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.

The U.S. Department of Labor issued several opinion letters on November 8, 2018.  One of those, Opinion Letter FLSA2018-27, reproduces verbatim the text of Opinion Letter FLSA2009-23, which was (one of many) withdrawn by the Obama Administration “for further consideration”. This Opinion Letter clarifies the definition of a “tipped employee” for purposes of the Fair Labor Standards Act tip credit. However, since Minnesota does not allow a “tip credit” against minimum wage, I won’t go into more detail here, except to note it for those of you who have multi-state restaurants.

Late last year, the U.S. Department of Labor (DOL) issued a notice of proposed rulemaking, requesting comments related to rescinding portions of the 2011 Obama Administration tip pooling regulations that prohibit an employer from controlling or diverting tips (tips remain with the employee they are given to and up to him/her to share with others or not). The new rule would rescind “the parts of its tip regulations that bar tip-sharing arrangements in establishments where the employers pay full Federal minimum wage and do not take a tip credit against their minimum wage obligations.” As the tip-pooling ban may negatively affect the potential earnings of back-of house-staff, this is not only an issue for employers to keep an eye on, but those back-of-the-house employees as well.  While most wait staff share tips, it is not often split equally, resulting in a disproportionate amount of tips to the front-of-the-house and rescinding this regulation would allow employers to ensure all its staff are equally tipped for their combined team efforts.

Interestingly, after the notice and comment period ended on February 5, 2018, the DOL Office of the Inspector General (OIG) informed the DOL’s Wage and Hour division that an audit on the rulemaking process the DOL engaged in regarding the proposed tip pooling regulation was ongoing.  OIG launched the audit in response to concerns the DOL allegedly hid internal estimates of the proposal’s impact on workers. Accordingly, employers in industries where tipping is a prevalent practice should continue to monitor the developments with the proposed rule.

MinnesotaJudicialCenterHope is on the horizon for Minnesota restaurants! On September 20, it was announced that the Minnesota Supreme Court will hear the appeal from the novel decision, Burt v. Rackner, Inc. d/b/a Bunny’s Bar & Grill (MN App. June 27, 2016). As I wrote about on August 4, 2016, the plaintiff, Todd Burt, was terminated by Bunny’s Bar and Grill for not sharing tips with other employees. Despite not losing tips/money, the Minnesota Court of Appeals held (for the first time in 40 years) that the termination of his employment for refusing to share his tips with other employees resulted in his lost employment, and thus, he had an actionable claim to recover future lost wages under the Minnesota Fair Labor Standards Act (MnFLSA). This may not sound like a big deal, but it is – here’s why.

The MnFLSA already provides remedies when an employee is wrongfully forced to share tips – the Minnesota Human Rights Commissioner may require the employer to pay the employee the lost wages. The problem is obvious, right?  Here, the employee didn’t lose any wages – because he wouldn’t share – so he sued under this new theory that it was wrongful discharge in violation of the MnFLSA. This opens up an entirely different box of remedies – and litigation. Good for the employee.  Bad for the employer. The question is, what remedies does the MnFLSA allow, as interpreted by the courts (this is called “common law”).

In the Court of Appeals opinion, the Court held, for the first time: “Where an employer requires, as a condition of employment, that an employee consent to working rules expressly prohibited by the MFLSA, the employee is authorized by the statute to sue for damages normally associated with a wrongful-discharge cause of action.” This decision was monumental, creating a new exception to Minnesota’s at-will employment.

Not surprisingly, and a great relief to many restaurants and employers, on July 27, 2016, Bunny’s Bar & Grill, petitioned the Minnesota Supreme Court to review (and overturn, obviously) the Court of Appeals decision. Here is the issue on appeal:

Whether the MFLSA, Minn. Stat. §§ 177.24 and 177.27, creates a claim for the retaliatory discharge of an employee who refused to share gratuities, abrogating the common law of at will employment without any expression of legislative intent to do so.”

That’s fancy lawyer speak for asking the Supreme Court to decide that the Court of Appeals decision improperly interprets the MnFLSA to create an action for wrongful discharge, when the law does not itself provide such an action. Bunny’s position is that the Minnesota legislature must change the law, not the courts, which are only tasked with interpreting the law. On August 17, the Minnesota Restaurant Association (MRA) asked the Minnesota Supreme Court to allow it to file a brief in support of Bunny’s Bar & Grill petition. On September 20, the Minnesota Supreme Court announced that it would take the extraordinary step and review the Court of Appeals decision, and also allowed the MRA to file an amicus curiae brief (a brief supporting why Bunny’s is right and the Court of Appeals was wrong) in support of Bunny’s.

Keep in mind that the decision, while applicable to tips sharing, will certainly be broadly interpreted (beyond tip sharing) and used for other wage situations. Accordingly, I would not be surprised to see more employer associations or large employers ask to file a “me too” amicus curiae brief. After that, it’s the hurry up and wait game – after briefing and oral arguments, I wouldn’t expect to see a decision until Spring 2017, so we’ll just have to wait.

CookUnless you’ve been sleeping for the past decade, you know that Minnesota is an at-will employment state. Thus, either an employee, or an employer, may terminate the employee’s employment at any time, with or without notice. But what happens if an employee is terminated for not sharing tips with other employees? Despite not losing tips (the employee didn’t share the money as requested, after all), the Minnesota Court of Appeals held in Burt v. Rackner, Inc. d/b/a Buny’s Bar & Grill (MN App. June 27, 2016), that the employee’s termination of employment for refusing to share tips resulted in lost employment, and thus, he had an actionable claim to recover future lost wages:

Where an employer requires, as a condition of employment, that an employee consent to working rules expressly prohibited by the MFLSA, the employee is authorized by the statute to sue for damages normally associated with a wrongful-discharge cause of action.”

In other words…although the server’s employment was “at-will”, because his employment was terminated for failing to follow the employer’s directives to share tips, which were in violation of the Minnesota Fair Labor Standards Act (MnFLSA), he was “wrongfully discharged” contrary to law. Thus, an exception to at-will employment is born.

Recall, the MnFLSA prohibits employers from requiring employees to share tips. Minn. Stat. 177.24, Subd. 3. This is not new. Though most servers will share tips out of respect for their teammates in the back of the house, an employer cannot require tip sharing or tip pooling. Often, the back of the house will self-regulate this bad form, whether conscious or subconscious (providing faster service and help to those who share tips). What is new, is the Court holding that an employee can sue an employer when that employee is fired for refusing to comply with an employer’s illegal condition of continued employment based on a violation of the MnFLSA.

In this case, the employee did not lose any wages – he didn’t share after all – but he was fired for not sharing wages (which he can’t be required to do by an employer) and thus, he lost future wages.  The takeaway? Employers should not require tip-sharing or terminate an employee for failing to share tips. Chances are the employee will figure it out soon enough with the help of his or her teammates in the back of the house.

BarberI got asked a great question the other day by a colleague that made me think a bit, so I thought, what a perfect topic for a blog.  So, here’s the question that started it all: Can a Minnesota employer in the service industry pay an employee the greater of: (a) minimum wage for each hour worked; or (b) commissions earned for services rendered during an employee’s shift?  Her questioning this practice stems from the thought that the employer is affirmatively stating that, for some hours, $0 is attributed to certain time at work.  In this example, let’s use a small employer, a hair salon.  The employee is scheduled to work from 8:00 a.m. to 5:00 p.m. and has 3 clients on the books (with 8 total slots for the day).  The rest of the day, the employee relies on walk-ins to fill her schedule, does other tasks around the salon to keep busy, or just waits around waiting for someone to walk-in. Some days she may leave to run errands. The employee earns $15/hr. commissions for each hour-long appointment, but credits $0/hr. for time without an appointment.

How Can the Employee Be Paid?

Can the employer pay the employee minimum wage for 8 hours of work ($7.25 x 8 = $58)?   Yes, but I know you know that.  That’s the easy one.  Can the employer just pay the employee for the 3 clients the employee serviced if the employee stayed all 8 hours? No – I know you know that too. As 3 x $15 = $45, the minimum wage requirements have not been met and the employer would have to pay the additional $13 ($58-$45) to get the employee up to minimum wage for all hours worked.  A Minnesota employer must pay for all hours worked, including waiting time, on-call time, training time, and any other time the employee is restricted to the employer’s premises.  Minn. Rules 5200.0120.  If the employee is free to leave during nonscheduled time (but must be able to receive a call to come back for an appointment), the employee is no longer working and need not be paid – so long as there are no restrictions that the employee remain close to the premises.

Can the employer just pay the employee commissions earned for services rendered during the shift?   Continue Reading Don’t Trim Off Too Much! Handling Commissions & Minimum Wage

MoneyOn February 25, 2016, MNDOLI issued its 2015 Minnesota Minimum Wage Report.  The report details trends and statistics with respect to minimum wage workers in Minnesota, but seemingly only to “toot” Minnesota’s own horn. Adjusted for inflation, Federal minimum wage has dropped 26% from 1974 to 2013, while Minnesota’s minimum wage is about 2% more than it was in 1974.  This means that Minnesota’s employers are paying more now for minimum wage workers than it was in 1974. Continue Reading Minnesota Minimum Wage Report Issued – Noting Differences Between Federal and Minnesota Minimum Wage