Okay you HR professionals, let’s take a quick, single-question quiz to see whether all those years of schooling and professional experience have paid off:
Is stealing wages from employees bad?
A. Well, duh!
B. It’s only stealing if you get caught.
C. Hmm — who’s the employee and how much do I like her?
D. I’m not really a good test-taker, so I don’t know how to answer this…
At the risk of stating the obvious, wage theft is bad (even if you don’t like the employee). But you knew that, of course, and the Minnesota legislature agrees with you. So much so, in fact, that they just passed a new Wage Theft law that goes into effect on August 1, 2019, and which will require you to change a number of your payroll and documentation practices as a result. And, no, that date is not a typo.
A whole lot, actually, some of which makes sense, and some of which, well, let’s just say seems more likely to feel like busy-work, than to actually deter wage theft practices.
Civil and criminal penalties
Let’s start with the obvious stuff. Under the law, it is illegal for employers, acting with the “intent to defraud”, to:
Violating the law can lead to penalties as high as a 20-year prison sentence and/or a $100,000 fine. Additionally, the law makes it illegal to retaliate against employees for asserting their rights under the new Wage Theft law, as well as existing wage and hour / wage payment statutes, and imposes penalties that can range from $700 - $3,000 per violation.
The law also makes some changes to the statute that governs the frequency of wage payments (i.e., the description of earnings that must be paid at least once every 31 days has expanded; all commissions earned must be paid at least once every three months; the penalties for failure to comply with a demand by the Commissioner of Labor & Industry for unpaid wages have significantly increased).
Makes sense, right? Now let’s take a look at the stuff that makes less sense, but which will actually require you to do some heavy lifting.
Employers in Minnesota have long been required to “provide each employee an earnings statement, either in writing or by electronic means, covering [the] pay period” that includes very specific information. In addition to the information currently required to be on the paystub, the Wage Theft law now requires the following to be added:
While that doesn’t seem too awful, what happens if your payroll software or provider can’t currently manage some of these data inputs? If not, then you’ll have to decide whether to risk noncompliance until the software is updated, or manually enter this information for every one of your employees during each payroll run until updated software is available.
Required Wage Statement
This is the Big Deal part of the law, in that it will have the most profound impact on your HR practices. “Big Deal” in this context can also mean “an absurd amount of work with little obvious purpose or deterrent effect on wage theft.”
Here’s what the statute says:
At the start of employment, an employer shall provide each employee a written notice containing the following information:
The Wage Statement must be signed by the employee, and you are required to maintain a copy of every signed Wage Statement. And if you have any employees who speak foreign languages, they have a right to demand a copy of the Wage Statement in any “language requested by the employee.”
Okay, so that’s a pain, but it gets worse. Any time any of the things listed above changes, employees must be provided with an updated version of the wage statement prior to the change going into effect.
Let that sink in for a second. If you offer an annual pay raise or cost-of-living wage adjustment, presumably you need to provide employees with updated Wage Statements.
And think about your vacation/PTO practices. Most employers increase the amount of PTO employees get in a year based on certain degrees of tenure, which means that, arguably, you need to provide a new Wage Statement every time an employee moves into a new accrual tier.
This could result in issuing multiple Wage Statements to the same employee in a single year. For instance, let’s say you do compensation adjustments every March, but you increase the amount of PTO employees receive on a calendar-year basis. That would seem to trigger the obligation to issue two revised Wage Statements.
It’s also unclear whether Wage Statements will only have to be provided to employees who are hired after 8/1/19, or whether they will also have to be provided to all current employees as of 8/1/19. Even if you won’t be required to provide an initial Wage Statement to all your current employees by 8/1/19, presumably you will have to start doing so any time there is a change to one of the listed data points.
While there are a number of unknowns about how this new law will operate in practice, I expect Minnesota’s Department of Labor and Industry (DOLI) to provide additional guidance as August 1st approaches.
If you steal wages, you’ll go to jail and/or pay a hefty fine.
However, in an interesting quirk to the law that would appear to be an oversight created by the law being quickly pushed through in a much larger omnibus bill without much discussion, there may not be any substantive penalty for failing to comply with the new Wage Statement requirement or paystub amendments (both sets of requirements are amendments to an existing Statement of Earnings statute).
The only apparent remedy for a violation of the Statement of Earnings statute is that an aggrieved employee can file a civil lawsuit to recover “the civil penalties or damages provided for in the section violated” and “compensatory damages and other appropriate relief”. The problem is that the Statement of Earnings statute doesn’t provide for any “civil penalties or damages”, and, assuming you actually aren’t stealing employee wages, it’s hard to see how any employee would be able to prove he/she suffered some sort of monetary loss or damages as a result of not being provided a Wage Statement.
However, compliance should still be your goal, since even if there isn’t a direct penalty, you don’t want to give DOLI a reason to audit your payroll practices, since they’ll almost certainly find something else you’re doing wrong. Plus, if you did get sued by an employee, you’d have to pay the employee’s attorneys’ fees, costs, and expenses (along with your own), even if the employee couldn’t prove any damages.
First, don’t steal your employees’ wages. Second, decide how you are going to update your paystubs. Third, decide how you are going to implement the Wage Statement requirements (e.g., who is going to get them, how often you’ll update them, etc.).
James provides guidance to employers on a variety of topics with a focus on employment, risk management and liability issues. In addition to working directly with employers, he regularly conducts in-depth training through webinars, at client sites, and through the University of Minnesota’s Continuin
James provides guidance to employers on a variety of topics with a focus on employment, risk management and liability issues. In addition to working directly with employers, he regularly conducts in-depth training through webinars, at client sites, and through the University of Minnesota’s Continuing Ed program. He previously was a plaintiff’s attorney and brings that perspective into his advice to employers. James received his law degree from the University of Minnesota and his BA from Washington University in St. Louis.
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