Articles

Minnesota's Wage Payment Laws

By Charles A. Horowitz, Attorney at Law

In today's uncertain economy, it is important for employees and employers alike to know their rights and obligations concerning payment of wages. What follows is a quick overview of Minnesota's wage payment laws.

• Frequency of payment - By statute, employees must be paid no less frequently than once every 31 days on a regular payday. An employer's failure to do so may result in action by the Department of Labor and imposition of penalties and costs, or private litigation by an employee.

• Terminated employees - By statute, terminated employees must be paid all unpaid wages within 24 hours of termination. If an employer fails to do so, the employee may make a formal written demand for payment. If the employer fails to make payment within 24 hours of such a request, the employee may sue to recover penalties - one day's wages for each day after the 24 hour request, up to 15 - and attorney fees, which the court must award to the employee who prevails at trial.

• Employees who quit or resign - Employees who quit or resign must be paid no later than the next regular pay period. The statute provides similar penalties to those allowed terminated employees.

• Statute of limitations - Unlike most contract claims in Minnesota, which are governed by a six year statute of limitations, an employee seeking payment of unpaid wages has only two years in which to bring suit, or three years if the employer's non-payment of wages was intentional as opposed to inadvertent. Interestingly, the courts have ruled that this two year period applies to employees who are subject to an employment contract with an employer, but not to independent contractors paid on a commissioned basis, the latter of whom have six years in which to bring suit.

• Unpaid vacation - "Use it or lose it" vacation policies are enforceable under Minnesota law. In the recent decision of Lee v. Fresenius Medical Care, Inc., the Minnesota Supreme Court ruled that employer policies calling for employee forfeiture of vested but unused vacation time upon separation from employment are also legally enforceable. To avoid any confusion or expensive litigation, any employer wishing to do so should state as much clearly and unambiguously in writing, preferably in the form of an employee handbook.

• Paid time off - Employers may institute policies providing paid time off in lieu of vacation pay. Paid time off, however, is not considered "wages" under Minnesota's wage payment statutes, and is not subject to requirements described above. Lee v. Fresenius. As a result, earned but unused paid time off is subject to forfeiture.

• Wages and hours laws - Minnesota's laws governing overtime pay are more expansive than their federal counterparts. To give but three examples: (1) Minnesota does not have an overtime exemption for computer employees, (2) Minnesota's overtime laws cover smaller employers than are covered under federal law and (3) overtime pay kicks in after 48 hours per week under Minnesota law, rather than 40 hours under federal law.

• Commissioned employees - A commissioned employee who has completed all the work necessary to obtain a commission is not entitled to payment if his or her contract states that commissions are not "earned" until all specified contingencies are met. The most common one requires that the employee remain employed at the time the customer makes payment for the goods or services in question. However, there is some authority in the law for wrongful termination claims based upon firings deliberately timed to avoid the payment of commissions, the vesting of stock options or other forms of compensation or benefits. This is an exception to the at-will employee doctrine, under which employees who are neither employed under a contract nor members of a collective bargaining unit may be terminated for any reason or no reason at all.

• Owners of closely held companies - Under Minnesota law, owners of small, closely held companies who are also employees may have a reasonable expectation of continued employment. In practice, this means that they cannot be fired except for good cause shown. Employers wishing to avoid such exposure should require that employee owners sign a contract of employment acknowledging they are employed at-will.

Do you need an employment checkup? If you are an employer or are in the process of starting up a company that plans to employ employees or engage independent contractors, it is advisable to consult with an employment law attorney to ensure that you are in compliance with the complex web of federal and state laws that relate to employment. Among other things, the experienced team at MT&C is available to review or draft up your employee handbook and ensure that all of your workplace policies are in compliance with the law. The adage "an ounce of prevention is worth a pound of cure" applies well to the area of workplace regulation.

Charles A. Horowitz is a partner with Mansfield Tanick & Cohen, practicing in the areas of employment litigation, insurance litigation and class action litigation. He can be reached via email at chorowitz@mansfieldtanick.com.