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Minnesota Supreme Court clarifies employer penalties

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in Human Resources

The Supreme Court of Minnesota has issued a decision clarifying penalties under the Minnesota Fair Labor Standards Act (MFLSA). The ruling makes it clear that employers that don’t follow the law and don’t maintain the required wage-and-hour records may face large fines payable to the state.

Plus, attorneys representing employees who win MFLSA cases are entitled to have their fees paid by the employer.

Recent case: Gary Milner, a Farmers Insurance Exchange claims representative, brought a class-action lawsuit on behalf of himself and all other claims representatives. Milner said the insurance company violated the MFLSA by misclassifying the claims representatives as exempt employees who were not entitled to overtime and by failing to keep any time records for them.

The claims representatives also argued that they were due overtime under the MFLSA for any hours in excess of 48 hours in a workweek, which should have been paid at time and a half.

During the jury trial, the employer confessed it had kept absolutely no records showing what hours the claims representatives worked. The jury concluded the employees were improperly classified and should have been paid overtime—but concluded Farmers owed nothing in back pay.

The judge then ordered Farmers to pay $376,000 in civil penalties and about $1.8 million in attorneys’ fees. The company appealed.

Ultimately, the case found its way to the Minnesota Supreme Court. It said employers aren’t technically liable for misclassifying employees. Instead, they are required to keep time records showing when employees work. That’s what Farmers admitted it had not done. Because the MFLSA allows courts to assess civil penalties for repeated or willful violations, the trial court could assess a large civil penalty. (Milner, et al., v. Farmers Insurance Exchange, No. A06-178, Supreme Court of Minnesota, 2008)

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