employers must also maintain additional records, including but not limited to, a list of the personnel policies provided to each employee, the date the policy was given to each employee, and a brief description of the policy.

Note that this post does not cover all facets of the new law.  Employers should familiarize themselves with the requirements in full to ensure compliance.  Minnesota Department of Labor and Industry resources can be found here: (1) Summary of Minnesota’s New Wage Theft Law, (2) Guidance for employers on Minnesota’s new Wage Theft Law, (3) Wage Theft Q&A, and (4) Employee Wage Notice Example.

Takeaway: Many provisions of the Wage Theft Law will go into effect July 1, 2019. Employers should check their documentation and practices to ensure compliance with the new requirements.

Authored by: Britt Gilbertson and Kirsten Pagel

Minneapolis Minimum Wage Increase Set for July 1, 2019

Per the Minneapolis Minimum Wage Ordinance, the minimum wage for small and large businesses will increase in the next month. Beginning  July 1, 2019, large employers, which are businesses with more than 100 employees, must pay at least $12.25 per hour to their employees. Small employers, which are businesses with 100 or fewer employees, must pay $11.00 per hour. Importantly, tips and gratuities do not affect the minimum wage an employer must pay to its employees.

In addition, the minimum wage ordinance applies to employees who perform work for two or more hours in a week within the City of Minneapolis. Therefore, even if an employer’s business is not located in Minneapolis, if it has employees working in Minneapolis, it may be subject to the minimum wage requirements.

Find employer resources related to compliance with the Minimum Wage Ordinance here.

Takeaway: The Minneapolis minimum wage increases on July 1, 2019. Employers should check their policies and payroll to ensure compliance with the new requirements.

Minnesota Legislature Introduces Separate Bills to Modify Sexual Harassment Standard

The Minnesota Legislature is considering two bills related to the standard for sexual harassment claims under the Minnesota Human Rights Act (MHRA).

On March 21, the Minnesota House passed H.F. 10, which seeks to change the definition of “sexual harassment” under the MHRA. The proposed language provides that conduct need not be “severe or pervasive” to constitute sexual harassment. A similar bill was introduced in 2018 and failed. If the proposed bill is successful, it will lower the threshold for actionable sexual harassment claims.

Additionally, this month, the Senate introduced S.F. 2295, which would modify the precedential effect of certain case law regarding what conduct constitutes sexual harassment. The proposal purports to clarify legislative intent for sexual harassment claims under the MHRA by stating that Minnesota courts “should not be bound by prior federal case law” regarding sexual harassment claims and specifically identifying certain Federal cases. It also appears to modify the standard for holding employers liable for harassment by supervisors established in Frieler v. CMG (Minnesota Supreme Court 2018).

Takeaway: This legislation will dramatically affect how sexual harassment cases are litigated in Minnesota. If this is of importance to you or your business, you should contact your local senators and representatives.

Authored by: Kristin (Emmons) Simonet and Greg Stenmoe

Department of Labor Proposes New Salary Requirement for Exempt Employees

On March 7, 2019, the Department of Labor (DOL) announced a proposed rule to raise salary requirements for overtime exemptions for executive, administrative, and professional employees. Currently, the salary threshold for exempt employees is $455 per week, or $23,660 annually. Under the Fair Labor Standards Act (FLSA), employees below this salary threshold must be paid overtime for hours worked in excess of 40 hours per week.

Under the proposed rule, the salary threshold for the overtime exemption would raise to $679 per week, or $35,308 annually. In order to classify employees as exempt from overtime requirements, employers would need to meet this new requirement, in addition to the job duty requirements. This salary proposal is approximately $12,000 lower than the DOL’s proposed change in 2016.

The proposal also increases the total annual compensation for exempt “highly compensated employees” from the current annual salary of $100,000 to $147,414.

The DOL submitted the proposed rule to the Office of the Federal Register for public comment. If accepted, the DOL estimates that the new rule will take effect in January 2020.

More information regarding the proposed rule is available at https://www.dol.gov/whd/overtime2019/. In addition, the public is encouraged to submit comments about the proposal at https://www.regulations.gov/, in the rulemaking docket RIN 1235-AA20. The public has 60 days to comment on the proposed rule, beginning on the date of publication.

Takeaway: Employers may soon have to comply with new salary requirements for FLSA overtime exemptions. It is never too early to review current overtime policies and employee classifications to identify changes that may be needed when the proposed rule goes into effect.

Minneapolis $15 Minimum Wage Ordinance Upheld

On March 4, 2019 the Minnesota Court of Appeals upheld a Minneapolis city ordinance setting the minimum wage in the city at $15.00 per hour. Minneapolis company Graco, Inc. sued the City of Minneapolis in  November 2017, arguing that the minimum wage law was unlawful in light of state laws regulating the minimum wage.

In April 2018, the district court held that the Minneapolis ordinance was lawful. Graco appealed to the Minnesota Court of Appeals. The Court of Appeals affirmed, holding that state law does not prohibit cities from setting a higher minimum wage so long as employers pay employees at least the state minimum wage.

As of July 1, 2018, large employers were required to pay employees who work within Minneapolis at least $11.25 per hour, which will increase annually, eventually reaching $15.00 per hour in 2022. Small employers must currently pay employees $10.25 per hour, which will also increase annually, reaching $15.00 per hour in 2024.

Takeway: Minneapolis’s new minimum wage ordinance is active and enforceable. Employers should review the ordinance carefully to ensure compliance. On July 1, 2019, the Minneapolis minimum wage will see another annual increase on its way to $15.00 per hour. Large employers will be required to pay at least $12.25 per hour and small employers will be required to pay $11.00 per hour.

Independent Contractor Misclassifications in Minnesota

One area of employment law that often trips up Minnesota companies is whether a worker should be considered an “employee” or an “independent contractor.” In general, independent contractors are considered to “be their own bosses.” In other words, because employers have less control over them, independent contractors are not subject to employment laws relating to wages, workplace health and safety, and withholding taxes. But the line between an independent contractor and an employee can be hard to draw, and federal and state agencies have been stepping up enforcement of the laws prohibiting misclassification of workers as independent contractors.

One mistake we frequently see is that when an agency, such as the U.S. Department of Labor or the Minnesota Department of Revenue, initiates an inquiry or enforcement action based on potential misclassification of a worker as an independent contractor, the company tries to respond informally, without involving their employment attorney. This can lead to unnecessary difficulties. For example, as the company tries to explain to the investigator why the worker is an independent contractor, the company may inadvertently provide information that the investigator can use against the company. Or, the company may not understand the impact of the investigation—misclassification can result in significant taxes, fines, or other liabilities. And, the company may not know the best practices for how to resolve the dispute. The last thing the company needs is for the result of one agency’s investigation to spur other agencies into undertaking their own investigation. Briggs and Morgan, P.A. has experience working with the Minnesota Department of Revenue and other relevant agencies to conclusively resolve misclassification inquiries.

Usually, the agency looks at a variety of factors to determine whether it believes the classification is correct. A company’s honest belief or good faith intent regarding classification of its workers as independent contractors is generally irrelevant, which is why so many companies may face liability for misclassifications. Instead, the agency will look at certain factors regarding the relationship between the worker and company. Another factor often working against the company is that the agency has an interest in finding an employee-employer relationship, so the scales may often tip in that direction when there is uncertainty.

Takeaway: When an employer receives notice of an investigation relating to misclassification of a worker as an independent contractor, it should not try to respond on its own—that can often make the situation worse. Instead, the employer should contact its employment law counsel right away so that a response strategy can be developed.

Authored by: Andrew Carlson and Kristin Emmons

Eighth Circuit Reiterates Presumption for At-Will Employment under Minnesota Law

Last week the Eighth Circuit Court of Appeals held in Ayala v. CyberPower Sys. (USA), Inc. that an employee’s compensation agreement did not modify his status as an at-will employee. No. 17-1852, 2018 WL 2703102, at *1 (8th Cir. June 6, 2018). In Ayala, the plaintiff entered into an agreement with defendant CyberPower that detailed the salary and bonus structure for his position as Executive Vice President of CyberPower. The agreement provided that it “outlines the new salary and bonus structure to remain in place until $150 million USD is reached. It is not a multiyear commitment or employment contract for either party.” The plaintiff was terminated before sales reached $150 million.

In 2015, the plaintiff sued CyberPower for breach of contract, claiming that the agreement secured his employment until the $150 million sales threshold was met. CyberPower argued that the agreement did not modify the plaintiff’s status as an at-will employee, so it had the right to terminate him at any time. The United States District Court for the District of Minnesota agreed with CyberPower and dismissed the lawsuit. The plaintiff appealed.

On appeal at the Eighth Circuit, the court stated that there is a strong presumption under Minnesota law in favor of at-will employment, and to alter the plaintiff’s status as an at-will employee, CyberPower “must have ‘clearly intended’ to do so by entering the Compensation Agreement.” Because the agreement stated that it only governed compensation and did not create a multi-year employment contract for either party, the court held that the plaintiff’s employment was at-will. Importantly, the court stated that “Minnesota law does not require a clear statement to continue at-will employment—it presumes such employment.”

Takeaway: This decision is a win for employers who have at-will employees, as it reiterates the strong presumption under Minnesota law in favor of at-will status, even if the employment agreement is silent on the issue. Employers should still be cautious, however, when drafting compensation agreements to ensure they are not unintentionally creating employment for a definite term.

Minnesota Legislature Considers Changes to Sexual Harassment Law

The Minnesota Legislature has been considering H.F. 4459, “a bill for an act clarifying the definition of sexual harassment” under the Minnesota Human Rights Act (MHRA). The bill would amend Minn. Stat. § 363A.03, subd. 43, which defines sexual harassment in employment, education, housing, and public service contexts.

Currently, Minnesota courts require that sexual harassment be “severe or pervasive” to be actionable under the MHRA. See Rasmussen v. Two Harbors Fish Co., 832 N.W.2d 790, 796 (Minn. 2013). This definition of actionable sexual harassment also mirrors the definition of sexual harassment under Title VII of the Civil Rights Act of 1964.

The proposed bill would add language to Minn. Stat. § 363A.03 providing that “an intimidating, hostile, or offensive environment … does not require the harassing conduct or communication to be severe or pervasive.” If passed, the amendment would apply to sexual harassment claims after August 1, 2018.

If the bill is successful, it will arguably lower the bar for actionable claims in Minnesota which could in turn significantly increase the number of claims faced by employers. Recent reports state that the bill is stalled in the Senate due to concerns from the business community.

Takeaway: Stay tuned for updates to Minnesota’s sexual harassment law. If you want to express concerns about this proposed legislation, contact your legislators.

New Tip-Pooling Rules on the Horizon

Yesterday the comments period ended on a proposal from the U.S. Department of Labor (DOL) regarding tip-pooling regulations under the Fair Labor Standards Act (FLSA). On December 5, 2017, the DOL published a news release regarding a proposed rule which would give employers greater freedom to allow tip pools and to determine how tips should be distributed to staff, including non-wait staff.

The comments period was originally scheduled to end 30 days after the DOL announced the proposal on December 5, 2017, but was extended to February 5, 2018 after the proposal gained widespread attention. The proposed regulation received 374,064 comments.

The current FLSA tip-pooling regulations prohibit redistribution of tips by the employer to an employee other than the one who originally earned and received the tips. The new DOL proposal would rescind these regulations to allow employers to make different rules regarding the distribution of tips to employees who do not traditionally receive tips. If the DOL adopts the proposal, employers could only take advantage of the new rule if they pay the full minimum wage to their employees and do not take a tip credit against payment of minimum wage.

The DOL release is available at https://www.dol.gov/newsroom/releases/whd/whd20171204.

Takeaway: Employers may see changes to federal regulations regarding tip-pooling in the near future. However, employers should be aware that specific state laws may still govern their business and may provide for separate regulations regarding tip pools.

Does the MHRA Require an Employer to Engage in an Interactive Process to Determine an Appropriate Reasonable Accommodation?

The Minnesota Court of Appeals recently held that the Minnesota Human Rights Act (MHRA) does not require an employer to engage in an interactive process with an employee to determine whether an appropriate reasonable accommodation is necessary.

In McBee v. Team Industries, Inc., the plaintiff, a machine operator, received medical attention for back and neck pain, including numbness in her hand and arms. No. 03-CV-15-1470 (Minn. Ct. App. Jan. 16, 2018). Her doctor placed her on a lifting restriction and she subsequently notified her employer of the restriction. The employer terminated her due to concerns related to her medical restrictions. The plaintiff brought suit alleging disability discrimination and reprisal in violation of the MHRA.

In deciding the case, the Minnesota Court of Appeals first analyzed whether the plaintiff was a qualified individual with a disability. Because she could not perform the essential functions of her job – the ability to lift ten pounds – the court determined that she was not qualified. The court also held that the plaintiff was unable to be accommodated because “an employer is not required to reallocate or eliminate essential functions of a job to accommodate an employee with a disability.”

Notably, the court also held that, unlike the American with Disabilities Act (ADA), the MHRA “does not require an employer to engage in an interactive process to determine an appropriate reasonable accommodation.” The court noted that this holding runs contrary to Eighth Circuit case law holding the MHRA require an interactive process, similar to the ADA. However, the court explained that the Eighth Circuit cited “federal law for this ruling based on language in the ADA, not language in the MHRA.” And the plain statutory language of the MHRA, unlike ADA regulations, makes no mention of a required interactive process.

Takeaway: The MHRA, which applies to all employers who employ at least 1 employee in Minnesota, does not require the employer to engage in an interactive process to determine an appropriate reasonable accommodation for a disabled employee. The ADA however, which applies to employers with 15 or more employees, may still be applicable to certain companies and does require an interactive process.