Minnesota Legislative Session Employment Law Summary

The 2019 Minnesota Legislative Session concluded last week.  Below is a brief summary of some employment related legislative changes passed by the legislature and anticipated to be signed into law by the Governor.

New Record Keeping Requirements.

Employers must for the first time under Minnesota law, maintain, “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.”

Additionally, at the commencement of employment the employer must also now provide a new employee written notice containing the following information:

(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 other provisions of chapter 177, 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 telephone number of the employer.

The employer must keep a copy of the notice signed by each employee acknowledging receipt of the notice.  The notice also must include language (to be provided by the Department of Labor and Industry) that informs the employee that they may request the notice be provided in a particular language.  The employer will then be responsible for providing the form in the language requested by the employee.  In the future, if there are any changes to the information contained in the notice, employers must notify the employee in writing prior to the date the change takes effect.

The statement of earning provided to employees with their pay now must include the following additional items:  1) whether the employee is paid by hour, shift, day, week, salary, piece, commission or other method; 2) allowances, if any, claimed for meals and lodging; and 3) the address of the employer's main office or principal place of business, and the telephone number.

Penalties to Employers Involved in Good Faith Wage Disputes Hugely Increased.

Potential penalties to employers involved in good faith disputes with their employees regarding the payment of wages were significantly increased.  Under existing law, employers who ultimately lost a pay dispute at trial, could be required to pay the disputed pay, liquidated damages in the amount of the disputed pay, plus attorneys’ fees and an additional penalty capped at 15 days wages.   The legislature modified Minn. Stat. 181.101 to remove the 15 day cap. Therefore, in any wage dispute with an employee where the employee has made a written demand for the wages, no matter how nominal, the potential penalty incurred by the employer will continue to accumulate each day the dispute continues.  Since disputes routinely go on for up to a year or more, the amount of the penalty could far surpass the amount in dispute. The Department of Labor and Industry and trial lawyers representing employees may attempt to use the potential penalty as a way to bully employers into paying wages that employers in good faith dispute.

Payment of Earned Commissions Required at Least Every Three Months.

Minnesota law will now require employers to pay, “all commissions earned by an employee at least once every three months.”  The new statute does not specifically address what it means to have “earned” a commission, therefore, the employer retains the ability to define what it means for its employee to have “earned” a commission.

Department of Labor and Industry May Interview Non-management Employees in Private.

The law was revised to specifically allow Minnesota Department of Labor and Industry investigators to “interview in private non-management employees regarding the matter under investigation.”   It also establishes a procedure for those investigators to apply to district court for an entry order if an employer refuses to allow entry for the purposes of an inspection.  

Criminal Wage Theft.

The legislature made changes to the criminal law related to wage theft for those rare employers who with “an intent to defraud” cheat employees out of their pay.   In the current economy where even the best employers have a hard time retaining employees, the actual incidences of wage theft will remain few and far between and the changes to the criminal law in this regard should not have a large impact on employers. Yet, the legislature appropriated additional funds to fight wage theft and increased enforcement action will occur.

What Should Employers Do To Prepare for these Legislative Changes?

Employers will need to make modifications to their hiring and policies consistent with the new statutory requirements, and revisit their record keeping practices.  The simplest way to conform to the new record keeping requirements will be to implement a revised employee handbook containing all policies and have each employee sign the revised handbook.  Employers who have previously had several different policies, some within a handbook and some free standing, will want to move to the single handbook format. 

Employers should conduct an internal audit of their pay practices to confirm that their employee handbook and other employment documentation clearly sets out all policies related to pay.  In particular, employers should confirm that the method for calculating PTO or vacation is clearly described, consistent with any applicable ordinances and that the policy is clear as to whether or not unused PTO and vacation time will be paid out upon separation from employment.  

Policies related to commissions should be reviewed and modified to remove any ambiguity regarding when a commission is earned.  Employers will need to implement a policy that ensures that “earned” commissions are paid at least once every three months. Disputes with employees also frequently arise regarding how commissions are calculated and whether commissions will be paid if an employee separates from employment before the commission payment is received.  Employers should carefully review those policies for clarity and consider having legal counsel review those documents. Among the issues is whether commissions should be paid on a pro rata basis over a routine schedule, or if commissions should be paid in lump sum upon the occurrence of payment by the customer.

Employers should reach out to counsel immediately in the event of any investigation or audit by the Department of Labor and Industry or any other government agency.   While the Department of Labor and Industry has the right to interview non-management employees privately, those non-management employees can also chose to express their desire that a representative of the employer be present during those interviews.

If you have any questions, please contact Martin Kappenman at 952-921-4603 or mkappenman@seatonlaw.com, or any of the Seaton, Peters & Revnew attorneys.

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