Employers with employees working 80 hours a year within Minneapolis should remember that the Minneapolis Wage Theft Prevention Ordinance goes into effect JANUARY 1, 2020. If you want more details about the ordinance and how it is different than the Minnesota Wage Theft Prevention Act, you can read my previous blog here.  In short, there are additional notice requirements and sick and safe time accrual and use balances must be put on the employee’s earnings statements.  All employees must be provided with the notice (not just new hires like the state law), and any changes to that notice must be signed by the employee.

To assist employers in compliance, the City of Minneapolis released an example prehire notice (though that name is somewhat misleading since it applies to current employees as well – don’t be tricked) in English and Spanish (that also complies with state law) and updated notice poster on its website yesterday.  It’s FAQs were previously released.

It’s that time of year where employers and employees alike get into the holiday spirit. Being the wage and hour blog that it is, I thought about sharing a few general holiday reminders (keep in mind I’m keeping this super simple just to toggle your brain):

  • Hourly employees who are provided a non-discretionary bonus must have that bonus layered back over their wages for the applicable period and included into the regular rate for overtime purposes (and thus, additional monies may be due the employee because of a bonus).
  • Think of a “discretionary” bonus as a “just because” bonus – there are no metrics, the employee does not know how to “earn” it, it is just something extra, typically unexpected.
  • A non-discretionary bonus is based on something (i.e. if the company does well, you will get 1% annual bonus; if you don’t go over on absences you will get $500, if x then y).
  • Employees cannot “volunteer” to perform their regular job whether it be for a company fundraiser, holiday party, etc. (well, they can, but they have to be paid at least minimum wage and overtime, if applicable).
  • Bonuses are “wages” – they should be paid like any other payroll (refrain from cash, gift cards, etc.).

Cheers!

The U.S. Department of Labor (DOL) certainly seems to mean well with it’s latest roll out. On November 13, 2019, it announced the issuance of the Office of Federal Contract Compliance Programs’ (OFCCP) Technical Assistance Guide – Construction Contractors. In its news release, the DOL noted this guide is meant as a “self-assessment tool” for federal project construction contractors to review their practices to “eliminate discrimination and achieve their equal employment opportunity goals”. Specifically, the guide contains an overview of obligations, steps to implement EEO construction contract specifications, and what to expect when preparing for an OFCCP audit. This includes guidance regarding equal pay, Pay Transparency Nondiscrimination Provision notice/requirements, compensation disparities and the like.

In reality (and this is why I say they mean well), the “guide” is a 157 page document that has even my head spinning….and the pictures of clean people in freshly laundered construction gear/clothing does not help…In short, pictures of women on a construction site in heels aside, I wanted to be sure to share this for our Minnesota construction companies that do federal projects, so that you know it is a resource. Beyond that, I see it as a reference tool and not something that 99.9% of contractors are actually going to sit down and read. Also recall – a guide is no substitution for the law. If the law changes, or the guide is wrong, an employer cannot point at this document/website as a defense. Happy reading!

In a September 10, 2019 opinion letter, FLSA2019-23, the U.S. Department of Labor was asked to interpret what a “month” means for purposes of the retail or service establishment exemption (29 U.S.C. 207(i)). In this exemption, an employee need not be paid overtime if the employee is employed by a “retail or service establishment,” their pay is at least 1.5 times minimum wage, and they receive half their compensation for a “representative period (not less than one month)” based on commissions for goods or services.

At first I was baffled that an actual opinion letter was written about the definition of a “month”. However, as I read on, I began to understand the lack of clarify. For example, an employer can designate a “workweek” based on any start day/time the employer desires – this is well established. So certainly the same is true with a “month”, right? Nope.

Here, the employer asked if four pay periods or two bi-weekly pay periods could be considered a valid representative month – essentially allowing the employer to designate the start of a “month”. Citing to several cases (including Whiteside v. Metro Life Ins. from Minnesota), the DOL concluded that the fair reading is that a month means a calendar month. Thus, 6 – but not 4 weeks (or 3 bi-weekly payrolls) is sufficient to meet the requirement of “not less than one month” – so long as the period is a “representative” period.

Don’t forget that Minnesota’s minimum wage rates increase January 1, 2020 to $10 for large employers and $8.15 for others.  Updated posters (which employers must post where employees can see them) can be found here.  Keep in mind that this is a state minimum wage.

If employers are doing business in Minneapolis, it has its own minimum wage ordinance which trumps the state rates as the wages are higher; those wage rates can be found here and increase next in July 2020.  St. Paul has its own ordinance as well, which begins its phase-in (to $15) starting January 1, 2020; those rates can be found here.

On September 12, 2019, three City of Minneapolis Council members shared a draft ordinance, the Minneapolis Freelance Worker Protections Ordinance. As it is just in the draft stages, I won’t go into great detail here, but to point it out.  For those Minnesota employers who rely on independent contractors – the development of this potential ordinance is one to follow.  The City is seeking feedback from freelancers in surveys and meetings.  However, the draft ordinance seeks to essentially expand the current Minneapolis Wage Theft Ordinance to independent contractors (also called “freelancers”).  The ordinance, as currently proposed, includes requirements such as:

  • If requested by the freelancer, a written contract including:
    • Name and address
    • Itemization of all services
    • Compensation for the services (rates and method)
    • Date payment is due or mechanism for how it will be determined
  • If a freelancer requests a written contract, work cannot begin until a contract is agreed upon (or the employer decides not to use that person’s services).
  • Timely payment pursuant to the contract (or 30 days if no date is specified)

Again, this is just in the development stages,  but employers should at least be aware that this is looming.

Just as soon as Minnesota employers start to understand the new Minnesota Wage Theft Law (enacted July 1, 2019), the City of Minneapolis has passed its own ordinance, the Minneapolis Wage Theft Prevention Ordinance, effective January 1, 2020.  Employers located in Minneapolis and employers located outside of Minneapolis but who have employees who work at least 80 hours per year in the City, must adhere to the Ordinance.

What Is Different Between the State Law and Minneapolis Ordinance?

The Ordinance requires more than the state law to largely incorporate information about the Minneapolis Sick and Safe Time Ordinance:

  • The Employee Notice must be given to ALL employees – not just new hires (as with the State law)
  • Employee Notice and earnings statements must include information about Sick and Safe Time:
    • Hours of leave the employee receives
    • Type of year used to determine accrual and carryover
    • Earliest date SST may begin (no more than 90 days from date of hire)
  • Employee notice must also require:
    • Employee’s date of hire
    • Overtime pay rates, number of hours to work to be eligible (typically 40 or 48)
    • If position involves gratuities, a statement that tip sharing or pooling is voluntary
  • An explanation of sick and safe time rules and employee’s signature of approval
  • Posters must be posted in English and other language (if applicable) and distributed to employees

Employers who fall under this ordinance should be sure that their time off policies are compliant and they are ready to roll out the employee notice and posters by January 1, 2020.  It is no small task – do not procrastinate and underestimate the work needed!  Also, looking into my crystal ball, I would not be surprised to see St. Paul (and then Duluth) follow suit as is common with such ordinances.

For anyone that thought something looked different on my blog, you are right!  Effective November 1, 2019, our firm (formerly Seaton, Peters & Revnew) is now Peters, Revnew, Kappenman & Anderson, P.A. following the retirement of founding shareholder Doug Seaton.  Doug has gone on to found the Upper Midwest Law Center, a non-profit public interest law firm.  It was a pleasure to work with Doug over the past 13 years and I wish him the best!

Except or Non-Exempt?  That is the question (which should not be answered by eenie-meenie-miney-mo)!  The U.S. Department of Labor (“DOL”) issued its Final Rule today (September 24, 2019) regarding the overtime exceptions under the so-called “white collar” exemptions.  As you may recall, the DOL previously issued a final rule in May 2016, but that rule was declared invalid, and the appeal held in abeyance pending this new Final Rule.  Accordingly, today the DOL has rescinded the 2016 final rule, which you can read more about here.

What’s New?  Effective January 1, 2020:

  • SALARY THRESHOLD. The salary threshold will be increased from $455 to $685 per week ($35,568 annualized).  The salary threshold for highly compensated employees (“HCE”) is raised from $100k to $107,432 per year.
  • MINIMUM GUARANTEE. A minimum guarantee plus extras is acceptable, so long as the employee also is guaranteed $684/wk.
    • For example, an inside salesperson makes a guarantee of $684/wk plus 1% commissions
    • An employee may be paid $684/wk plus additional compensation based on hours worked beyond a normal workweek, based on any basis (flat sum, bonus, straight-time hourly, time and one-half or any other basis) and may include paid time off.
  • NON-DISCRETIONARY BONUSES INCLUDED UP TO $3,556.80. Employers may now use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary level (i.e. no greater than $3,556.80), so long as it is paid at least annually.
    • If the employee does not earn enough bonus and incentive payments, however, to retain the salary threshold, an employer must make a “catch-up” payment within one pay period of the 52-week period (up to 10%) in order to retain the exemption.
    • In this case, the catch-up payment does not count toward compensation for the year it was paid, but the prior years’ salary amount (that it is applied to).
    • The 52-week period may be any consistent period (i.e. a calendar year, fiscal year, anniversary of date of hire).
    • If an employee does not work a full 52-week period due to being a new hire, or terminated, the employee may qualify if the employee receives a pro rata portion of the $3,556.80, based on the number of weeks employed.
  • COMPUTING EARNINGS ON HOURLY, DAILY, SHIFT BASIS. Earnings may be computed on an hourly, daily, or shift basis if the employee is guaranteed $684/wk and a, “reasonable relationship exists between the guaranteed amount and the amount actually earned.”  This test will be met if the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly, daily or shift rate for the employee’s normal scheduled workweek.  There are other nuances to this method, so be sure to understand the rule fully before using this method.
  • COMPUTING EARNINGS ON A FEE BASIS. Earnings may be computed on a fee basis, if the fee payment is at a rate that would amount to at least $684/wk (i.e. being paid $350 to create a widget that took 20 hours to complete as 40 hours of that work would amount to $700/wk).

Additionally, the DOL noted its intention to update the salary levels and HCE levels more regularly in the future (via notice and comment rulemaking).  There is no automatic threshold increase at this time.  Also note, the DOL did not change or alter the duties test at all.

What Should Employers Do?

  • CONDUCT AN INTERNAL AUDIT. Now is the time for an end-of-year internal wage and hour audit – start now so that any changes can be made prior to January 1, 2020 (give yourself at least 4-6 weeks for an audit to collect job descriptions,  analyze organizational charts, talk to supervisors about actual duties, update job descriptions, etc.).  The issuance of the final rule is the perfect time to review each exempt employee’s job duties and pay, and verify (or correct) whether the employee is properly classified before January 1, 2020.
    • Keep in mind that any communications that you have internally and all internal wage and hour audit work done without counsel to assist, is not privileged, and thus, may be discoverable. Thus, if someone concludes or sends an email, or creates an analysis that concludes an employee should be non-exempt, and it is ultimately decided the person is going to remain exempt, and that employee, or another challenges that exemption in the future, all of those documents are potentially discoverable by the then-plaintiff who will certainly point to those communications in support of a willful violation (which allows them to go back 3 years instead of 2 for backpay).
    • Remember that the salary threshold is just one component of determining whether an employee is exempt from overtime, so when auditing, you must address all three components. An employee must also meet: (1) the duties test (the duties must primarily involve executive, administrative, or professional duties as defined by the regulations); (2) the salary basis test (paid a fixed salary regardless of variations in quality or quantity of work – including hours worked); and (3) the salary level test (paid at least $685/wk).
  • CONDUCT PERFORMANCE REVIEWS OR MERIT INCREASES TO BE EFFECTIVE JANUARY 1, 2020. To the extent possible, conduct performance reviews at the end of the year so that any necessary changes (whether an employee is moved to hourly or given enough of an increase to remain exempt) can be made by January 1.
  • UPDATE YOUR EMPLOYEE HANDBOOK.  The beginning of the year is also the perfect time to roll out a new or revised employee handbook.  Review your handbook to determine whether any definitions of “salaried” or “exempt” are consistent with the new rule.  Review your overtime policies and be sure you are compliant with other 2019 changes, and any vacation/sick/PTO is compliant with any applicable sick and safe leave laws or ordinances.

Finally, this does not change Minnesota’s FLSA and any other state laws, which may be more restrictive (for example, Minnesota does not recognize the computer employee exemption).  Recall that the higher standard (whichever is more employee favorable) applies.

Employers who are required to submit the 2017 and 2018 Component 2 EEO-1 data (wage data) can now do so via the EEOC’s portal here.  In addition, the EEOC has released a FAQ that may answer many employer questions such as filing requirements, summary compensation data, hours worked, multi-establishment reporting, acquisitions and mergers, spinoffs, professional employer organizations, the online filing system, confidentiality and data security.