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Are You A Wage Thief?

In May 2019, the state legislature passed new wage theft legislation and gave the Minnesota Department of Labor & Industry an additional $20 million to enforce the new law. No one condones the abuse of workers, least of all the vast majority of great contractors building Minnesota. But make no mistake about it, many long-standing, tried and proven practices utilized by contractors to provide affordable quality products are under attack. New administrative rules put otherwise law-abiding contractors at risk, and many laborers who prefer self-employment over working for someone may no longer have that option.

The law requires all employers to provide new hires with a written notice that includes a minimum of 8 specific items of information. The notice must be signed by the employee and kept in the company records for at least three years. If the new employee requests the notice in a language other than English, the employer must provide it. Anytime there is a change to any of the items in the notice, such as rate of pay, the employee must sign a notice of the change.

The law also mandates new information that must be provided on earnings statements or paystubs. Employers need to confirm that their payroll processors are providing all of the new information on their employees’ paystubs or risk violating the wage theft law.

The new law creates criminal penalties for intentionally underpaying employees wages they’ve earned, falsifying time records, or asking employees to return any portion of their earnings. The maximum penalties for intentionally withholding rightfully earned wages from employees is 20 years in prison and a $100,000 fine.

The new law requires the DLI Commissioner to share the orders it issues to employers for violations of the wage theft law with other state agencies, agencies issuing contracts for public construction projects, and other employees affected by the order.

There is a perception that the construction industry routinely misclassifies workers as independent contractors when they should be employees. Many trade laborers and other subcontractors prefer to be self-employed. They prefer the option of offering their labor to the highest bidder, the flexibility of choosing who to work for or which project to work on, and the power to determine how much time they want to spend working. Contractors prefer the flexibility of scaling their labor pool as needed and the ability to build a team of tradespeople to draw from with the skills required for individual projects. Customers save money when contractors right-size their labor force for the projects being built at any given time.

Unfortunately, state government disfavors independent contractor arrangements. State agencies dictate to contractors and their workers what their employment arrangement must be. Intentionally misclassifying those who should be employees may be considered wage theft under the new law subjecting contractors to new penalties.

The wage theft law is new, affects every business that pays someone other than the owner for labor, requires significant new administrative work, and carries severe penalties. All contractors with employees and independent contractors should review their practices and policies with legal counsel to ensure they are not unknowingly violating the new wage theft laws. The lawyers at Minnesota Construction Law Services are experienced with these issues and regulatory agency investigations. If you don’t have a current relationship with a construction attorney familiar with your situation, give us a call.