On Thursday, May 30, Minnesota Governor Tim Walz signed into law an amendment to the Minnesota Criminal Code making “wage theft” by an employer a crime. The penalties will make Minnesota one of the toughest jurisdictions in the country for employers who deliberately refuse to pay employee wages and salary when due. These penalties go into effect on August 1.
Under the statute, “wage theft” occurs when an employer, with intent to defraud, fails to pay an employee all wages, salary, gratuities, earnings or commissions due the employee by contract or by law. It also occurs when an employer requires an employee to accept a receipt for wages for an amount greater than what was actually paid, demands or receives a rebate or refund of wages due, or makes it appear that the employee was paid more than the wages actually paid.
Significantly, wage theft in excess of $1,000 will be deemed a felony. The penalties for wage theft depend upon the amount of wages deprived to the employee, with a maximum fine of $100,000 and maximum prison sentence of 20 years for theft in excess of $35,000.
Although the criminalization of wage theft is new and applies only where there is proof of an intent to defraud, the failure to pay wages regardless of intent has always been illegal under both state and federal law. Civil statutes impose strict liability on employers that fail to pay timely wages. The Minnesota Department of Labor and Industry has been cracking down on the practice of wage theft in the civil context for years.
Wage theft can take many forms, including paying less than minimum wage, withholding tips, requiring nonexempt employees to work off the clock, misclassifying employees as independent contractors, or wrongfully making deductions from wages for damage to property. The difference now is that this enactment makes wage theft a crime.
Significantly, it is not simply a corporate crime, it is a crime that can be charged against individuals involved in the decisions to fraudulently withhold wages as well as against the company itself. The wage theft statute defines “employer” as “any individual, partnership, association, corporation, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee.” There is no hiding behind the corporate veil under the wage theft statute.
It is worth noting that the crime of wage theft requires proof beyond a reasonable doubt of an “intent to defraud.” A mere inability to pay is not synonymous with intent to defraud. Presumably, criminal liability for wage theft wage will not lie when the employer unexpectedly finds itself unable to meet payroll. In such a case, there would be no intent to defraud. There would still be civil liability for failure to paid wages in that circumstance. On the other hand, if an employer (or agent of an employer) fraudulently conceals from employee’s an inability to meet payroll, thereby extracting labor from the employee knowing that wages cannot be paid, then criminal liability is a very real possibility.