Article
Minnesota’s New Wage Theft Regulations and Employer Requirements: Real World Planning for Compliance
July 2, 2019
In case you missed it, on May 30, 2019, Minnesota passed the Jobs and Economic Development Omnibus Bill. Along with many other budget and legislative items, that bill included several new regulations imposing new responsibilities and recordkeeping requirements for Minnesota employers effective July 1, 2019.
These regulations, referred to as “Wage Theft” rules, are intended to ensure that all employees are provided with transparent access to important employment and payroll information and was passed in response to the large volume of wage theft complaints submitted to the Minnesota Department of Labor (DOL) each year.
CHANGES & NEW REQUIREMENTS SUMMARY
While it’s easy to get behind the overall intent and goals of the new Wage Theft regulations, employers need to understand how these requirements will affect the timing and documentation related to many of their most common HR and payroll processes. Here, we will review several key processes impacted by the new regulations: the employee written notice, commissions payment timing, payroll and earnings statement information, and employee handbook policies and recordkeeping requirements.
1. Employee Written Notice:
Processes Impacted: Employee Offers – Employee Onboarding – Ongoing Employee Changes
One of the key components of the new regulations require that all new employees be provided, on or before the date of hire, with a single written notice that contains all of the following employment information:
• The employee’s employment status (i.e. full time, part time, seasonal, etc.);
• Indication of whether an employee is exempt from minimum wage, overtime, and/or other state wage and hour laws, and, if so, on what basis;
• The number of days in the employee’s pay period and the regularly scheduled pay frequency (i.e. semi-monthly, bi-weekly, weekly, etc.);
• The employee’s first scheduled pay date;
• The employee’s rate or rates of pay and how that pay is calculated, including whether the employee is paid by the hour, shift, day, week, salary, piece, commission, or other method;
• Allowances, if any, related to permitted meals and lodging;
• Paid vacation, sick time, or other paid time off benefits available, including details of how this paid time off is earned and used;
• A list of deductions that may be made from the employee’s pay;
• The employer’s legal name and the operating name, if different;
• The physical address of the employer’s main office of principal place of business and a mailing address, if different; and
• The employer’s telephone number.
This written notice, once reviewed and signed by the employee, must be retained by the employer. In addition, although the original notice may be provided in English, it must also contain a statement in multiple languages that informs employees they may request the notice be translated into another language. The Minnesota Department of Labor has provided a sample translation statement on their website for employers to use.
These written notifications don’t just stop at employee onboarding. On an ongoing basis, employers are also required to provide existing employees with written notice of any changes in the above employment information before the changes become effective—For example, when an employee moves from an hourly position into a salaried position.
2. Commission Payment Timing
Process Impacted: Commission Payroll Frequency
While Minnesota has long required a regular payroll frequency of at least once per month, the new regulations require that all commissions earned by an employee be paid at least once every three months on a regular pay day.
3. Payroll and Earnings Statement Information
Processes Impacted: Payroll Timekeeping – Payroll Processing – Paystub Formatting
To ensure that employees have enough information to understand what they are paid and how their wages are calculated, employers are now required to include the following information on all employees paystubs each pay day:
• Employee name;
• Pay period dates;
• Total hours/units worked by the employee;
• The employee’s rate or rates of pay and how that pay is calculated, including whether the employee is paid by the hour, shift, day, week, salary, piece, commission, or other method;
• Total gross pay;
• Detailed list of deductions made from gross pay;
• Allowances paid, if any, related to permitted meals and lodging;
• Net amount of pay after all deductions are made;
• The employer’s legal and operating name;
• The employer’s telephone contact; and
• The physical address of the employer’s main office or principal place of business and a mailing address, if different.
While this information may seem simple to provide, employers may need to reach out to their payroll software provider to ensure that paystubs can be formatted to include the level of detail required. Moreover, because the intention of the new regulations are to make it easier for workers to verify their own wages, providers will also need to ensure paystubs include adequate work rate and quantity information that is easy for employees to understand and calculate.
4. Employee Handbook Policies & Recordkeeping Requirements
Processes Impacted: Employee Record Retention – Personnel Policy Manuals – Payroll Recordkeeping
The final new Wage Theft requirement relates to employer policy communication and recordkeeping. For many employers, this will require a review and update of current handbook or policy documents. All Minnesota employers must now maintain records of the following information for each employee:
• All employee hours worked each day and each workweek, including, for all employees paid at piece rate, the number of pieces completed at each piece rate;
• A list of personnel policies with brief descriptions of each policy that were provided to each employee, including the date the policies were provided to the employee;
• A signed copy of the new employee written notice and a copy of any written changes to the notice that occurred during ongoing employment; and
• For employers subject to Prevailing Wage laws, updated certified payroll reports and information.
In addition, all records (new and old) that are required to be kept by an employer must also be readily available for inspection. The new regulations state that “records must be kept by an employer at the place where employees are working or kept in a manner that allows the employer to comply with the commissioner’s demand within 72 hours.”
This is a tight response turnaround for even the most organized HR team, and overall, the Minnesota Wage Theft regulations will require employers of all sizes to take a close look at their current processes, systems, policies, and recordkeeping practices to make sure they are tracking and reporting all relevant information. Here are a few strategies to ensure your team is prepared, compliant, and efficient.
KEY CONSIDERATIONS & UPDATES FOR EMPLOYERS
Big picture, all employers should consider the following practical questions:
• Who will develop, implement, and manage the employee written notification process? Can systems/software be leveraged to support the workflow?
• How do current offer, onboarding, payroll, and recordkeeping processes overlap with the new Wage Theft requirements? Where can employers consolidate and streamline forms, checklists, and notifications to reduce duplication?
• What is the most appropriate timing to provide this written notice to employees? Does it make the most sense to send it with the initial offer letter (since employers may be sending much of this information in the offer letter anyway), or does it become a key piece of the onboarding process?
• Are all employment policies documented, including a brief summary of policy content, and do records include the date the policy was provided to each employee?
• Do current timekeeping processes accurately collect unit of pay information (hours, jobs, pieces, etc.) on a daily, weekly, and per pay period basis?
• Do all paystubs include the required rate of pay, unit of pay (i.e. hours, jobs, pieces, etc.), and gross pay detail required? If not, does current payroll and timekeeping software allow for necessary updates and customization to meet the requirements?
• Currently, could all employment and payroll information for all employees be efficiently collected and provided to inspectors within 72 hours of a request?
With the many changes taking effect, the broad implications for many key HR/payroll functions, and a very tight deadline of July 1, 2019, it’s understandable that new Wage Theft Law may leave many employers feeling frazzled. If you’re unsure how to get and remain compliant with these new regulations, check out the Minnesota Department of Labor website’s resources at https://www.dli.mn.gov/business/employment-practices or reach out to our expert payroll and employment team at AEM Workforce Solutions. You can reach us anytime at aemws@aemcpas.com or 507-625-2727.