Senate Republicans push for limiting wage theft penalties

By: - May 19, 2022 12:47 pm

Senator Eric Pratt (R-Prior Lake), right, testify on the omnibus jobs and economic development bill before the Senate Finance Committee Tuesday, April 13, 2022. Photo by Catherine J. Davis/Senate Media Services.

Tucked into the Senate’s massive end-of-session jobs bill (SF 4019) is a provision that would limit penalties against employers for wage theft.

The proposal is unlikely to pass a Democratic-controlled House, which is resistant to altering the state’s wage theft law. When it passed in 2019, the law it was heralded as one of the toughest in the country for making wage theft over $1,000 a felony

Despite the tougher law on the books, prosecutors have yet to bring a criminal case against an employer for wage theft, even though employers cheat their workers out of $12 million a year in Minnesota, according to one estimate by the state Department of Labor and Industry (DLI).

Currently, there is no limit to the penalties that can accrue to employers who fail to promptly pay back wages to their employee once they’re ordered to do so by DLI.

Employers have 10 days to make their employee whole, after which they must pay the employee an additional day’s wages for each day they’re late.

Under the proposal authored by Sen. Eric Pratt, R-Prior Lake, the penalties would be limited to 20 days of an employee’s average daily earnings.

Pratt argues the change is justified because he says it’s the only penalty in state law that’s not capped. And he says without a cap, employees are incentivized not to settle and to hold out for a larger payout while employers are disincentivized from appealing their cases.

“There ought to be a cap that (incentivizes) both sides to come to a settlement,” Pratt said, noting that prior to 2019 the state had a 15-day cap on wage theft penalties. Pratt has pushed to set a cap on the penalties each year since the law was passed.

Few cases even reach the point where employers face penalties, as the Reformer reported earlier this month. That’s partly a function of limited state resources to investigate wage theft claims, as well as the tendency for employers and employees to settle.

No employer has been charged penalties in excess of 20 days of wages since the 2019 law took effect, according to James Honerman, a DLI spokesman.

But that doesn’t mean it won’t happen in the future, Honerman said.

“One of the primary reasons for the average daily earnings penalty is to provide an incentive for an employer to resolve a case before incurring an increasing penalty after a demand is made,” Honerman wrote in an email. “That incentive is important to the potential resolution of cases.”

Pratt, who was also a chief author of the 2019 wage theft law, is facing staunch resistance from Democrats.

“There’s no reform here,” said Sen. Bobby Jo Champion, DFL-Minneapolis, during Senate debate on April 26. “The penalties should be significant … We need them to be more significant than the actual theft to deter bad actors.”

Champion was unsuccessful in trying to strip the proposal from the larger Senate jobs bill. His Democratic colleagues in control of the House, however, do have the power to block it.

The measure is currently being debated in conference committee, where the Senate and House are trying to find common ground on their competing bills.

Pratt’s bill also makes other small changes to the wage theft law, including requiring that DLI first provide a written warning to employers who fail to properly notify employees of their pay rate, paid time off and the day they will be paid.

Pratt’s bill also gives employers more time to provide that notice — seven days — whereas it’s currently required at the start of employment.

Pratt says the changes are meant to clean up a law that was written quickly.

“I’ve been trying to make changes to the law without weakening any other protections for the employees and making sure that we can more easily implement it for the employers,” Pratt said.

*This story has been updated to clarify that Pratt has previously proposed setting a cap on wage theft penalties.

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Max Nesterak
Max Nesterak

Max Nesterak is the deputy editor of the Reformer and reports on labor and housing. Most recently he was an associate producer for Minnesota Public Radio after a stint at NPR. He also co-founded the Behavioral Scientist and was a Fulbright Scholar to Berlin, Germany.