Donald C. Erickson

FRYBERGER LAW FIRM

MSBA Certified Labor and Employment Law Specialist

derickson@fryberger.com

218.725.6852

 

In light of 2019 local, state, and federal law changes employers need to insure they are in compliance as they enter 2020.  A quick checklist follows:

1. If you have employees working in the City of Duluth, are the employees receiving earned sick and safe time (ESST) under your PTO, vacation, or sick time policies in compliance with the City of Duluth ESST Ordinance?
   1. For information on compliance, see City of Duluth ESST Compliance below.
2. Does each employee’s paystub reflect the information now required by Minnesota law
   1. For information on compliance, see Minnesota Earnings Statement Compliance below.
3. For each new employee you have hired since July 1, 2019, has the employee received the wage and deductions written notice now required by Minnesota Law.
   1. For information on compliance, see Minnesota New Employee Wage and Deduction Notification Compliance below.
4. For each change in an employee’s compensation since July 1, 2019, was the employee notified in writing prior to the change?
   1. For information on compliance, see Minnesota Wage Change Notification Compliance below.
5. Do the personnel files for each of your employees reflect when each employee received each of your employment policies, together with a brief description of the policy?
   1. For information on compliance, see Minnesota Employment Policy Record Keeping Compliance below.
6. If you changed an employment policy after July 1, 2019, do the personnel files for each of your employees reflect when the employee received a copy of the changed policy?
   1. For information on compliance, see Minnesota Changed Employment Policy Record Keeping Compliance below.
7. For each of your exempt salaried employees, as of January 1, 2020, does each employee receive a salary of at least $684 per week or $35,568 per year?
   1. For information on compliance, see Federal Exempt Employee Salary Compliance below.

I.            City of Duluth ESST Compliance.

A.     Accrual and Carry-Over of ESST.

Effective January 1, 2020, the City of Duluth Ordinance No. 10571, mandates all private employers that employ five (5) or more employees, to provide Earned Sick and Safe Time (ESST) to each employee who works more than fifty percent (50%) of his or her working time in the City of Duluth.  This includes part-time employees who generally are not covered under most employers’ PTO or Sick Leave policies.  It also includes exempt salaried employees; despite the fact exempt salaried employees are generally entitled to full pay in any workweek in which they perform any work.[1]

Compliance with the Ordinance is especially important for employers, as it allows employees to seek administrative remedies from the City Clerk and from the courts for a period of one (1) year after an employer’s decision or action that affects an employee’s ESST. 

The Ordinance favors employee’s rights over responsibilities.  It does not allow employers to demand documentation of ESST absences from work unless they exceed three (3) days or unless documentation is allowed by other laws such as FMLA, ADA accommodations or fitness for duty determinations, worker’s compensation, or the Minnesota Human Rights Act.

The Ordinance does not apply to an employer’s workers who are independent contractors, student interns, or seasonal workers.  It also does not apply to railroad workers, federal employees, state employees, county employees, and local government employees, other than the City of Duluth employees.

An employer may comply with the ESST Ordinance if it has an existing Paid Time Off (PTO), Sick Leave, or Vacation policy that allows the accrual at the same or better rate than the Ordinance and allows the use of accrued PTO, Sick Leave, or Vacation for the same purposes as the Ordinance.  Employers are well advised to check the accrual rate of their current policies and the purposes for which accruals may be used.

The Ordinance requires a minimum accrual rate of one (1) hour of ESST for each fifty (50) hours worked, in full hour increments, starting with the first day of employment.  An employee may begin to use accrued ESST after 90 days of employment.  Employers can require ESST use be restricted to increments of at least four (4) hours.

An employer can choose to “front load” ESST by providing forty (40) hours of ESST following 90 days of employment and allowing 40 hours of accrued, but unused, ESST to be carried over to the next year.  If not front loaded, 40 hours of ESST would require an employee to work 2000 hours in a year to earn 40 hours of ESST.

B.     Allowed Uses of Accrued ESST.

The Ordinance allows the use of ESST for the employee’s own or a family member’s physical or mental illness or injury or need for safety from domestic abuse, sexual assault, or stalking.

The use of ESST is broadly defined to include use beyond care for an illness or injury.  It includes the use of ESST for the employee’s own or a family member’s need for medical diagnosis, care, treatment, or need for preventative medical care.

Employers with existing PTO, Vacation or Sick Leave policies that want to use the policy for ESST compliance are well advised to check the purposes for which their current policies can be used, and to revise them if necessary to comply with the ESST Ordinance.

C.     Notice to Employees.

The Ordinance also requires Employers to give employees written notice of the following:

• Employees are entitled to ESST;
• The amount of ESST;
• The use of ESST is guaranteed under City Ordinance 10571;
• Retaliation is prohibited against employees who request or use ESST; and
• Each employee is entitled to file a written complaint with the City Clerk if accrued ESST is denied or the employee is retaliated against for requesting or using ESST

A notice that can be used by employers to comply is available at:  https://duluthmn.gov/media/8332/esst-poster.pdf.

D.    Additional Information.

Additional Information, including

• the Ordinance,
• Frequently Asked Questions,
• ESST Tracking Tool,
• ESST Administrative Regulations, and an
• Employer ESST Checklist

are available at https://duluthmn.gov/city-clerk/earned-sick-safe-time/about-earned-sick-safe-time/.

As there appears to be some inconsistency between the Ordinance and the Administrative Regulations, Employers should consult their employment law attorneys as questions arise.

II.        Minnesota Earnings Statement Compliance.

 

The 2019 Minnesota Legislature passed a Wage Theft and Record Keeping Act (the Act).

Effective July 1, 2019, the Act requires Employers to pay all employees wages, including salary, earnings, and gratuities earned by an employee at least once every 31 days and all commissions earned by an employee at least once every three (3) months, on a regular payday designated in advance by the employer regardless of whether the employee requests payment at longer intervals.[2]

The new provides a substantive right to the payment of commissions and wages at the employee’s rate rates required by law, whichever is greater.[3]

Effective August 1, 2019, criminal penalties went into effect for employers who fail to pay employees in accordance with the law.

The Act also gives the Minnesota Department of Labor and Industry more authority to assess penalties against employers and order the employer to:

1. Pay wages or commissions owed to an employee.
2. Pay an amount equal to the wages or commissions owed as liquidated damages.
3. Pay compensatory damages incurred by an employee.
4. Cease and desist in a practice that violates the Act.
5. Pay a civil penalty for repeated or willful violations.

The Act requires Employers to provide employees with additional information on their Earnings Statements[4].  The information now required to be on an earnings statement (pay stub) is the following:

1. the name of the employee;
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;
4. the total number of hours worked by the employee unless exempt from chapter 177;
5. the total amount of gross pay earned by the employee during that period;
6. a list of deductions made from the employee’s pay;
7. the net amount of pay after all deductions are made;
8. the date on which the pay period ends;
9. the legal name of the employer and the operating name of the employer if different from the legal name;
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.

An employer who chooses to provide an earnings statement by electronic means must provide employees access to an employer-owned computer during an employee’s regular working hours to review and print earnings statements.[5]

If an employee provides at least a 24-hour notice, the employer must provide the statement by written, rather than electronic means.  Once an employee requests a written statement, the employer must thereafter provide written statements.[6]

While most payroll services have conformed their earnings statements to comply with the new requirements, it remains the employer’s responsibility to insure that employees are appropriately notified.  Accordingly, to insure compliance, employers are well advised to compare the requirements of the law against the earnings statements received by employees.

III.     Minnesota New Employee Wage and Deduction Notification Compliance.

 

The Wage Theft and Record Keeping Act (the Act) also requires new employees hired after July 1, 2019 to receive a written Employee Notice, on hire, that sets for the basis on which the employee’s wages are calculated and the deductions that will be made from the employee’s wages.  If the employee is exempt, the basis on which the exemption is claimed must also be set forth.  The information required to be provided to the employee in writing is the following:[7]

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.

To comply, the employer is required to keep a copy of the notice, signed by the employee and produce it on request from the Minnesota Department of Labor and Industry.

Employers may obtain an approved form for the Employee Notice at: https://www.dli.mn.gov/business/employment-practices/wage-theft-legislation-2019-and-summaries.

IV.      Minnesota Wage Change Notification Compliance.

 

The Wage Theft and Record Keeping Act (the Act) requires employers to notify employees of any changes in the Employee Notice before any change becomes effective.[8]

Employers may comply with this new requirement by using the Employee Notice referenced in the preceding section for changes to existing employee’s wages, status as an exempt employee, or deductions.  Once again, the employer must maintain a copy of the notice provided which the employee has signed.

As most employees are at-will employees, for employers, the significance of this documentation is to provide proof that the employee received notice of compensation (or other employment) changes, and the effect the employee’s acceptance or non-acceptance has on the employee’s status or benefits.  For those employees who do not accept the change, the document will also likely be used to establish the employee’s right to unemployment benefits for quitting employment when there has been a significant adverse change in compensation or benefits.

V.         Minnesota Employment Policy Record Keeping Compliance.

 

The Record Keeping portion of the new Act requires the employer to maintain a record for each employee 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.[9]

The failure to do so may lead to a fine of $1,000 for each failure, and up to $5,000 for each repeated failure.

Employers can easily comply with this requirement by attaching an Employee Handbook Table of Contents to the employee’s acknowledgement of the receipt of the Handbook.  The record must be maintained for each employee.

VI.   Minnesota Changed Employment Policy Record Keeping Compliance.

 

The Record Keeping portion of the new Act also requires the employer to maintain a record of when each employee receives a new or amended employment policy.

Employers can comply with this requirement by requiring written acknowledgements of new or amended policies and maintaining in each employee’s personnel file the acknowledgement.

VII.  Federal Exempt Employee Salary Compliance.

 

Effective January 1, 2020 the salary requirement for an exempt employee was raised to $684 per week or $35,568 per year.  To maintain the exemption, the employee must also meet the duties test of the applicable exemption: executive, administrative, or professional.

For salaried exempt employees who do not meet the salary basis requirement, an employer has several options.

• One option is to continue to pay the same salary to the employee but limit his or her overtime opportunities.

• A second option is to convert the employee from salaried to hourly.
  • If converted to hourly, the employer has three (3) legal ways to pay overtime:
    • 1 ½ times the hourly rate of pay for each hour over 40 in a workweek;,
    • the fluctuating workweek method,[10] or
    • the 40 hour workweek method.[11]
  • Employers should discuss these three options with their employment attorneys and consider the effect each of the methods will have on their workforce.
• The third, most obvious option is to raise the salaries to $684 per week to maintain the exemption.

VIII.      Further Information.

 

Further assistance on employment and labor law issues may be obtained from the attorneys in the Employment and Labor Law Group at the Fryberger Law Firm: Don Erickson, Joe Mihalek, Tom Witt, and Adam Sullivan.

[1] Under federal law, an exempt salaried employee is entitled to full pay in any workweek in which the employee performs any work.  Deductions may be made for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy, or practice of providing compensation for salary lost due to illness.  It does not appear to have been necessary for the Ordinance to include ESST for exempt employees.

[2] Minn. Stat. § 181.101 (a).

[3] Minn. Stat. § 181.101

[4] Minn. Stat. § 181.032, (b)

[5] Minn. Stat. § 181.032 (a)

[6] Minn. Stat. § 181.032 (c)

[7] Minn. Stat. § 181.032, (d)

[8] Minn. Stat. § 181.032 (f)

[9] Minn. Stat. § 177.30 (4)

[10] See 29 CFR 778.114 (a) for a description of the method.

[11] See 29 CFR 778.114 (c) for a description of calculating overtime under the workweek method.