Category Archives: Uncategorized

DOL Withdraws Independent Contractor and Joint Employer Guidance

The United States Department of Labor (DOL) issued a press release on June 7, 2017, announcing the withdrawal of two significant guidance statements issued during the Obama Administration.

In July 2015, the DOL released Administrator’s Interpretation No. 2015-1 regarding the potential misclassification of employees as independent contractors. This guidance emphasized the applicability of the economic realities test to determine proper classification under the Fair Labor Standards Act (FLSA) and noted that most workers are employees under the FLSA’s broad definitions.

In January 2016, the DOL released Administrator’s Interpretation No. 2016-1 emphasizing the potential applicability of joint employer status. This guidance analyzed both horizontal and vertical joint employment. Horizontal joint employment generally involves the relationship between related corporate entities, such as a parent company and a subsidiary. Vertical joint employment generally involves the relationship between unrelated companies upon both of which the employee may be economically dependent. The DOL emphasized that joint employment should be defined expansively under the FLSA.

Despite withdrawing both of these guidance statements (they are no longer posted on the DOL website), the press release stated that the DOL will continue to fully and fairly enforce all laws within its jurisdiction.

Takeaway: By withdrawing its previously issued guidance on independent contractors and joint employment, the DOL may be signaling more relaxed enforcement in these areas. Nonetheless, employers should continue to follow applicable law in assigning independent contractor status and assessing joint employer responsibility.

“Pre-emption”: On a One-Way Ticket to Nowhere?

A “Pre-emption” or a uniform labor standards bill is a reaction in the Minnesota Legislature to the passage of sick time ordinances in Minneapolis and St. Paul. The idea is that Minnesota Employers’ obligations to employees regarding time-off and other similar obligations should be the same state-wide out of principles of fairness in competition and conformity. Also, the burden to metro-area employers in the current ordinances could well be altered or at least reduced if pre-emption bill passed by which state law pre-empts local ordinances and state-wide views pre-empt metro views of good public policy regarding private employer sick leave obligations.

A pre-emption bill is working its way through the legislature in these final session days, but the report “from the front” is that Governor Dayton will veto any pre-emption bill that makes it to his desk.

Takeaway: Minnesota Employers should prepare for the continued existence of different paid time-off standards throughout the State.

For Whom the Statute Tolls: A Nuance in the Minnesota Human Rights Act Important to Employers

A distinguishing characteristic of employment discrimination claims in their short statute of limitations – for Minnesota Human Rights Act claims the statute is only 12 months. Defamation claims are two years and tort and breach of contract claims are six years, so a one year limitation period is very favorable to employers. Doubtless, the Minnesota Legislature (like Congress with Title VII and its 300 day limitation period) saw employment discrimination claims as volatile and problematic enough to set a short time to make a claim. And many a claim has fallen on a count to the 365th day between the alleged discriminatory act and the filing of a charge.

A recent Minnesota Supreme Court case highlights a nuance to the hard and fast rule of 365 days. There is built into the statute a tolling period for any internal arbitration process or “conciliation”:

The running of the one-year limitation period is suspended during the time a potential charging party and respondent are voluntarily engaged in a dispute resolution process involving a claim of unlawful discrimination under this chapter, including arbitration, conciliation, mediation or grievance procedures pursuant to a collective bargaining agreement or statutory, charter, ordinance provisions for a civil service or other employment system or a school board sexual harassment or sexual violence policy.  – Minn. Stat. 363.28, subd. 3(b).

In Peterson v. City of Minneapolis, the plaintiff brought an age discrimination claim through an internal report and the defendant employer started an internal investigation under a Workforce Policy that contemplated possible resolution. While the trial courts found otherwise, the Minnesota Court of Appeals and ultimately the Minnesota Supreme Court concluded that the internal process constituted “alternative dispute resolution” of the “conciliation” type that suspended the statute. While there was no neutral involved or actual mediation discussions, the Court found that the intentions of the Workforce Policy and possibility of resolution constituted “conciliation” under the tolling provision of the statute.

For Minnesota Employers, this means that the protection provided by the short statute of limitations can be affected by an internal “alternative dispute resolution” process. To offset this potential uncertainty, either there should be no alternative dispute process as defined by Peterson as part of the internal investigation or, if there is, there should be a distinct end so the added tolled period can be accurately calculated. The statute has certain reporting provisions as well.

Takeaway:  Like a referee in a Minnesota United football game, the Minnesota Courts will simply add to statute of limitations “regulation time” any tolled period. Minnesota Employers doing internal investigations should be savvy to this and consult with legal counsel about how best to know if a process likely tolls the one year period or design the process so there is no tolling or its impact is short.

California Law and Venue for California Employees

Companies that have employees in various states often seek uniformity in developing employment agreements by using choice of governing law and venue provisions based on the state in which the company is headquartered or registered. For example, a Minneapolis-based company might select Minnesota law to govern its employment agreements, even though some of those employees are located in other states.

Employers who seek this consistency should be aware of a new California law which provides that employees who primarily reside and work in California cannot as a condition of employment be required to (1) adjudicate outside of California a claim arising in California or (2) be deprived of the substantive provisions of California law with respect to a controversy arising in California. This law applies to contracts entered into, modified, or extended on or after January 1, 2017.

Any provision of a contract violating this new prohibition is voidable at the request of the employee, after which any disputes will be governed by California law and will be adjudicated in California. This option to void contrary choice of law or venue provisions does not apply to contracts in which the employee was in fact individually represented by legal counsel in negotiating the terms of the agreement. A court may award reasonable attorney fees to an employee who must enforce their rights under this new law.

Takeaway: Employers based outside of California should be aware that contracts with California employees with choice of governing law and venue provisions outside of California are voidable and should measure expectations accordingly.

Duty to Indemnify Bars Negligence Claim for Damages

Employees will on occasion negligently perform their duties and as a consequence can often be discharged. But what about any damages caused by their negligence? Who pays the bill for that?

This issue was recently decided by the Minnesota Court of Appeals which held that the employer was not allowed to seek damage payment from the employee. First Class Valet Services, LLC v. Gleason, No. A16-1242 (Minn. Ct. App. March 20, 2017).

In First Class, the employee twice negligently caused damage to customer cars in his position as a parking valet. After reimbursing the car owners for their damages, the company filed a negligence lawsuit against the employee seeking to recover those payments. While prior Minnesota common law suggested that an employer could bring a claim against an employee to recover such payments, the Minnesota Court of Appeals determined that the valet company’s claim was barred by its duty to indemnify the employee for the negligent performance of his duties.

In 1993, the Minnesota Legislature enacted Minn. Stat. § 181.970 which generally requires an employer to defend and indemnify its employee against damages if the employee was acting in the performance of his duties. Although this statute did not expressly abrogate the common law rule, the First Class court held that the common law was indeed abrogated by necessary implication. The court reasoned that indemnification means to “hold harmless” in all respects and that permitting the employer to bring a claim against the employee might lead to the absurd result of the employee circularly seeking indemnification from the company regarding its own claim.

Takeaway: If a claim for damages results from an employee’s negligent performance of his or her job duties, and the employee is not guilty of intentional misconduct, willful neglect of the duties of their position, or bad faith, then the employer is statutorily obligated to indemnify the employee. As a result, an employer claim against the employee to recover payment of those negligently caused damages is barred by the duty to indemnify.

The Next Wave: Minnesota Metro and the $15 Minimum Wage

Moving beyond earned sick leave and safe time ordinances, it is very likely that this year the Minneapolis and St. Paul City Councils will take on the possibility of a $15 minimum wage ordinance. Such a municipal minimum wage exceeds state ($7.75 for small employers and $9.50 for large employers) and federal ($7.25) minimum wage, of course. The municipal earned sick leave and safe time ordinances passed by both cities in 2016 were the first wave in a national movement for employee rights that began in other major cities (such as San Francisco and Seattle) where the $15 minimum wage was then the next wave. Indeed, a task force on the $15 minimum wage ordinance has just formed in Minneapolis. State minimum wage initiatives stalled out in the last legislature sessions, so the major municipalities are taking the initiatives.

Arguments in favor of the $15 an hour minimum wage ordinances sound in quality of life and attraction of entry level employees in a high employment rate economy. And although $15 an hour may not be a realistic living wage, especially for a family, it reduces the need of low wage employees to work several jobs, creating a very human reason for metropolitan areas to have a higher minimum wage. Indeed, many Twin Cities metropolitan area employers already pay a minimum of $12 plus an hour, so the change is not extreme.

And the possibility of such ordinances passing as a second wave of employee rights municipal legislation has likely increased with the employer community’s inability to hold back the first wave sick leave and safe time ordinances in 2016. Having spent a lot of effort unsuccessfully in 2016 in broad opposition to the first wave, it is a strong possibility that employers opposing the second wave of the $15 minimum wage in 2017 will need to focus their efforts on exemptions and credits. Tip credits, student work study, training wages, gradual phase-in periods are examples of such possible exemptions in the ordinances that reduce the impact of this next wave.

Takeaway: Minneapolis and St. Paul employers are wise to anticipate in their business models, budgets for payroll and benefits and staff planning the passage of a $15 municipal minimum wage ordinance and follow closely the passage and specific provisions of this next wave of employee-protection ordinances. You don’t want to wind up like the old story of King Canute who tried to order the waves to hold back (unsuccessfully). Minnesota Employer will keep you updated.

Look Out St. Paul Employers: Here Comes the ESST!

Minnesota Employers operating in the East Metro need to be aware of the impending deadlines in the St. Paul Earned Sick and Safe Time Ordinance (“ESST”) which requires employers with St. Paul-based employees to provide paid sick leave and safe time to those employees. For employers with 24 or more full or part-time St. Paul area-based employees, the ESST is effective July 1, 2017 and for smaller employers the effective date is Jan. 1, 2018. A good summary of the ordinance and its impact on St. Paul employers is available at the St. Paul Chamber of Commerce website.

While there is currently litigation contesting the legality of the similar Minneapolis ordinance, that litigation does not directly affect the St. Paul ESST. St. Paul area employers should assume it will come into being. The Minneapolis ordinance has similar effective dates and there is no current injunction (more about the Minneapolis ordinance in an upcoming Minnesota Employer Blog post).

The implementation of the St. Paul ESST raises corollary questions about uniformity of company-wide PTO policies for employers with employees inside and outside St. Paul proper. It may be easier to administer a uniform rather than a fractured PTO policy for such employers.

Takeaway: The impending ESST Ordinance effective dates require employer action and, perhaps, a broader review of PTO policies with legal counsel. ESST is going to happen so affected employers should prepare!

Reminder: New I-9 Form Beginning January 22, 2017

Happy New Year! As a reminder of a previous post, employers must use the new I-9 form beginning January 22, 2017. A copy of the original post is below:

On November 14, 2016, the U.S. Citizenship and Immigration Services (USCIS) published a new Form I-9. The following are key changes in the revised form:

  • The new form is available in paper or hardcopy form or in a fillable computer form.
  • Completion of the form on a computer is now enhanced by prompts, drop-down menus and calendars.
  • While this new “smart” form makes completion on a computer easier, the form as provided cannot be electronically signed. Instead, it must be printed for signature.
  • The instructions for completion have been separated from the form itself. Employers should not forget to make the instructions available to employees when they are completing Section 1.
  • The form is a bit longer. The reformatting created a new “Additional Information” space in Section 2 in which employers can note comments that were previously squeezed into margins.
  • A separate page has been created for the preparer and/or translator certification and may be completed by multiple individuals.

Beginning January 22, 2017, employers must only use the new form. In the meantime, employers may use either the prior or new version.

Takeaway: The USCIS has published a new Form I-9 which MUST be used as of January 22, 2017. Employers should familiarize themselves with the new form and plan for implementation.

Taking on Structural Barriers to Hiring

The St. Paul Chamber of Commerce is seeking to fund a study on structural barriers to hiring. The focus is on job requirements that may not be necessary to fulfilling job duties but have the practical effect of creating a barrier for applicants otherwise qualified to do the job. For example, a driver’s license requirement for a job accessible by public transportation is such a structural barrier. Educational requirements may be another such example of an unnecessary barrier to hiring. Such structural barriers are bad for business and for the community. This is a rising movement.

Minnesota Employers dealing with the current low unemployment economy have a business reason for analyzing such structural barriers which usually are found in job description requirements. And it can only be a salutary process since any employment lawyer will attest that an accurate and updated job description is key to any defense of a discrimination, workers compensation, unemployment compensation or other wrongful termination claim. The process of review can be in partnership or in conjunction with a legal best practices review to have accurate and non-discriminatory job description.

Takeaway: The movement to eliminate structural barriers to hiring is strengthened by the hiring motivations in a low unemployment environment and put the spot light on job descriptions. Legal counsel can certainly assist in reviewing the legal implications of changing a job description to reduce unnecessary barriers to hiring while preserving legitimate and legally-enforceable job requirements.

New Form I-9 Released

On November 14, 2016, the U.S. Citizenship and Immigration Services (USCIS) published a new Form I-9. The following are key changes in the revised form:

  • The new form is available in paper or hardcopy form or in a fillable computer form.
  • Completion of the form on a computer is now enhanced by prompts, drop-down menus and calendars.
  • While this new “smart” form makes completion on a computer easier, the form as provided cannot be electronically signed. Instead, it must be printed for signature.
  • The instructions for completion have been separated from the form itself. Employers should not forget to make the instructions available to employees when they are completing Section 1.
  • The form is a bit longer. The reformatting created a new “Additional Information” space in Section 2 in which employers can note comments that were previously squeezed into margins.
  • A separate page has been created for the preparer and/or translator certification and may be completed by multiple individuals.

Beginning January 22, 2017, employers must only use the new form. In the meantime, employers may use either the prior or new version.

Takeaway: The USCIS has published a new Form I-9 which MUST be used as of January 22, 2017. Employers should familiarize themselves with the new form and plan for implementation.

Department of Labor Appeals Overtime Injunction

The new Department of Labor (DOL) overtime regulations increasing the minimum salary threshold for white collar exemptions to an annualized $47,476 were set to become effective December 1, 2016. However, on November 22, 2016, a Texas Federal District Court issued a nationwide preliminary injunction blocking the new rules from becoming effective.

The DOL has now appealed the Court’s injunction decision to the Fifth Circuit Court of Appeals. The timing for such an appeal typically stretches over several months. The DOL does have the option, however, of requesting that its appeal be considered on an expedited basis, but such requests are not automatically granted. The DOL may also file a motion requesting that the injunction be stayed while its appeal is pending. Granting a stay would reinstate the new overtime regulations. Doing so would of course create a potentially cumbersome scenario of implementing significant overtime changes which might only be reversed once the 5th Circuit rules on the DOL appeal.

Takeaway: At least for now, and unless a motion to stay is made and granted, the DOL new overtime regulations remain without effect. Accordingly, employers are not at this time obligated to adjust employee salaries to maintain their exempt status.

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.