Minnesota Law
Minnesota Employment Law: Management
- Employment Law: Management
Employment Law: Management
The Employment Relationship
Employee versus Independent Contractor
When a worker gets paid to do a task or provide a service for another person, the worker is either an independent contractor or an employee. The distinction is not always clear, but it is important for both the business and the worker. The classification determines whether a business must withhold taxes and what records it must keep, the benefits a worker is entitled to, whether an injured worker can file a workers' compensation claim, and whether a worker is protected by federal and state wage and hour regulations.
Whether a worker is an independent contractor or an employee is based on the work performed, not the worker's title. The more control an employer has over a worker, the more likely it is the worker is an employee. The more a worker acts like an independent business enterprise, the more likely the worker is an independent contractor. In some cases, the status is clear: a worker who arrives at a set time every day, is trained by the employer, uses the boss's tools or equipment, and is paid by the hour, week, or month, is most likely an employee. Someone who works for more than one company at a time, can set his or her own hours, and realizes a profit or risks a loss is most likely an independent contractor.
An employer could be subject to fines if the Internal Revenue Service, Minnesota Department of Revenue, or Minnesota Department of Jobs and Training finds a worker has been an employee when the employer treated him or her as an independent contractor. An employer who is unsure about a worker's status can ask a federal or state agency for an opinion based on the agency's guidelines. Guidelines vary from agency to agency, and one agency may classify someone as an employee even though another considers the same worker an independent contractor.
Employment at Will
The state of Minnesota recognizes the traditional rule of employment at will. This means that, in the absence of an agreement to the contrary, an employer can discharge an employee at any time for any reason other than an illegal reason, such as racial or gender discrimination. It also means that an employee can resign at any time, for any reason, with or without giving notice.
Most workers in Minnesota are at will employees. Generally, an employee is hired at will unless an employer specifically does something to change the status of the relationship. There are several ways an employer can alter the relationship. An employer may enter into an oral or written contract guaranteeing to employ someone for a specific period of time or promising to terminate the employee only for specified reasons. An employee handbook or collective bargaining agreement can limit the employer's right to terminate employees. An employer can inadvertently limit his or her right to fire an employee if the employer, by his or her own actions, gives the employee reason to believe the job will continue. For example, if an employer promises a job to someone from out of state and that person moves to Minnesota specifically to take the job, the employment relationship is probably not at will because the employee has gone to the trouble and expense of moving after reasonably relying on the promise of new employment.
Government Administered Benefits
Unemployment Insurance
Unemployment insurance provides benefits to employees who are laid off, fired, or otherwise forced to leave their jobs. Most employees are covered by unemployment insurance, a program administered by the state and funded by employer contributions. The Business Tax Law Chapter discusses the unemployment tax more fully.
Unemployment benefits are not automatic; the worker must apply for them through the Minnesota Department of Jobs and Training. After gathering information about an applicant, the Department makes an initial determination about the person's eligibility for benefits. If the Department's decision is that the individual is eligible, the Department informs the former employer. Because the former employer contributes to the benefits, the employer has the right to know what the former employee told the Department and has an opportunity to present the employer's side of the story.
An applicant cannot receive benefits if any one of the following conditions applies:
- The applicant is fired for misconduct
- The applicant fails to apply for or accept suitable work
- The applicant is a commission-only salesperson
- The applicant participates in a labor strike
- The applicant refuses an offer to work again for the former employer
- The applicant quits for any reason other than an illegal or otherwise intolerable work environment
- The applicant is a student hired by the educational institution in which he or she was enrolled
Workers' Compensation
Workers' Compensation provides benefits to employees injured in the workplace. With a few limited exceptions, all Minnesota employers must abide by the Minnesota Workers' Compensation Law. Under the law, all employers in Minnesota are required to purchase insurance against compensation claims from a company authorized by the state. With state permission, some employers can qualify for self-insurance. Any insurance broker should be able to help a business obtain workers' compensation insurance. An employer can also seek help by contacting the State of Minnesota Workers' Compensation Division.
The cost of premiums for compensation insurance is determined by factors such as the number of employees a business has, how safe the record of the workplace proves to be, and how much employees are paid. Generally, the greater the payroll or the higher the risk, the higher the premium. However, an employer may be able to lower premiums by establishing programs to provide for a safer workplace and by working with injured employees to minimize lost work time.
Employers are required to post a notice in the workplace informing workers of their rights to workers' compensation. If an employee is injured, the employer must report the injury immediately to the insurance carrier. A "First Report of Injury" form must be sent out as soon as possible, but it does not mean that the employer is admitting that the injury is covered by workers' compensation or that the injury even occurred.
It is illegal for an employer to refuse to hire an individual because he or she has a disabling condition from a prior injury. However, employers who hire workers with pre-existing conditions are protected from some liability. If an employee suffers an injury that is made greater because of a pre-existing condition at the time of hiring, the employer's liability is limited under the Minnesota Second Injury Law. The purpose of this law is to encourage employers to hire people who may have disabilities resulting from a previous injury.
Social Security
Social Security provides workers and their dependents with retirement and other benefits. Social Security benefits are financed through taxes on wages paid by both employers and workers. Under the Federal Insurance Contribution Act (FICA), an employer is responsible for withholding the appropriate taxes from an employee's pay, in addition to submitting its own share of FICA taxes. Withholding requirements are discussed in more detail in the Business Tax Law Chapter.
Civil Rights in the Workplace
Many federal civil rights laws only apply to employers with a minimum number of employees. The federal Americans with Disabilities Act, for example, only applies to employers with 15 or more employees after July 26, 1994. The Minnesota Human Rights Act, however, applies to all Minnesota employers who have one or more employees who are not close relatives. In addition, the Minnesota act covers more types of discrimination than do the federal laws.
In General
Most employment discrimination is outlawed by two major civil rights acts passed by Congress in 1964 and 1991 and by the Minnesota Human Rights Act. Through a combination of these laws, Minnesota workers are protected against discrimination based on race, color, creed, religion, national origin, sex, sexual orientation, marital status, status with regard to public assistance, membership or activity in a local commission, age, or disability. People frequently refer to "Title VII" rights when they are talking about a particular section of the Civil Rights Act of 1964. Title VII prohibits discrimination in a wide number of employment areas including hiring, firing, recruitment, transfers, promotions, testing, layoffs, recalls, fringe benefits, training, apprenticeship programs, and job advertisements. Title VII specifically prohibits retaliation against a person who files a charge of discrimination, participates in an investigation of discrimination, or opposes an unlawful employment practice.
Under certain extremely limited circumstances these civil rights acts allow employers to base their employment decisions or practices on a person's race, marital status, sex, etc., if the employer can demonstrate a truly legitimate need. For example, it is not impermissible sex discrimination to refuse to hire a man to be an attendant in a women's locker room. Religious institutions can refuse to hire individuals based on their religious beliefs, but only for positions that are directly related to the performance of religious duties. Religious institutions are generally not allowed to discriminate when hiring individuals for secular tasks such as secretarial or janitorial work.
Certain employers, such as police departments, can base employment decisions on an applicant's physical abilities. Some pre-employment exams are allowed under Minnesota law if they measure skills that are truly essential for an applicant to have in order to perform a particular job and are not applied in a selective or discriminatory way. Both state and federal agencies handle discrimination complaints.
Age Discrimination
The Age Discrimination in Employment Act (ADEA) expands Title VII prohibitions against age discrimination. Most employers cannot enforce mandatory retirement policies, except under a few very specific circumstances where age is truly a qualification for doing a particular job, such as firefighting, police work, or flying airplanes. Anyone age 40 or over who works for an employer with 20 or more employees is protected by the ADEA and cannot be retired against his or her will, regardless of age, as long as he or she can do the job. Any Minnesota employer employing fewer than 20 employees is prohibited by Title VII and other federal and state laws from discrimination based on age, but such an employer can force an employee aged 70 or older to retire.
Discrimination Against Persons with Disabilities
The Americans with Disabilities Act (ADA) is a federal law that prohibits discrimination based on physical and mental ability. The ADA requires employers to make reasonable accommodations for physically or mentally disabled employees, including modifying facilities and work schedules and providing special training. Using pre-employment tests that identify and exclude disabled applicants is permissible only when the tests are unequivocally job-related.
The ADA does not change in any way an employer's right to hire people who have the skills to perform the "essential duties" of a job. The ADA makes it illegal to refuse to hire an applicant or to fire a current employee who lacks physical or mental abilities that are not essential to the job.
The "reasonable accommodations" for disabled applicants or employees required of an employer may not place an undue burden on the employer. Reasonable accommodations include modifying work schedules, changing the work environment, buying or modifying special equipment, and reassigning to another position an employee who can no longer do the "essential duties" of a job. The ADA protects from discrimination only those people with permanent conditions that limit a major life activity. Thus, an employee who has a sprained ankle that is expected to heal fully is not protected under the ADA, even though that employee is disabled for a period of time. However, a person with a permanent disabling condition that is controlled by drugs, physical therapy, or by some other treatment is covered by the ADA. People with AIDS or HIV are also covered by the ADA.
The ADA prohibits discriminating against individuals who have completed or are still participating in drug rehabilitation programs. However, an applicant or employee currently using illegal drugs is not protected by the ADA.
Sexual Harassment
Everyone, male or female, has the right to be free from sexual harassment in the workplace. Sexual harassment can take many forms:
- Someone says something sexual about a coworker's appearance
- An employer enforces a mandatory dress code that provokes others to make sexually explicit comments
- Someone makes unwanted sexual contact
- Someone connects a condition of the job, such as a raise, with sexual contact
- Someone makes sexual jokes or explicit sexual comments that embarrass a coworker
- Someone displays or passes around pornographic pictures
The law requires that unwelcome behavior be both undesirable and offensive to be considered sexual harassment. Of these two criteria, the most problematic is determining what kind of behavior is offensive. Because of the diversity of sexual attitudes in this country, what is sexually offensive to one person may be just harmless sexual banter to another. The law uses the "reasonable person" standard to determine what is offensive: if a reasonable person would find an action offensive, then it is offensive.
In addition to laws designed to give victims a civil remedy against sexual harassment, criminal laws provide remedies against the most serious forms of unwanted sexual contact. If a harasser's behavior crosses the line into assault, battery, or rape, the victim can file criminal charges against the perpetrator. Anyone fired or forced to leave a job because of sexual harassment may be entitled to receive unemployment insurance benefits while searching for a new job.
Pregnancy Discrimination
Title VII protects pregnant workers and pregnant job applicants from discrimination. Employers cannot refuse to hire a woman because she is pregnant, fire a woman because she is pregnant, take away benefits or accrued seniority because a woman takes maternity leave, or fire or refuse to hire a woman who has an abortion.
Generally, an employer must treat pregnant women the same as other workers who cannot perform their jobs for short periods of time. Thus, if an employer allows employees to take a leave for a broken leg or short-term illness, he or she must allow pregnant women to take a leave under the same terms and conditions. Pregnancy leave is also protected under the Family and Medical Leave Act discussed below.
Other Workplace Rights and Responsibilities
Workplace Safety and Health
Workplace issues in Minnesota are governed by federal standards under the Occupational Safety and Health Act (OSHA) in combination with Minnesota Occupational Safety and Health Codes. Under these laws, an employer is responsible for making sure working conditions are safe and healthful. More specifically, an employer is responsible for creating working conditions free from recognized hazards that are causing, or are likely to cause, death or serious injury. All places of employment are subject to inspection for compliance with Minnesota safety and health standards, and monetary and criminal penalties can be assessed for noncompliance.
Employers must alert employees to their OSHA rights by displaying an "Occupational Safety and Health Protection on the Job" poster. In addition, employers cannot charge employees for protective equipment required under OSHA standards.
Employers also have certain rights under OSHA. For example, employers may request a variance from an OSHA standard in some situations, may participate in the process of developing or revising standards, or may go before the Occupational Safety and Health Review Board to request that a citation or penalty be reviewed and changed. In addition, under the Act trade secrets or privileged communications are protected.
Parenting, Family, and Medical Leave
Both the state of Minnesota and the federal government require certain employers to provide parenting, family, and medical leave to qualified employees. The federal law in this area preempts state law only when the federal law provides greater benefits. In areas for which Minnesota provides greater benefits, Minnesota law is controlling. Accordingly, it pays to be familiar with both laws.
The Family and Medical Leave Act of 1993 (FMLA) is a federal law that allows qualified employees to take up to 12 weeks of unpaid leave to attend to family matters, including health emergencies. Under the Act, a qualified employee may take an unpaid leave following the birth or adoption of a child, after acquiring a foster child, to care for an immediate family member with a serious health condition, or to care for his or her own serious health condition. Men and women are equally entitled to take these leaves.
Not every worker is qualified to take these leaves of absence. A person must be a full-time employee of a company with 50 or more employees and have worked for the company at least 12 months. In addition, an employee must have worked at the company for at least 1250 hours during the 12 months immediately prior to taking a leave under the FMLA.
Under the Act, during periods of unpaid FMLA leave, an employer must maintain the employee's health benefits at the same level and in the same manner as they would have been if the employee had continued to work. The employee is not entitled to accrue benefits such as vacation time or sick leave during a leave under the FMLA. Under most circumstances, an employee may elect or the employer may require the use of any accrued paid leave for periods of unpaid leave under the FMLA.
When the leave is foreseeable, an employee must provide the employer with at least 30 days notice of the need for the leave. If the leave is not foreseeable, then the notice must be given as soon as it is practical. An employer may require the employee to provide medical certification of a serious health condition and may require periodic reports during the leave of the employee's status and intent to return to work. In addition, an employer may require a fitness-for-duty certification upon return to work in appropriate situations.
When an employee returns from a leave under the FMLA, the employee is entitled to be restored to the same job the employee left when the leave began. If the same job is not available, the employer must place the employee in an equivalent job with equivalent pay, benefits, duties, and responsibilities. Any benefits accrued by the employee at the time the leave begins must stay with the employee. Under the Act, employers are prohibited from discriminating against or interfering with employees who take FMLA leaves.
Under the Minnesota Family Leave Act, employers with 20 or more employees are required to provide qualified employees with up to six weeks unpaid leave for the birth or adoption of a child. During the employee's absence, the employer must make insurance benefits available to the employee, although the employee can be required to pay the premiums for that insurance. Upon return, the employee is entitled to his or her previous job or a comparable position. A worker choosing not to return to work at the end of a leave period may be considered to have voluntarily quit and be denied unemployment benefits. Employers with 20 or more employees must allow employees to use their own accrued sick, disability, or medical leave to care for a sick or injured child for a reasonable period.
Privacy
Employees' right to privacy while at work is a hotly debated issue today as increasing numbers of employers turn to searches, surveillance, and eavesdropping in an attempt to better monitor their employees' activities. The law in this area is evolving and still largely unsettled, but it is fair to say that an employee surrenders some of his or her right to privacy at the workplace door. However, the number of employees who are challenging employer practices is growing.
The controlling factor courts look to in deciding if an employee has a right of privacy is whether an employee's expectation of privacy in a particular situation is reasonable. For example, the expectation of privacy is more reasonable for items in a locked desk drawer than for items left out on a desk. Similarly, the expectation is more reasonable for private phone calls made on a pay phone than for work-related calls made on the employer's phone.
The reasonable expectation standard is not a very strong guarantor of employee privacy. An employer can dramatically expand his or her right to searches, monitoring, and surveillance simply by giving notice to employees. Once an employee receives notice that the employer reserves the right to monitor calls, search offices, read electronic mail, or film the workplace, there is very little reasonable expectation of privacy. In addition to the surveillance and search activities previously mentioned, areas in which the right to privacy is an issue include lie detector tests, drug and alcohol testing, AIDS testing, smoking in the workplace, rights of free speech, rules governing dress and personal appearance, and disclosure of employee records.
Substance Abuse in the Workplace
The Minnesota Human Rights Act, under some conditions, protects alcoholics and drug addicts from discrimination. The protection is not absolute; an alcoholic or drug addict can be disciplined or fired if the drug or alcohol addiction prevents the addict from performing essential job duties or if the addiction endangers the safety of others.
Under certain circumstances, employers in Minnesota can compel employees to pass drug and alcohol tests as a condition of employment. These tests must not be given in a discriminatory way, and if passing a drug or alcohol test is a job requirement, then all employees performing that job must submit to the testing requirement.
An employer may test an employee for drugs and alcohol only under the following conditions:
- Reasonable suspicion: when an employer notices obvious signs (slurred speech, glazed eyes, etc.) that an employee is under the influence of drugs or alcohol; when an employee injures himself or herself or another worker while on the job, or has an accident while operating a vehicle to perform a work-related task; when an employee has unmistakably violated workplace rules on drugs or alcohol while operating an employer's machinery, equipment, or vehicle.
- Safety-sensitive positions: when an employee performs a task in which impairment by drugs or alcohol directly affects the safety of other workers or the general public.
- Routine physical exams: when conducting a routine physical exam, provided that giving such an exam is directly related to job performance. In addition, such a test cannot be required more than once a year, and employees must be given at least two weeks' written notice of the exam.
- Treatment program follow-up: at any time in the two years after an employee completes a drug or alcohol treatment program, provided the treatment was covered by an employee benefits plan or if the employer directed the employee to complete the treatment. Any such testing must be done in accordance with a written policy, and the policy must be made available in advance to all employees. Also, under the law, an individual who fails a substance test must be given a chance to go through rehabilitation before being fired.
Whistleblower Statutes
Minnesota and the federal government both forbid an employer to retaliate against an employee for reporting a violation of a law or for refusing to participate in activity the employee believes to be illegal. If an employee acts in good faith and reports suspected illegal activities to the employer, a governmental agency, or law enforcement officer, the employee cannot be fired or be treated adversely. The employee need not go through internal employer-sponsored channels to report suspected illegal activity. The law does not permit an employee to make statements or disclosures knowing they are false or in reckless disregard of the truth. Employers must notify employees of their whistleblower rights by posting a summary of the law.
Veterans' Reemployment Rights
Certain veterans returning from active duty are entitled to be re-employed by their pre-service employer. A veteran must meet the following five requirements to be covered by the Veterans' Reemployment Rights Act:
- The veteran held an "other than temporary" (not necessarily "permanent") civilian job
- The veteran left the civilian job for the purpose of going on active duty
- The veteran did not remain on active duty longer than four years, unless the period beyond four years (up to an additional year) was "at the request and for the convenience of the Federal Government"
- The veteran was discharged or released from active duty "under honorable conditions"
- The veteran applied for reemployment with the pre-service employer or successor in interest within 90 days after separation from active duty
Employee Access to Personnel Records
Minnesota statutes give employees of most private organizations the right to review personnel records kept on that employee by the employer. An employer must have at least 20 employees to be subject to the law. An employee is anyone currently working for the company or who has been separated from the company for less than one year. Independent contractors are not covered. The personnel record includes an application; a wage or salary history; commendations, warnings, discharge or termination letters; employment history and job titles; and a performance evaluation. In most situations, the personnel record does not include written references; information regarding allegations of criminal misconduct; results of employer administered tests; or statements or portions of statements by coworkers concerning job performance that would disclose the identity of the coworker by name, inference, or otherwise.
Non-Compete Agreements and Trade Secrets
A non-compete agreement is a type of restrictive covenant that limits an employee's right to work in a particular industry after he or she leaves a company. The former employee may be prevented from doing one or all of the following:
- Working for a competitor of the former employer
- Starting a business that competes with the former employer
- Contacting former or current customers or employees of the former employer
Another type of restrictive covenant prevents an employee from using trade secrets and other confidential or privileged information learned on the job after termination. Factors in the enforceability of confidentiality agreements include the ability of the former employer to prove that the information is indeed confidential, precautions that were taken to guard the information, and the reasonableness of the time and geographic limitations imposed.
Termination
Recognizing whether an employee was hired "at will" is critical to proceeding properly with termination. As stated earlier, if a worker has been employed at will, he or she may be discharged at any time for any reason other than an illegal one (some illegal reasons are discussed below). If the employment relationship is not at will, such as when an employer has promised to employ someone for a specific period of time, termination must be "for cause." Causes that justify job termination include habitual lateness or absence, theft of the company's or a co-worker's property, and falsifying records.
When a written employment contract exists, it may include requirements that relate to termination. A common requirement is that an employee be notified at least 30 days in advance of the termination. If an employee belongs to a union, the negotiated contract governs the process for involuntary termination. In the case of independent sales agents who work on commission, Minnesota requires that any earnings due the employee be paid within three working days after the last day of work. The penalty for failure to do so is the commission amount plus one-fifteenth of the commission for each day of nonpayment.
Rights and protections given to employees through an employee manual may be enforceable against employers in post-termination lawsuits as "implied contracts." For example, some courts have found that company retirement, sick leave, and fringe-benefits plans described in employee manuals were enforceable promises of compensation. Oral promises made at the hiring interview also may be recognized as implied contracts.
As stated earlier, fired employees are usually eligible for unemployment benefits. Since unemployment tax for some businesses is based on their experience with unemployment claims, it can be important to know how and when to contest claims. Unemployment claims may have ramifications for any discharge-related lawsuits an ex-employee may file. For example, if a company chooses not to oppose a former employee's claim for unemployment benefits, the company could be found to have waived a legitimate reason for the firing or to be tacitly admitting wrongdoing. Thus, a former employee who wins an unemployment case may then find it easier to file a lawsuit for wrongful discharge.
Prohibitions to Firing
Dismissals are illegal when based on age, sex, race, national origin or religion, or disability (see earlier discussion under Civil Rights in the Workplace). In addition, statute or public policy prohibits firing an employee for reporting alleged violations of the law (see Whistleblower Statutes, above); participating in union activity, such as a strike; joining with others to protest unsafe working conditions; refusing to commit an unlawful act on the employer's behalf, such as committing perjury or fixing prices; reporting to jury duty; reporting railroad accidents; or engaging in legal activities off-premises and after working hours. It is also prohibited to fire an employee whose wages have been garnished or whose pension rights under the Employment Retirement Income Security Act (discussed in the Employee Benefits Law Chapter) may be affected.
Defamation Related to Termination
Fired employees sometimes sue former employers for libel (defamation in written form) and slander (defamation in oral form). A defamatory statement is one that harms a person's reputation by lowering his or her standing in the community or deterring others from associating with him or her. Defamation occurs when the statement is false, communicated to a third party, and no special privilege exists.
Discussing a decision to terminate or criticizing a fired employee in front of non-essential third parties are actions that can increase an employer's vulnerability to defamation charges. Successful lawsuits have been based on statements in discharge letters and negative references to prospective employers. Truth is an absolute defense in any defamation lawsuit, and thus, it is important that an employer always state truthful reasons for any termination. A Minnesota employee whose employment is involuntarily terminated has the right to request that the employer provide the truthful reason for termination in writing.
Resources
Minnesota Small Business Assistance Office, 500 Metro Square Building, 121 Seventh Place East, St. Paul, MN 55101-2146, (612) 296-3871 or 1-800-657-3858 (A Guide to Starting a Business in Minnesota (13th ed. 1995)).
Small Business Handbook: Laws, Regulations and Technical Assistance Services (United States Department of Labor, 1993).