Admittedly, I’m a little late blogging about this one…not sure how it escaped me. It is slightly old news, but important for home health care providers or other employers who use varying average hourly rates. The Department of Labor (DOL) issued an opinion letter on December 21, 2018 regarding the determination of minimum wage and overtime compliance with the Fair Labor Standards Act (FLSA) for employees with varying average hourly rates. Specifically, the letter concerns an employer who provides in-home health care services. The FLSA mandates employers provided all covered, nonexempt employees at least the federal minimum wage for all hours worked and overtime compensation for all hours worked in excess of 40 hours per week.

Home health care workers may be required to travel between clients’ homes during the workday. In this case, the employer calculated employees’ weekly pay by multiplying the employee’s time with clients by his or her hourly rate, and then dividing the total by the employee’s total hours worked (including time with the client and travel time). The employer compared the resulting number to federal and state minimum wage rate requirements to confirm compliance.

The DOL has previously opined an employer complies with the FLSA “[i]f the employee’s total wages for the workweek divided by compensable hours equal or exceed the applicable minimum wage.” Thus, even though the employees’ hourly rates varied each week, because the employer ensured that the average hourly pay rate always exceeded the FLSA’s minimum wage requirements for all hours worked, the DOL found the employer’s compensation plan complied with the FLSA’s minimum wage requirements.

However, the DOL remarked that the employer’s compensation plan might not comply with the FLSA’s overtime requirements. Under the FLSA, nonexempt employees must receive overtime compensation, at a minimum of one and one-half times their regular rate of pay, for all hours worked over 40 hours per week. The employer in this situation assumed a regular rate of pay of $10 per hour when calculating overtime. The DOL opined that this may violate the overtime requirements for employees whose actually regular rate of pay is greater than $10 per hour because, “neither an employer nor an employee may arbitrarily choose the regular rate of pay; it is an ‘actual fact’ based on ‘mathematical computation’.” However, if the employees’ actual regular rate of pay were less than $10 per hour the compensation plan would not violate the FLSA’s overtime requirements because an employer has the discretion to pay overtime in excess of the FLSA’s requirements. As with all opinion letters it is important to remember that they are fact specific to an individual employer. However, they serve as a general guidance for all employers in similar situations.

On November 14, 2018, the St. Paul City Council passed an ordinance implementing a minimum wage of $15 for employees who work within the geographic boundaries of St. Paul. Employees based outside of St. Paul, but who occasionally perform work in St. Paul, are also covered if, “over the course of one week [the employee] performs at least two hours of work for an employer within the geographic boundaries of the city.” This means that the Ordinance (for now) appears to apply to employers both located within St. Paul, and those outside of St. Paul with employees who work two or more hours in a week in St. Paul. I cannot imagine that this will not be challenged, however, similar to the challenge made (and won) in Minneapolis by non-Minneapolis employers with respect to the scope of its Sick and Safe Time Act Ordinance.

Employers are defined in the Ordinance as “Macro” (more than 10,000 employees); “Large” (more than 100); “Small” (100 or less); and “Micro” (fewer than 5). The minimum wage hike begins January 1, 2020 for Macro businesses at $12.50 and ends up at $15 by July 1, 2022, with automatic increases thereafter. All other size employers begin the first increase on July 1, 2020. Large businesses start at $11.50 and end up at $15 by July 1, 2023.  Small businesses start at $10 and end up at $15 by July 1, 2026. Micro businesses start at $9.25 and end up at $15 by July 1, 2028. Once an employer has hit the $15 minimum wage, thereafter the minimum wage is automatically increased to whatever the City Minimum Wage rate is that applies to the City of Saint Paul (the adjusted minimum wage rates will be announced September 1 of each year). For purposes of determining company size, all employees, including temporaries, are included. Franchises with more than 10 locations nationally are based on all locations owned and operated by a single franchisee.

A few other items to note – there is no exemption for tipped employees.  Thus, like with our State minimum wage, employers cannot apply a tip credit to meet the minimum wage requirements. There are exceptions for youth wages, city-approved youth-focused training or apprentice program, persons with disabilities, extended employment program workers, independent contractors, and others. Finally, like Minneapolis, St. Paul will prepare a notice for employers to use, as well as accompanying regulations for the finer details…and likely a flashy website to make it easy for employees to learn their rights and file complaints.

On November 14, 2018, the Eighth Circuit Court of Appeals held in Baouch v. Werner Enterprises, Inc. that per diem travel payments made to truck drivers driving away from home at night as reimbursement for travel expenses are “wages,” even though not taxed as part of an “accountable plan” under Treas. Reg. §1.62-2(c)(2). To qualify as an “accountable plan” a payment plan has to meet the IRS’ business connection, substantiation and return of excess expenses requirements. The Court held that the payments under the accountable plan were part of the drivers’ “regular rate,” as they were made as remuneration for work performed under the FLSA. The Court held that representations made by the employer to the IRS were not inconsistent with the FLSA’s governing the calculation of regular rates for the purposes of minimum wages. As the payments were made based on miles driven, and thus, hours worked, the payments were correctly included in the regular rate calculation, even though the primary effect of the payments were to cause participating drivers to take home more pay due to the non-payment of taxes on the payments.  The Court concluded that “per diem payments that vary with the amount of work performed are part of the regular rate.”

So, what does this mean?  Well, an employer who has an “accountable plan” for the payment of mileage reimbursement may be able to include that payment as “wages” for establishing the “regular rate” under the FLSA for purposes of meeting minimum wage.  However – you can’t have your cake and eat it too.  More often an employer argues that per diem is not part of the regular rate (as that increases overtime). Accordingly, employers should be careful that if per diem payments under an accountable plan are tied to hours worked, they may indeed be included in the regular rate for purposes of overtime. Finally, the Court noted such an analysis should be reviewed on a case-by-case basis, and look at factors such as whether the payments were unrestricted (employees need not report expenses or provide receipts and could spend the money as they liked) and the purpose and intent of the payments.

Quick reminder – on January 1, 2019, Minnesota’s minimum wage will increase to $9.86 per hour for large employers, and $8.04 an hour for all others (small employers, training wage rate and youth wage rate).  Employers located in Minneapolis should already be paying $10.25 per hour for small businesses and $11.25 for large (more than 100) businesses.  Remember, the higher rate applies if you are a Minneapolis employer; those rates increase every July 1.  As for St Paul employers, the City Council announced a new minimum wage ordinance on October 9, 2018, which it hopes to pass into law before the end of the year (more on that later in a future post).

 

Small businesses (100 or fewer employees) have less than one month left until the first phase of the Minneapolis Minimum Wage Ordinance goes into effect. The Minneapolis Minimum Wage Ordinance went into effect for large business (more than 100 employees) on January 1, 2018, when the minimum wage increased to $10.00. However, as I mentioned here, the ordinance differentiates based on employer size. Thus, on July 1, 2018, small employers are facing their first minimum wage increase under the ordinance, while large employers are on their second minimum wage increase.  Starting July 1, small Minneapolis employers must pay employees a minimum wage of $10.25 per hour, while large employers must pay $11.25 per hour.

The Minnesota Department of Labor and Industry’s (MnDOLI) May 31, 2018 Wage and Hour Bulletin reminds employers of teen working limitations, as schools are ending for the summer. Although I wrote about this topic recently in this blog post, as the teens start to flood the summer marketplace, I thought it important to share (and heck, let’s be honest, this may be the quickest blog I’ve even “written”):

May 31, 2018

Keeping teens safe at work this summer

Summer break is nearly here for Minnesota teens and many may be looking for employment. Following are some important tips about child labor laws for employers to consider before hiring teens for summer work. Contact us if you have any questions.

The Minnesota Department of  Labor and Industry strives to help employers keep workplaces safe for teens through education and by enforcing the Minnesota Child Labor Standards Act.

Child labor restrictions specific to ages 14 and 15

Teens ages 14 and 15 cannot:

  • work before 7 a.m. or after 9 p.m.;
  • work more than eight hours in a 24-hour period; or
  • work more than 40 hours a week.

Sixteen- and 17-year-olds don’t have working-hours restrictions if school is not in session.

Examples of work teens cannot do

Those age 17 and under cannot:

  • work in construction;
  • work in the sale, serving, dispensing or handling of alcohol;
  • operate power-driven machinery, such as forklifts, saws or meat grinders; or
  • work in the operation, erection or dismantling of rides or machinery in an amusement park or traveling show, or loading or unloading passengers on rides.

Those age 15 and under cannot:

  • operate power-driven lawn and garden equipment;
  • operate power-driven machinery, such as drills, sanders, etc; or
  • work with laundry, rug cleaning or dry cleaning equipment.

For a complete list of prohibited occupations for minors, contact us or visit our webpage about prohibited work for youth.

Exemptions for types of work for teens

Following is a list of exemptions for the type of work a minor may perform, the age at which they can work and work-hour restrictions.

Minors under the age of 14 may be employed as:

  • an actor, actress or model;
  • a newspaper carrier if at least 11 years old;
  • a youth athletic program referee if at least 11 years old and with parental or guardian consent); and
  • an agricultural employee if at least 12 years old (this work is also exempt from work-hour restrictions).

Prohibited employment for minors under the age of 18 does not apply to a minor:

  • who is 17 and is a high-school graduate; or
  • who is working for a parental corporation owned solely by the minor’s parents or guardians.

Exemption permits for working minors

Labor Standards has the ability to exempt minors from work-hour restrictions and prohibited employment.

Employers may complete an exemption permit for the minor in question and submit it to us for review via mail, email or fax.

 

A question I’m often asked by employers is whether they can decrease an employee’s rate of pay. This usually comes up after the business has a reason to do so, notifies the employee, and the employee responds that it’s unlawful and they’re going to report the company to the Minnesota Department of Labor and Industry, U.S. Department of Labor, or call an attorney. Despite the angry employee, it is not an unlawful pay practice, so long as the employer and employee do not have a contract for employment that specifically sets forth a rate of pay or other compensation terms.

That being said, there are some other considerations. For example, best practices would be to only decrease pay prospectively – in other words, before the hours have been worked.  This eliminates the argument that the money was “earned” at the previous rate. For example, if an employee is paid on April 15 for work performed from April 1 to April 14, and you tell the employee on April 10 that their hourly rate of pay is being decreased, the old rate of pay should be used from April 1 through April 10 and the new (lower) rate of pay could be used thereafter. However, from a personnel (employee happiness) perspective, it would be a better practice to make the change effective April 15 for the next payroll, or even the payroll following, in order to give employees plenty of time to juggle their finances if need be. It also would be a good idea to provide the employee with notice of the change in pay in writing that clearly states it is applicable starting on whatever date in the future.

Finally, of course it goes without saying, the employee must at least be paid minimum wage at all times – and be sure that you are using the most recent wage whether it be the federal minimum wage, Minnesota minimum wage, or city minimum wage (such as the Minneapolis Minimum Wage Ordinance).

 

As food industry businesses are well aware, in Minnesota, you cannot take a credit for tips when computing minimum wage, nor can an employer require tip pooling (Surly Brewing recently paid $2.5 Million in back wages for alleged tip pooling).  In response to cities in Minnesota passing or introducing higher minimum wage ordinances (such as $15 in Minneapolis and St. Paul), Republican lawmakers introduced a bill that would allow employers to pay their tipped employees a lower minimum wage. The bill is in response to concerns from primarily restaurants and bars, regarding the strain a higher minimum wage will incur on them.  The House committee is currently debating this proposed bill.

Under the bill, large employers (employers with annual gross receipts of $500,000 or more), may cap an employee’s minimum wage at $9.65, so as long as the employee makes an average of $14 per hour, including tips.  For small employers (employers with annual gross receipts of $500,000 or less), an employer may cap an employee’s base wage at $7.87 if the employee makes an average of $12 per hour, once the tips are included. If an employee does not make $14 or $12 per hour, depending on the employer’s size, the employer is required to pay them the higher of the Minnesota or federal minimum wage. Stay tuned!

Effective January 1, 2018, Minnesota large employers (annual gross revenue of $500,000 or more) must pay a minimum wage of $9.65 per hour; small employers must pay $7.87 per hour.  This is HIGHER than federal minimum wage of $7.25 per hour. Accordingly, Minnesota law applies, and so generally no Minnesota employee (with some exceptions) should earn less than $7.87 per hour (and, I know you know this, but there is no “tip credit” allowed in Minnesota).

But wait – there’s more! As I wrote about earlier, Minnesota employers subject to the Minneapolis Minimum Wage Ordinance must pay an even higher minimum wage starting January 1, 2018. Thus, for those employers, Minneapolis’ ordinance will trump both Minnesota state law and Federal law (hence, the Chamber of Commerce’s lawsuit that is pending). Starting January 1, 2018, large businesses (more than 100 employees) that fall under the Minneapolis ordinance will need to pay a minimum wage of $10 per hour.  Starting July 1, 2018, small businesses that fall under the Minneapolis ordinance will need to pay $10.25 per hour, and large businesses $11.25 per hour. Thereafter, the hourly wages increase each July 1 until 2024, when all employers that fall under the Minneapolis ordinance will need to pay the minimum wage of $15 per hour. You can read more about it on the City’s website here.

Minnesota employers should be careful to be familiar with all wages laws and ordinances that may apply to your business.  For example, a business can be a small employer under the $7.87 Minnesota State minimum wage (based on annual gross revenue), but a large business (more than 100 employees) under the Minneapolis Ordinance; in this case the employer would need to pay the higher of the minimum wage rates – the $10 per hour under the Minneapolis Ordinance.

On November 10, 2017, the Minnesota Chamber of Commerce filed another lawsuit against the City of Minneapolis, this time challenging the Minneapolis minimum wage ordinance, set to take effect on January 1, 2018. In a press release, the Chamber noted that, “a patchwork of inconsistent local laws creates an administrative nightmare for employers, especially those with facilities in multiple locations.” Sound familiar? Recall earlier this year, the Chamber also sued the City of Minneapolis over its Sick & Safe Leave Ordinance under a similar theory. The Minnesota Court of Appeals recently affirmed part of the decision in that suit (against the Chamber), but notably, temporarily enjoined the City from enforcing that ordinance against businesses without a physical location in the City of Minneapolis.

As it stands, Minnesota State minimum wage is currently $9.50 per hour, and increases annually each year by inflation. Thus, effective January 1, 2018, Minnesota’s minimum wage will be $9.65 per hour. Minneapolis’ ordinance, on the other hand, requires a minimum wage of $10 per hour starting January 1, 2018 for large businesses (more than 100 employees). Starting July 1, 2018, Minneapolis requires $10.25 per hour minimum wage for small businesses, and $11.25 per hour for large business. By July 1, 2022, the Minneapolis Ordinance requires a $15 minimum wage for large business, and the same by July 1, 2014 for small businesses. Thereafter, the minimum wage increases by inflation January 1 of every year.

Until the Court rules otherwise, however, employers (even those with collective bargaining agreements) must follow the Minneapolis Minimum Wage Ordinance if it is applicable to your business. If you are not sure whether the ordinance applies to your business (i.e. employers not located in Minneapolis but who have employees working in or passing through Minneapolis), I’d encourage you to seek counsel before the end of the year.