Minnesota Supreme Court Affirms Wage Claim Penalties

Employees who believe they have been improperly denied payment of wages or commissions owed when separated from employment may make a claim against their employer seeking full payment. Particular statutory provisions apply depending on whether the employee was terminated or voluntarily resigned.

In either situation, the employee may be entitled to a penalty payment, in addition to full payment of the owed wages or commissions. That penalty is “equal to the amount of the employee’s average daily earnings at the employee’s regular rate of pay or the rate required by law, whichever rate is greater, for every day, not exceeding 15 days in all” until such payment is made. An employee is not entitled to the penalty payment unless the claim results in the employee obtaining an amount greater than the amount of wages or commissions already paid by the employer in good faith.  Minn. Stat. § 181.14, subd. 3.

The Minnesota Supreme Court recently decided whether non-wage related amounts owed by the employee to the employer can be offset against the wages or commissions recovered in determining whether the employee is entitled to the penalty payment.

In Toyota Lift of Minnesota, Inc. v.  American Warehouse Systems, LLC, a lawsuit resulted in the employee being awarded more than $100,000 in disputed commissions. However, the employer’s counterclaim resulted in a more than $800,000 unrelated judgment against the employee. The Minnesota Supreme Court held that the unrelated counterclaim judgment could not be offset against the employee’s wage claim recovery. While the statute is silent as to whether such an offset is expressly permissible or not, the Court concluded that, when each part of the statute is read in context, such an offset was not authorized by the Minnesota Legislature.

Takeaway: Unrelated amounts owed to the employer cannot be offset against wages or commissions owing to the employee to avoid the statutory penalty payment. Employers should be aware that the possibility of such a penalty remains regardless of the merits of their counterclaims against the employee.

2017 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 27, 2016, the Internal Revenue Service announced the 2017 cost-of-living adjusted amounts for certain retirement plan and fringe benefit limitations. Earlier in 2016, the Internal Revenue Service announced the 2017 cost-of-living adjustments affecting health savings accounts and high deductible health plans, and on October 18, 2016, the Social Security Administration announced the 2017 cost-of-living adjustments related to Social Security benefits.

A list of the cost-of-living adjusted amounts that most commonly affect employer-sponsored benefit plans is available here.

No Employee Defections on the Day of Elections

All Minnesota Employers are statutorily obligated to provide employees, “the right to be absent from work for the time necessary to appear at the employee’s polling place, cast a ballot and return to work” without a pay or PTO deduction or any direct or indirect interference.  Minn. Stat. §204C.04. This applies to any time of day and to exempt and non-exempt employees scheduled to work during the time the polls are open. Violation is a misdemeanor.

Is this potentially a citizen’s “senior skip day?” No. The statute rests on a rule of reasonableness regarding the scheduling of time off, and the amount of time off. The employer has the right to be told when the employee will be gone and ask that absences be coordinated (but can’t so require). An employee who just doesn’t show up for work on November 7th can’t count on a statutory free pass.

How can an employer handle a suspected abuse? Preemptive, pro-active measures are likely not the best path to follow since warning and rules could well look to be prohibited indirect attempts to thwart the statutory time-off requirement. But after-the-fact, carefully handled individual investigations of suspected abuse can be consistent with the statute and its rule of reasonableness. The previous version of the statute allowed for the morning off and that may be a reasonable rule of thumb.

Takeaway:  An employer suspecting employee abuse, especially wide-spread abuse, of the paid time off to vote statute can, after the fact, determine if the employee(s) actually complied with the statutory rule of reasonableness. But proceed cautiously given the statute’s prohibition against indirect interference. Advice of legal counsel would be particularly helpful when the employer seeks to make sure election day doesn’t become defection day.

Lawsuits and Congress Attempt to Stop New DOL Overtime Rules

In May 2016, the federal Department of Labor issued its final rules amending the overtime regulations applicable to white collar exemptions. In principal part, these new regulations increase the minimum salary threshold amount necessary for the exemptions to apply from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The DOL also increased the minimum salary threshold amount applicable to the highly compensated employee exemption from $100,000 per year to $134,004 per year. These minimum salary amounts are subject to automatic updates every three years.  The new overtime rules become effective December 1, 2016.

The DOL estimates that these new regulations will affect at least 4.5 million workers and employers are scrambling to determine whether to significantly increase the base salary paid to those white collar workers or to forfeit the applicable overtime exemption.

In an effort to block enforcement of the new DOL rules, two lawsuits were filed in Texas federal court on September 20, 2016. In Nevada v. United States Department of Labor, 21 states have sought a declaratory judgment that the new regulations were improperly implemented and an injunction preventing their enforcement. In Plano Chamber of Commerce v. Perez, several Chambers of Commerce and other business organizations filed a similar lawsuit seeking the same type of relief.

Congress is also seeking to block enforcement of these new overtime regulations. On September 28, 2016, the House of Representatives voted 246 to 177 in favor of the “Regulatory Relief for Small Businesses, Schools, and Nonprofits Act” to delay enforcement of the new DOL rules until June 1, 2017.

Takeaway: While efforts are fast and furious to block – or at least delay – enforcement of the new DOL overtime rules, the current December 1, 2016, effective date is fast approaching. Employers should reach out to their legal counsel with any questions they have regarding how to comply with these new rules and any updates on the above-noted actions.

Minnesota Supreme Court Rejects Minneapolis Minimum Wage Ballot Initiative

On August 31, 2016, the Minnesota Supreme Court issued an order agreeing with the Minneapolis City Attorney that a ballot initiative could not be used to enact a new minimum wage in the City of Minneapolis.

In late July of this year, the Minneapolis City Attorney issued a legal opinion that concluded that a petition with 20,000 signatures in support of a ballot initiative to amend the City Charter to include a $15 minimum wage was not a proper subject for a ballot initiative.  Following the City Attorney’s advice, the City Council agreed not to include the ballot initiative on the ballot for the upcoming election in November.  Labor activists then challenged the City’s position in Hennepin County District Court.  Last week, the district court disagreed with the City and ruled that the $15 minimum wage should be included on the ballot in this November’s election.  The City appealed the district court’s decision.

On appeal, the Minnesota Supreme Court reversed the district court and sided with the City.  The Court reasoned that city charters may or may not provide for the enactment of an ordinance through the ballot initiative and that the Minneapolis City Charter does “not authorize the proposed charter amendment.”  Vasseur et al. v. City of Minneapolis, et al., No. A16-1367 (Minn. Aug. 31, 2016).

Takeaway:  The $15 minimum wage ballot initiative for the City of Minneapolis will not appear on the ballot this November.

Massachusetts Limits An Employer From Asking Applicants About Salary History

An applicant’s wage history is often a factor employers consider in making hiring decisions. In fact, it is not uncommon for an employment application to ask how much a candidate made at their previous positions.  Various good faith reasons may support this question.  For example, how much an applicant was paid may indicate, beyond job title, how significant his or her job duties and experience have been.

Past wage history may also determine how much the new employer is willing to offer the candidate to entice their employment. The Massachusetts legislature recently considered this issue and determined that setting compensation based on wage history can unfortunately perpetuate market wage disparities based on gender or race.  In response, Massachusetts enacted a new pay equity law that prohibits employers from seeking wage history information from applicants.  A copy of the new law can be found here.

Pursuant to this new law, it will considered an unlawful act for an employer to:

  • Screen job applicants based on their wage, including benefits or other compensation or salary histories, including by requiring that an applicant’s prior wages, including benefits or other compensation or salary history satisfy minimum or maximum criteria; or request or require as a condition of being interviewed, or as a condition of continuing to be considered for an offer of employment, that an applicant disclose prior wages or salary history.
  • Seek the salary history of any prospective employee from any current or former employer; provided, however, that a prospective employee may provide written authorization to a prospective employer to confirm prior wages, including benefits or other compensation or salary history only after any offer of employment with compensation has been made to the prospective employee.

This new law will not be effective until January 1, 2018.

Takeaway: Employers hiring applicants in Massachusetts should be aware of this new law and take steps to edit their employment application forms and processes as necessary prior to January 2018.  Employers should continue to monitor this issue as similar laws might well be enacted in other states.

Do Employees Need to Have Final Hiring and Firing Authority to Qualify for the FLSA’s Executive Exemption?

Not necessarily – a recent decision from the Eighth Circuit Court of Appeals illustrates that employees may qualify for the executive exemption under the Fair Labor Standards Act (FLSA) even if they do not have final authority over hiring and firing decisions.

In Garrison v. ConAgra Foods Packaged Foods, LLC, the issue before the court was whether the plaintiffs’ recommendations relating to hiring and firing decisions were given sufficient weight to qualify for the executive exemption.  Nos. 15-1177, 15-1428 (8th Cir. Aug. 15, 2016).  It was undisputed that the other requirements of the executive exemption were satisfied.

The parties agreed that the plaintiffs did not have final authority over hiring and firing decisions, but disputed whether they nevertheless qualified as exempt because their “recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” 29 C.F.R. § 541.100(a)(4).  The court held that the evidence established that the plaintiffs’ recommendations concerning hiring and firing decisions were given “particular weight” because:

  • The plaintiffs were responsible for appraising performance and reporting good or poor performance for probationary employees;
  • Two of the plaintiffs recommended the discharge of one probationary employee and that recommendation was followed;
  • Some employees were demoted based on evaluations and feedback from the plaintiffs;
  • The plaintiffs were able to fill temporary vacancies by moving employees from one classification to another; and
  • The plaintiffs recommended discipline for employees and management followed those recommendations most, if not all, of the time.

Because the Eighth Circuit agreed that the plaintiffs’ recommendations concerning hiring and firing decisions were given particular weight, the court affirmed summary judgment in favor of the employer on the grounds that the employees were exempt from the FLSA.

Takeaway: Employees may qualify for the FLSA’s executive exemption even if they do not have final authority over hiring and firing decisions, provided that their recommendations concerning hiring and firing are given particular weight.

How To Take Credit For Bonuses and Commissions Under the DOL’s New Salary Basis Rules

The Department of Labor’s new salary basis rules, which are set to go into effect in December of 2016, permit employers to use bonuses, incentives, and commissions to satisfy part of the salary requirements for exempt employees under the Fair Labor Standards Act (FLSA).  Here’s what employers need to know about this aspect of the DOL’s new rules:

  • Employers can use nondiscretionary bonuses, incentives, and commissions to satisfy up to 10% (or $91.30 per week) of the new $913 per week salary requirement for exempt employees.
  • To qualify, the nondiscretionary bonuses, incentives, or commissions must be paid quarterly or more frequently.
  • Because the employer can only take credit for up to 10% of the $913 per week salary requirement, the employer still must pay affected employees a minimum of $821.70 per week to ensure the salary basis requirements are satisfied.
  • If by the last pay period of the quarter, the employee’s salary plus his or her nondiscretionary bonuses, incentives, or commissions do not equal at least 13 times the weekly salary requirement (or $11,869), the employer may make one final “catch-up” payment sufficient to achieve the required amount.
  • Any catch-up payment made by an employer must be paid no later than the next pay period after the end of the quarter and must count only toward the prior quarter’s salary amount (not toward the salary amount for the quarter in which it was paid).

Takeaway:  Employers may use nondiscretionary bonuses, incentives, and commissions to satisfy up to 10% of the FLSA’s salary basis requirements for exempt employees, provided that they follow the above-listed rules.

Eighth Circuit Court of Appeals Reinstates NFL’s Punishment of Adrian Peterson

The NFL’s 2014 punishment of Adrian Peterson has been a rollercoaster ride.  After a district court vacated the punishment, the Eighth Circuit Court of Appeals has now reinstated it.

The NFL suspended Peterson and fined him the equivalent of six games worth of pay after he entered a plea of no contest in November 2014 to a misdemeanor charge of reckless assault against one of his children.  Peterson challenged the punishment under the NFL Players Association’s collective bargaining agreement, but an arbitrator initially upheld the punishment as valid.

Next, Peterson challenged the decision in federal court.  Because federal courts are generally very deferential to arbitration decisions, Peterson had a difficult legal standard to meet to vacate the decision.  However, in February of 2015, the district court agreed with Peterson and vacated the punishment on the grounds that:  (i) the punishment violated the collective bargaining agreement because it applied a new NFL personal conduct policy retroactively in violation of a previous decision regarding Ray Rice; and (ii) the arbitrator exceeded his authority by considering whether the punishment could be sustained under the NFL’s previous personal conduct policy.  The NFL then appealed the district court’s order to the Eight Circuit Court of Appeals.

In National Football League Players Association v. National Football League, the Eighth Circuit Court of Appeals reversed the district court and reinstated the NFL’s punishment of Peterson as valid.  No. 15-1438 (8th Cir. August 4, 2016).  In reaching this decision, the court first reasoned that the district court’s disagreement with the arbitrator’s conclusion regarding retroactive application of the new NFL policy was not a valid basis to vacate the arbitrator’s decision.  Rather, the arbitrator’s decision needed to be upheld so long as the arbitrator was “at least arguably construing or applying the contract, including the law of the shop.”  Because the arbitrator “undoubtedly construed” the previous Ray Rice decision, the Eighth Circuit held that this requirement was satisfied and that the arbitrator’s decision on the issue should not be second-guessed by the courts.

The Eighth Circuit also disagreed that the arbitrator exceeded his authority by considering whether the discipline could be upheld under the NFL’s old personal conduct policy.  With respect to this issue, the NFL Players Association argued that the only question presented to the arbitrator was whether the NFL could retroactively apply its new policy to Peterson.  The Eighth Circuit pointed out, however, that the NFL characterized the issue more broadly as “Is the discipline appropriate?”  The NFL Players Association also raised arguments during the arbitration concerning whether the discipline was permitted under the NFL’s old policy.  As a result, the Eighth Circuit concluded that the arbitrator was at least arguably acting within the scope of his authority when he considered the previous policy, so that his decision must be upheld.

Takeaway:  The Eighth Circuit’s decision concerning Adrian Peterson is a reminder that courts are very deferential to arbitration decisions and that it is generally difficult to vacate an arbitration decision in federal court.

Can Minneapolis Voters Raise The Minimum Wage By Ballot Initiative?

No – the Minneapolis City Attorney recently published a legal opinion stating that a ballot initiative cannot be used to enact a new minimum wage in the City of Minneapolis.

In June of 2016, a group called 15 Now Minnesota submitted a petition with 20,000 signatures to the City of Minneapolis.  The petition sought to include a ballot initiative in the upcoming November election, which would amend the Minneapolis City Charter to increase the minimum wage.  The proposed amendment would have gradually raised the minimum wage in Minneapolis over time so that it would reach $15.00 per hour by August of 2022.

On July 28, 2016, the Minneapolis City Attorney issued a legal opinion that concluded that the proposed amendment to the city charter was not a proper subject for a ballot initiative.  The City Attorney reasoned that, under Minnesota law, city charters may only be used for the “establishment, administration or regulation of city government.”  See Minn. Stat. § 410.07.  In contrast to a charter amendment governing the administration of city government, a legislative ordinance may only be implemented through ballot initiative if specifically authorized by the city charter.  See Minn. Stat. § 410.20.

The City Attorney concluded that the proposed minimum-wage amendment was “legislative in nature” and did not relate to the establishment, administration or regulation of city government.  Because the Minneapolis City Charter does not specifically authorize the implementation of legislative ordinances through the ballot initiative process, the City Attorney further concluded that “the proposed amendment is not a proper subject for a charter amendment and the Council should decline to place the provision on the ballot.”

Takeaway:  The 20,000 signature petition seeking to amend the Minneapolis City Charter to increase the minimum wage is likely not a valid means of enacting a higher minimum wage within the City of Minneapolis.

When is an Employer a “Successor Employer” or a “Perfectly Clear Successor Employer”?

When an employer purchases another company or facility with a workforce covered by a collective bargaining agreement, it should pay careful attention to whether it is either a “successor employer” or a “perfectly clear successor employer” under the National Labor Relations Act (NLRA).  Here’s what employers need to know about these two different statuses:

Successor Employers:  A “successor employer” is a new employer that continues its predecessor’s business in substantially unchanged form and hires employees of the predecessor as a majority of its workforce.  An employer who qualifies as a successor employer has an obligation to bargain with the union that represented the employees while they were employed by the predecessor.  Because it is not usually evident whether the union will retain majority status in the new workforce, however, the duty to bargain with the union does not normally arise until after the successor establishes the initial terms and conditions of employment.  This means that a new employer who is merely a “successor employer” typically has an opportunity to change the terms and conditions of employment before the duty to bargain with the union arises.

Perfectly Clear Successor Employers:  If it is “perfectly clear” that a new employer will retain all of the employees of the bargaining unit, the obligation to bargain with the union may arise before the new employer sets the initial terms and conditions of employment.  A new employer is deemed to be a “perfectly clear successor employer” if it has either: (i) actively or, by tacit inference, misled employees into believing they would all be retained without change in their wages, hours, or conditions of employment; or (ii) failed to clearly announce its intent to establish a new set of conditions of employment prior to inviting former employees to accept employment.  Thus, to avoid becoming a perfectly clear successor employer, the new employer must clearly announce its intent to establish a new set of conditions prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.

The National Labor Relations Board (NLRB) discussed these two concepts in detail in its recent decision in Nexeo Solutions, LLC, 364 NLRB No. 44 (July 18, 2016).  In Nexeo Solutions, LLC, the NLRB held that the new employer was a “perfectly clear successor employer” because it informed the predecessor’s bargaining unit employees that they would be transferred to the new business, and then, a day later, advised them that they would be retained with equivalent salaries and benefits comparable to those provided by the predecessor.  The new employer did not announce an intent to change the terms and conditions of employment until three months after these initial communications were made.  Because of the initial communications, the NLRB reasoned that the union’s majority status in the new work force was “essentially guaranteed,” and the new employer was a perfectly clear successor who had a duty to bargain before imposing new conditions of employment.

Takeaway:  To avoid becoming a “perfectly clear successor employer,” an employer involved in an acquisition should clearly announce its intent to establish a new set of terms and conditions of employment for the acquired workforce prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.

T.I.P.S. For Avoiding Unfair Labor Practice Charges under the NLRA

There are four problematic behaviors, which employers should avoid to stay in compliance with the National Labor Relations Act (NLRA).  These behaviors are commonly abbreviated as T.I.P.S. and consist of the following:

  • Threats: Employers may violate the NLRA if they make threats against employees who support unions or unionization efforts.  Impermissible threats may take a variety of forms, such as threatening to close a facility, to cut employees’ pay, or to fire employees.
  • Interrogation: Employers may violate the NLRA if they interrogate employees about union activities or unionization efforts.  For example, employers should not ask employees which of their co-workers are union sympathizers or whether they are voting in support of the union.
  • Promises: Employers may violate the NLRA if they promise benefits to employees who oppose a union.  For example, an employer should not offer a one-time bonus to any employee who votes against a union.
  • Surveillance/Spying: Employers may violate the NLRA if they spy on employees or conduct surveillance regarding the employees’ union activities.  For example, employers should not attempt to record employee meetings about forming a union or photograph employees who are engaging in union activity.

Takeaway:  Employers can reduce the risk of unfair labor practice charges by following these T.I.P.S.