The New Minnesota Wage Theft Law Creates Big Risks for Unwary Employers. Starting August 1, 2019, the date of this post, Minnesota employers committing “wage theft” will now be guilty of a crime. This is just one part of a recent and substantive set of employment reforms in Minnesota intended to enhance worker protections. “Wage theft,” for purposes of the new law, includes any of the following conducted with an intent to defraud:
- Failure 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;
- Directly or indirectly causing any employee to give a receipt for wages for a greater amount than that actually paid to the employee for services rendered;
- Directly or indirectly demanding or receiving from any employee any rebate or refund from the wages owed the employee under contract of employment with the employer; or
- Making or attempting to make it appear in any manner that the wages paid to any employee were greater than the amount actually paid to the employee.
The new law increases the authority of the Minnesota Department of Labor and Industry (MN DLI) to conduct investigations of potential violations without delay or obstruction, and even includes the right to “interview in private nonmanagement employees regarding the matter under investigation.” It also includes increased funding over the next two years for MN DLI’s enforcement of the state’s wage and hour laws and expands or at least confirms the authority of the Office of the Minnesota Attorney General to take direct action in such investigations and for prosecuting such claims.
The potential consequences for violators will be significant, including imprisonment up to 20 years and/or fines up to $100,000 for large thefts in excess of $35,000.00. That may seem like a difficult level to reach, especially for employers who largely hire low-wage workers. In reality, routine violators may easily exceed this threshold.
Take, for example, a “small employer” under the Minnesota Fair Labor Standards Act (“MFLSA”) with ten employees making minimum wage and working an average of 55 hours per week. In this scenario each employee, under the MFLSA standards, earns 7 hours of overtime pay per week. If, as is an all-too-common practice, the employer does not pay overtime premium pay (the additional .5 in the 1.5 multiplier for overtime pay rates), then the employer is taking from each employee approximately $27.12 per week. Each week, across the ten employees, that constitutes theft of roughly $271.25. Over a year (at 50 weeks worked), that adds up to $13,562.50. Over three years, that small employer will cross the threshold into potential liability for the maximum sentence and fine allowed.
Employers with violative pay practices are laying landmines for themselves to step on in the not-too-distant future. Except for extremely egregious and obvious examples of wage theft, these changes are not likely to make a big splash immediately. The criminal penalties only apply to thefts on or after Aug. 1, 2019.
But that means that now is the perfect time to review your pay practices. Employers that delay addressing potentially violative pay practices are exposing themselves to exponentially increasing risk over time.
And this should be good news for most employers. Most employers do attempt to comply with applicable employment law. The few bad actors that do intentionally implement illegal pay practices give themselves an unfair advantage in the market. It may take some time, and a few surprising headlines, but the serious consequences of wage theft will hopefully act as an effective deterrent and put competing employers on a more-level playing field.
If you have been denied overtime pay you have earned, or are being taken advantage of by your employer for any other illegal pay practice, schedule a consult today to talk with one of our experienced employment attorneys. Our attorneys have helped many employees recover the pay they have been unfairly denied.
Similarly, if you are an employer and want to avoid the significant civil and criminal penalties that can come with wage and hour or other employment practice violations, you should consult with an experienced employment attorney to review and correct problematic pay practices. A little guidance today could protect against significant risks in the future.