Good Advice for Avoiding Department of Labor Audit

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Yesterday’s Whistleblower column in the Minneapolis Star Tribune provides some solid advice for employers for avoiding a Department of Labor audit, and in the process, paying back taxes, wages and fines. The column reported on ten Minnesota businesses who had shorted their employees on wages and overtime. After complete audits, the companies were fined up to $85,000, representing the wages and overtime that they had denied their employees. The companies listed in the article were only a portion of the 41 companies that were fined by the Department of Labor in 2010.

Which were the most common infractions?

  • Requiring employees to split tips: Minnesota Statute section 177.24 prohibits employers from requiring employees to share gratuities, as tips are seen as the sole property of the employee who earned them. This is in contrast with the laws of other states that allow tip sharing.
  • Paying employees less than minimum wages: Minnesota law also prohibits employers from paying their employees less than minimum wage and allowing tips to make up the difference. This is known as a “tip credit” and although allowed in other states, it is illegal in Minnesota. In Minnesota, “large employers” (those with gross volume of sales made or business done of more than $625,000) must pay employees more than $6.15 an hour, while “small employers” (those with annual revenue of less than $625,000) must pay employees more than $4.90 per hour.
  • Deducting the cost of uniforms and “consumable supplies” from employees’ wages: Minnesota laws specify exactly what an employer may deduct from an employee’s wages. They can deduct (with the employee’s authorization):
    • the cost of union dues, premiums of any life insurance, hospitalization and surgical
      insurance, group accident and health insurance, group term life insurance, group annuities or
      contributions to credit unions or a community chest fund, a local arts council, a local science
      council or a local arts and science council, or Minnesota benefit association, a federally or state
      registered political action committee, or participation in any employee stock purchase plan;
    • the cost of lost or stolen property, damage to property, or to any other claimed debt, provided that the employee gives written permission;
    • Uniforms, consumable supplies and purchased or rented equipment used in employment, provided that the cost doesn’t exceed $50.00 and the cost is reimbursed at the end of employment.
  • Not paying overtime
    • Minnesota law requires employers with annual gross revenue of less than $500,000 to pay overtime when an employee works more than 48 hours per workweek
    • Employers who earn more than $500,000 in annual gross revenue must follow the federal law and pay overtime to employees who work more than 40 hours per work week.

The mistakes that the employers profiled in the Star Tribune story and not uncommon. However, the fines for such poor employment practices are high and can be very difficult for employers to pay (and the Department of Labor doesn’t always make payment plans and often requires payment in full). Making sure you are operating in compliance with the law before being audited in a good business practice that all employers should follow.


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