Minnesota Supreme Court Finds Certain Wage Deductions Unlawful

On August 14, 2013, the Minnesota Supreme Court held in Karl v. Uptown Drink, LLC, that employees do not have to show that their wages fell below minimum wage in order to prove that unlawful deductions were made by their employer. Minnesota Statute §181.79 makes it unlawful for an employer to make any deduction from an employee’s wages for lost or stolen property, damage to property, or to recover any other debt from the employee.

A class of 750 plaintiffs who worked for the defendant’s restaurants as bartenders, servers and security guards, filed suit against their employer alleging, among other things, that deductions were unlawfully made from their wages because they were required to pay for shortages if customers walked out without paying or failed to sign credit card receipts. The employer argued that since the deductions were made from the employees’ tips, and not from their hourly pay, no deductions were being made from their wages. However, the court of appeals concluded that the term “wages” as used in Minnesota law includes gratuities. In addition, the court of appeals determined that §181.79 does not require employees to show that deductions caused their wages to fall below the minimum wage in order for the deduction to be unlawful, and held that any deduction to recover debt from an employee without the employee’s written authorization is unlawful.

In Minnesota, wage deductions from an employee’s pay may only be made under very limited circumstances and often require the written consent of the employee. The decision highlights the necessity of employers to ensure that any wage deduction policies or practices involving automatic deductions from wages are legally compliant.

If you have questions regarding any of these developments, please feel free to contact the author at 952.921.4618 or at tadams@seatonlaw.com.