In one of the most significant pieces of legislation affecting employers in many years, the Minnesota Legislature passed, and Governor Walz signed, the Jobs and Economic Development Omnibus bill that includes new wage theft protections for employees and new requirements for employers.  The wage theft bill is one of the few pieces of bipartisan employment legislation that survived the 2019 legislative session.  The law constitutes a very significant change in wage payment requirements and enforcement.  It includes increased civil enforcement and recordkeeping requirements for employers, as well as new criminal penalties for intentional wage theft.  These changes will go into effect on July 1, 2019.

What is Wage Theft?

The Omnibus bill includes two separate areas of enforcement.  The first area concerns civil enforcement of wage payments.  It increases the penalties for failure to pay wages and creates certain notice and recordkeeping requirements.  The second area concerns criminal penalties for intentional wage theft.  While both areas are referred to colloquially as wage theft, the statutory definition of wage theft applies only to intentional wage theft under the criminal statute.  The law, however, increases potential exposure for employers that do not pay employees properly.

Civil Enforcement

The bill allocates over $2 million annually to civil enforcement of wage theft issues through the Minnesota Department of Labor and Industry and the Attorney General’s Office.  It provides greater enforcement mechanisms including the authority to inspect places of employment “without unreasonable delay” and gives the Commissioner of Labor the ability to obtain an inspection order from the court if the employer refuses.  It also makes it a misdemeanor to hinder or delay the Commissioner in the performance of his duties.

The new law gives the Commissioner the right to interview non-management employees in private regarding matters under investigation.  It also increases the penalty for repeat failures to provide the records required by the Department of Labor to $5,000 per repeated failure.  The law gives the Department the ability to share data with other public agencies, including licensing agencies.  The data sharing will likely have implications for government contractors that run afoul of these new requirements.  Finally, the law includes a retaliation prohibition, which includes a private right to bring a lawsuit, as well as a civil penalty in an amount between $700 and $3,000 per violation.

Timing of Payment of Wages

The law amends Minnesota Statute § 181.101 regarding the timing of wage payments.  The statute now explicitly includes salary, earnings, and gratuities within the types of wages that must be paid at least once every 31 days.  The law also states that all commission earned by an employee must be paid at least once every three months.  The law removes the 15-day cap on penalties for late payment of wages.  The law now explicitly includes commissions in the types of wages that may be demanded for payment; if the commission is not paid within 10 days of a demand for payment, the Department may charge and collect the commission earned along with a penalty equal to 1/15 of the commissions earned but unpaid for each day beyond the 10-day limit. 

Notice and Recordkeeping Requirements

The law requires that employers include additional information in the earning statements provided to employees at the end of each pay period.  In addition to the information previously required under Minnesota Statute § 181.032, employers must now also include 1) the rate or rates of pay including the basis of that rate, i.e., whether the employee is paid hourly, by shift, day, week, salary, piece, commission, or other method; 2) allowances claimed pursuant to permitted meals and lodging; 3) the physical address of the employer’s main office or principal place of business including a mailing address if different; and 4) the employer’s telephone number.

In addition, the law requires a new written notice be provided to each employee at the start of employment.  The notice must include:

1. the rate or rates of pay and basis thereof, including whether the employee is paid by the hour, shift, day, week, salary, piece, commission, or other method, and the specific application of any additional rates;
2. allowances, if any, claimed pursuant to permitted meals and lodging;
3. paid vacation, sick time, or other paid time-off accruals and terms of use;
4. the employee's employment status and whether the employee is exempt from minimum wage, overtime, and on what basis;
5. a list of deductions that may be made from the employee’s pay;
6. the number of days in the pay period, the regularly scheduled pay day, and the pay day on which the employee will receive the first payment of wages earned;
7. the legal name of the employer and the operating name of the employer if different from the legal name;
8. the physical address of the employer’s main office or principal place of business, and a mailing address if different; and
9. the employer’s telephone number.

Employers must keep a signed copy of the notice given to each employee.  The notice must be provided to the employees in English and must include text from the Department that the employee may request the notice in a language other than English.  If an employee requests the notice in a language other than English, the employer must provide the notice in the requested language and the Department will assist with the translation.  The law also requires that employers give employees any written changes to the information contained in the notice prior to the date the changes take effect. 

The law has new recordkeeping requirements as well.  In addition to the name, address, occupation, rate of pay, amount paid to each employee during each pay period, and the hours worked each day and workweek by the employee, the law requires that 1) for employees paid at piece rate, the number of pieces completed at each piece rate; 2) a list of the personnel policies provided to the employee, including the date the policies were given to the employee and a brief description of the policies; and 3) a copy of the required notice provided to the employee at the beginning of employment including any written changes to the notice.

All of these records must be made readily available for the Department upon demand.  The records must be kept where the employees are working or in a manner that allows the employer to comply with the requirement within 72 hours.  It also allows for a $5,000 fine for each repeated failure to maintain the required records. 

Criminal Penalties

Perhaps the most significant aspect of the new law is that it specifically defines wage theft for purposes of criminal theft and includes criminal penalties of imprisonment of up to 20 years and up to a $100,000 fine for any wage theft in excess of $35,000.  While early versions of this bill in the Minnesota House of Representatives defined wage theft to include mistakes by an employer, the new bill requires an “intent to defraud” in order for the criminal theft statute to apply.  Wage theft now occurs when an employer, with intent to defraud:

1. fails to pay an employee all wages, salary, gratuities, earnings, or commissions at the employee’s rate or rates of pay or at the rate or rates required by law, including any applicable statute, regulation, rule, ordinance, government resolution or policy, contract, or other legal authority, whichever rate of pay is greater;
2. directly or indirectly causes any employee to give a receipt for wages for a greater amount than that actually paid to the employee for services rendered;
3. directly or indirectly demands or receives from any employee any rebate or refund from the wages owed the employee under contract of employment with the employer; or
4. makes or attempts to make it appear in any manner that the wages paid to any employee were greater than the amount actually paid to the employee.

One of the areas that remains unclear in the statute is the definition of employer for purposes of the criminal theft statute.  Under the new law, an employer includes “any individual, partnership, association, corporation, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee.”  This definition is exceedingly broad.  It may  encompass staffing agencies, benefit management organizations, or any other organization that provides services that affect employees when operating on behalf of the employer.  Whether this broad definition was intended by the Legislature remains to be seen.

Recommendations for Employers

Given the July 1 effective date, employers should consider taking take a number of steps as soon as practicable. Employers will want to review their payroll documents to ensure the statements given to employees comply with the new requirements, including the basis for the wage rate, allowances for meals and lodging, and a business address and phone number.  Employers will also need to ensure they are creating and providing to new employees the required notice with the nine required categories of information.  Employers that contract with professional employer organizations will want to coordinate with these organizations to confirm this information is provided.

Employers should consider reviewing commission plans and the timing of the payment of those commissions. The new law provides a good opportunity to update those plans for clarity and compliance.  Finally, given both the increased civil enforcement and the new criminal penalties, employers may want to conduct a comprehensive review of their pay practices and recordkeeping for compliance with Minnesota and federal compliance.