On June 21, 2019, the Minnesota Department of Labor & Industry released a sample Wage Statement and related FAQs about the Wage Theft law. This article has been updated to reflect the new information available.
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 July 1, 2019 (a previous version of this article mentioned 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.
There is some reason to believe the Minnesota Department of Labor & Industry (DLI) may delay enforcement for some period of time, given the very short amount of time employers have to come into compliance. DLI’s Wage Theft Q&A states the following:
1. Will the Department of Labor and Industry (DLI) have a grace period for employers to come into compliance if they are not able to reprogram their systems in time for the July 1, 2019, effective date?
The department's primary focus for the next few months will be on providing employers with the information and assistance they need to understand and implement the requirements of the new law.
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, although DLI states that the Wage Statement need not be in any specific format or form, they make it pretty clear that your existing methods of communicating this information (such as handbooks, collective bargaining agreements, etc.) won’t be sufficient to comply with the statute.
Also, 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”, which means you have to find some way to have the statement translated into the language of their choice.
Okay, so the Wage Statement is a pain, but it gets worse. Any time any of the things listed above changes, the statute states that, “An employer must provide the employee any written changes to the information contained in the notice under paragraph (d) prior to the date the changes take effect.”
Under the statutory language, it’s unclear whether changes require an entirely new Wage Statement be provided in connection with every such change. However, DLI appears to be taking the position that new Wage Statements aren’t necessary, and that a simple written notice of the pending changes should be sufficient:
7. Does the complete written notice need to be given again any time there is a change to specific information included in the notice?
If a written notice has been provided to an employee, then only the changes to the information in the written notice would need to be provided to the employee in writing prior to the changes taking effect.
As an additional bonus of sorts, DLI confirms that employers aren’t required to obtain signatures in connection with these update notices (although you are encouraged to do so).
However, even if a simpler written notice will suffice, just think about how often you may have to be sending out such notices. For instance, most employers increase the amount of vacation/PTO employees get in a year based on certain degrees of tenure, which means that you’ll need to send out a written notice every time an employee moves into a new accrual tier.
This could result in issuing multiple written notices 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 distinct written notices.
As an additional bit of good news for employers, under the statute, it was unclear whether Wage Statements would need to be provided to all current employees as of 7/1/19, or just to employees who are hired after 7/1/19. Fortunately, DLI takes the position that you don’t have to give all current employees a Wage Statement by 7/1/19.
However, DLI also confirms something we suspected: current employees who haven’t received a Wage Statement will have to be provided with (and sign) one the first time they experience a change to one of the listed Wage Statement items. In other words, current employees won’t need one as of 7/1/19, but they will need to be formally issued one at some point.
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. DLI has put together a template Wage Statement form, but so have we, and we think ours is more user-friendly than DLI’s, plus their form doesn’t have the helpful instructions ours does. So, if you’re a Hotline subscriber, and if you have questions about the new law, or would like a copy of our version of the form, please contact us.
James provides guidance to employers on a variety of topics with a focus on employment, risk management and liability issues.
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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