Much like a goose that lays golden eggs, season tickets for your favorite sporting team, and tuberculosis, Minnesota’s wage theft law is the gift that keeps on giving.
A lot of attention has been paid to the new Wage Notice requirements of Minnesota’s revised wage theft laws (including by us). However, there are two other new administrative requirements you may not have read much about:
In addition to all the information that historically has had to be on employee paystubs, the following statutory language describes the additional items that need to be included (the underlining indicates the newly adopted revisions):
(b) The earnings statement may be in any form determined by the employer but must include:
(2) the rate or rates of pay and basis thereof, including whether the employee is paid by hour, shift, day, week, salary, piece, commission, or other method;
(3) allowances, if any, claimed pursuant to permitted meals and lodging;
(10) the physical address of the employer's main office or principal place of business, and a mailing address if different; and
(11) the telephone number of the employer.
The address(es) and telephone number requirements are straightforward enough, and probably don’t bear further discussion.
The “allowances, if any, claimed pursuant to permitted meals and lodging” won’t apply to many employees, since it’s not referring to normal expense reimbursements or per diems. Instead, it’s for those situations where you count the value of meals or lodging you provide to employees towards minimum wage. For instance, a property management company that requires a property manager to live on-site can count the fair market value of the apartment they provide to employees toward their minimum wage obligations.
That leaves us with the requirements of subdivision (b)(2), which has caused headaches for many of our clients. Although the requirement to include the employee’s “rate of pay” on the paystub has always been part of the law, what’s new is the obligation to include the “basis” for the rate(s) of pay including the method of payment.
So, for instance, let’s say you pay someone a piece rate. It’s not enough to simply include the total amount the employee earned during the week. Nor is it likely enough to include the weekly earnings along with a statement that the employee is paid a piece rate. Instead, you probably need to include the number of pieces completed, and the rate-per-piece that was paid.
Things get particularly complex for employees that might receive multiple forms of pay in any given paycheck. I was working with a client recently who has certain employees that could receive up to 15 different forms of earnings on any particular paycheck. Given the obligation to include a description of the “basis thereof,” that’s a lot of information to cram into a paystub.
But even if you don’t have a complex pay scheme, some common employer practices will need to be reflected / explained on the paystub. For example, if you pay a per diem to an employee, or a quarterly production or attendance bonus, you’ll have to separately list those payments and provide the “basis thereof”.
For a per diem, the “basis thereof” might be pretty straightforward (e.g., “$25 per day,” etc.). However, for bonuses (or commissions, for that matter), there often isn’t a simple, pithy way to describe how they’re earned, and including the full details of, say, a commission plan with every paystub seems absurd.
So what should you do? As you can see, the statute provides no guidance, nor (so far) has Minnesota’s Department of Labor & Industry. Therefore, you’ll have to find some sort of compromise that sticks to the spirit of the statute, while not turning your paystub into a 45-page monstrosity.
For instance, where you can reasonably summarize a pay practice in a sentence or two, you should probably do so on the paystub. But for more complex forms of compensation, an incorporation-by-reference approach might work, such as: “Commissions are calculated according to the terms of our Sales Commission Plan; see XX for a copy.”
In addition to grappling with updating paystubs, many of our clients are scratching their heads over the following new requirement:
177.30 KEEPING RECORDS; PENALTY.
(a) Every employer subject to sections 177.21 to 177.44 must make and keep a record of:
(4) 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;
In other words, you have to maintain a specific record for each of your employees that includes: 1) a list of the policies they were provided, 2) the date those policies were provided, and 3) a brief description of “the policies”.
These records also have to be revised each time a new or updated policy is provided to an employee. So, if you review and update your employee handbook annually, then a new distribution record should be created for each employee who received the updates. Fortunately, unlike the Wage Notices discussed in our previous article, these distribution records do not have to be signed by employees.
In addition to the basic administrative burden this new requirement poses, the statutes don’t define what constitutes a “personnel policy.” While the contents of your employee handbook are obvious examples of “personnel policies,” what about department-specific practices, such as vacation request procedures adopted to ensure adequate staffing throughout the year? Point being: when you are compiling your list of provided policies, don’t be blindered by your handbook.
There is also no guidance as to exactly how the record of distributed policies must be maintained, so whatever is easiest for you is the practice you should pursue. For instance, some of our clients are putting individual distribution notices in each employee’s personnel file, while others are leaving individual employee files alone, and maintaining a master distribution list of employees containing the necessary information.
Finally, many questions remain as to what “a brief description of the policies” means in practice. If you’ve drafted a handbook and distributed it to employees, it seems a bit silly and redundant to have to create a summary of each policy to accompany the list.
With that in mind, here is an email exchange we had with Minnesota’s Department of Labor & Industry:
Overly lawerly question from your intrepid ABRC consultants:
Most employers keep their personnel policies in an employee handbook and provide a copy of that handbook to employees upon hire. The employee handbook contains a Table of Contents listing each of the personnel policies and the handbook contains the personnel policies. The employee handbook typically has a signature page that the employee signs to acknowledge they received the handbook and the employer places that signed acknowledgement form in the employee’s file.
Does it satisfy the law if the employer places the signed acknowledgement form in the employee’s file and if the employer keeps a copy of the handbook along with any subsequent updates in a separate file?
Or, is the employer required to develop a separate summary of each policy in the employee handbook and keep a copy of that summary in each employee’s file?
Actual answer from the MN Department of Labor & Industry:
It is my understanding that as long as you notate the handbook version or date in the employee file, you only need to have a file copy for all personnel.
That’s good news for employers with handbooks that have tables of content, as the DLI is indicating they will accept the table of contents as the required “list of policies,” and the handbook it’s connected with as the “brief description of the policies.” Of course, you will still have to maintain records of when the handbook was actually provided to each employee, and any personnel policies not captured in the handbook will have to be separately listed and summarized.
The changes to Minnesota’s wage theft laws are imposing several significant administrative burdens on employers. While much of the air in the room has been taken up by the new Wage Notice requirements, it’s important not to forget about the paystub and policy distribution obligations—especially because there can be significant monetary penalties for failure to comply.
If you are a Hotline client and would like additional guidance, don’t hesitate to reach email us.
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.
On May 11, 2014, the governor of Minnesota signed the Women’s Economic Security Act (WESA), a bill that will require Minnesota employers to make dramatic changes to their employment policies and practices.
While WESA directly impacts employers who conduct business in Minnesota, the changes follow plans by federal and local governments to expand legal protections for women and other employees. For this reason, employers in other jurisdictions should pay close attention to these national and state law trends.
“The only thing that is constant is change.”
Turns out that dusty old Greek philosophers occasionally say profound things (Heraclitus also said that a man’s character is his destiny). And since the Greeks are considered the fathers of democracy and were responsible for no small number of laws themselves, it seems an appropriate departure point to talk about the constantly changing landscape of employment laws.
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