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Minnesota How to Collect Unpaid Wages and Commissions in Minnesota | Trepanier MacGillis Battina P.A. Law Firm
July 12, 2013 by Craig W. Trepanier
Sometimes an employer fails to pay an employee his or her final wages, commissions, bonuses, vacation time, or other pay after the employee is terminated or resigns from a position. In many cases, an employee is left wondering how to collect these unpaid wages – especially if the amount owed is too small to hire an attorney to collect the wages owed. There are several steps an employee can follow in an effort to effectively collect unpaid wages without the help of an attorney. These steps include determining the amount of wages owed, making a written demand for the unpaid wages, calculating applicable statutory penalties, and pursuing an unpaid wages claim in small claims court, often referred to as Conciliation Court.
Determine the Amount of Wages Owed
Following your resignation or termination, you should determine the amount of wages, commissions, bonuses, vacation time or other pay that you are owed. In order to calculate what you are owed, you should review your offer letter, employment agreement, commission plan, employee handbook, old pay stubs, timecards, applicable minimum wage laws, and any other documents in your possession that will prove what the employer agreed to pay you and how many hours you worked. Minnesota law provides, “An employee may directly seek and recover payment from an employer . . . even if the employee is not a party to a contract that requires the employer to pay the employee at the rate of pay demanded by the employee, so long as the contract or any applicable statute, regulation, rule, ordinance, government resolution or policy, or other legal authority requires payment to the employee at the particular rate of pay. The employee shall be able to directly seek payment at the highest rate of pay provided in the contract or applicable law, and any other related remedies as provided in this section.” Minn. Stat. § 181.13(a); Minn. Stat. § 181.14, subd. 2.
In Minnesota, if an employer contracts to provide paid vacation benefits or paid time off (“PTO”), these benefits will be considered wages under the law and the employer may be subject to statutory penalties if it does not pay the value of the employee’s accrued but unused PTO/vacation upon termination or resignation of employment. See Lee v. Fresenius Medical Care, Inc., 741 N.W.2d 117 (Minn. 2007). Sometimes, employers can limit the payout of earned but unused PTO upon termination based on the terms set out in an employee handbook or other company policy – including a “use-it-or-lose-it” policy, a “cap-on-vacation-time-accrual” policy, or a policy providing that employees terminated for “misconduct” will forfeit the value of their unused PTO/vacation. For a more detailed discussion of Minnesota law on recovering earned but unpaid PTO/vacation, click here.
In any event, the first step to recovering your unpaid wages is to carefully calculate the full amount of unpaid wages, commissions, bonuses, PTO/vacation, and other compensation owed to you. You should also gather, obtain copies of, and organize all supporting documents.
Minnesota Personnel Record Review and Access Act
In connection with obtaining all supporting documents for your unpaid wages or commissions claims, in Minnesota, upon written request of a current or former employee, employers must provide an employee an opportunity to review the employee’s personnel record. See Minn. Stat. § 181.961 (“With respect to employees who are separated from employment, upon the employee’s written request, the employer shall provide a copy of the personnel record to the employee.”). The personnel record includes, to the extent maintained by the employer, “any application for employment; wage or salary history; notices of commendation, warning, discipline, or termination; authorization for a deduction or withholding of pay; fringe benefit information; leave records; and employment history with the employer, including salary and compensation history, job titles, dates of promotions, transfers, and other changes, attendance records, performance evaluations, and retirement record.” Minn. Stat. § 181.960, subd. 4. This would be a good place to start to determine how much you are owed, as well as any discrepancies between what you and your former employer believe you are owed.
Determine Whether the Employer Made Any Improper Deductions
When trying to determine the amount of unpaid wages your former employer owes you, one important question to ask is whether the employer made any improper deductions from your pay. Sometimes an employer will try to make deductions from your paycheck for certain items that are not allowed under Minnesota law.
Minnesota law provides that an employer may not:
make any deduction, directly or indirectly, from the wages due or earned by any employee, who is not an independent contractor, for lost or stolen property, damage to property, or to recover any other claimed indebtedness running from employee to employer, unless the employee, after the loss has occurred or the claimed indebtedness has arisen, voluntarily authorizes the employer in writing to make the deduction or unless the employee is held liable in a court of competent jurisdiction for the loss or indebtedness.
Minn. Stat. § 181.79, subd. 1(a).
An employer who makes an improper deduction from an employee’s paycheck is liable to the employee for “twice the amount of the deduction or credit taken.” Minn. Stat. § 181.79, subd. 2. You should note, however, that section 181.79 does not apply to all employees in all situations, and it does not apply to independent contractors. See Minn. Stat. § 181.79, subd. 1(a) and (c).
Determine the Employer’s Statutory Deadline for Paying the Wages
An employer has a certain amount of time to pay wages to employees that were earned up through the employee’s final day of employment. The employer’s deadline will depend on your unique situation.
If you were an employee and you were terminated, your final wages are “immediately due and payable upon demand of the employee” and the employer can be penalized for failing to pay the employee “within 24 hours after demand” See Minn. Stat. § 181.13(a). The demand “must be in writing, but need not state the precise amount of unpaid wages or commissions owed.” Id.
If you were an entrusted with the “collection, disbursement, or handling of money or property” then the employer has “ten calendar days after the termination of the employment to audit and adjust the accounts of the employee before the employee’s wages or commissions shall be paid.” Minn. Stat. § 181.14, subd. 4. “No employer shall make any deduction, directly or indirectly, from the wages due or earned by any employee, who is not an independent contractor, for lost or stolen property, damage to property, or to recover any other claimed indebtedness running from employee to employer, except as permitted by section 181.79.” Id. (see also discussion of section 181.79 above).
Employees Who Resigned:
If you were an employee and you resigned, with some exceptions, you must be paid your final wages “in full not later than the first regularly scheduled payday following the employee’s final day of employment.” See Minn. Stat. § 181.14, subd. 1. The exceptions that may change the day that your wages are due include: (1) if you were subject to a collective bargaining agreement that contains a different provision; and (2) If the first regularly scheduled payday is less than five calendar days following your final day of employment, full payment may be delayed until the second regularly scheduled payday but shall not exceed a total of twenty (20) calendar days following your final day of employment. See id.
If you were a migrant worker, defined as “an individual at least 17 years of age who travels more than 100 miles to Minnesota from some other state to perform seasonal agricultural labor in Minnesota,” Minn. Stat. § 181.85, subd. 5, then “the wages or commissions earned and unpaid at the time the employee quits or resigns shall become due and payable within five days thereafter.” See Minn. Stat. § 181.14, subd. 1.
Independent Contractor Commissioned Salespersons:
If you were an independent contractor and a commissioned salesperson, you must be “promptly” paid at least your commissions “earned through the last day of employment” (your commission plan, if any, will normally determine when your commissions are “earned”). See Minn. Stat. § 181.145, subd. 2(a). The phrase “commissions earned through the last day of employment” means “commissions due for services or merchandise which have actually been delivered to and accepted by the customer by the final day of the salesperson’s employment.” Id.
If you or the employer gives five days’ written notice of termination or resignation, the employer must pay the salesperson’s commissions earned through the last day of employment on demand “no later than three working days after the salesperson’s last day of work.” Minn. Stat. § 181.145, subd. 2(b)
If you resigned without giving at least five days’ written notice, the employer must pay the salesperson’s commissions earned through the last day of employment on demand “no later than six working days after the salesperson’s last day of work.” Minn. Stat. § 181.145, subd. 2(c).
If you were entrusted with the “collection, disbursement, or handling of money or property” then the employer has “ten working days after the termination of employment to audit and adjust the accounts of the salesperson before the salesperson can demand commissions earned.” Minn. Stat. § 181.145, subd. 2(d). Following the ten-day audit period, the unpaid commissions are immediately due on demand. See Minn. Stat. § 181.145, subd. 2(d). Statutory penalties apply “only from the date of demand made after the expiration of the ten working day audit period.” Id.
Make a Written Demand for the Unpaid Wages
Following your termination or resignation, you should promptly make a demand in writing for all of your earned but unpaid wages through the last day of your employment. You can send a letter to the employer, addressed to the individual who handles the payment of wages (e.g., a Human Resources director or payroll manager). If you don’t know who handles the payment of wages, address the letter to the President, the Human Resource Department (if one exists), a member of upper management, or another executive at the employer who has the authority to make sure your unpaid wage claim is addressed in a timely fashion.
Your written demand for unpaid wages should include the following:
The date of your termination or resignation
A clear demand that the employer pay you all wages, salary, commissions, bonuses, PTO, vacation pay, and all other wages earned but unpaid through the last day of your employment. (You may also wish to demand wages that become due after your final day of employment, but statutory penalties typically will not apply to the collection of such wages).
A reference to the Minnesota law that covers your unique situation:
Minn. Stat. § 181.13 if you were an employee who was terminated
Minn. Stat. § 181.14 if you were an employee who resigned
Minn. Stat. § 181.145 if you were an independent contractor commissioned salesperson
Minn. Stat. § 181.79 if the employer made unlawful deductions from your wages
If possible, attach any documentation that shows what the employer owes you
The address to which you would like your wages mailed (if not included, wages will be “paid in the usual manner of payment.” Minn. Stat. § 181.13(b); Minn. Stat. § 181.14, subd. 5).
It is important to document how and when you deliver the written demand to the employer. This may become important later for determining if statutory penalties apply and if you end up needing to sue your employer to collect the unpaid wages. Minnesota law does not state how the written demand must be delivered. As a result, you can deliver the demand in person, or send it by regular U.S. mail, certified U.S. mail, overnight delivery service, fax, e-mail or any other method you choose. It is recommended that you deliver the written demand by more than one means (e.g., by certified U.S. mail and by fax) to make it harder for your former employer to claim that it did not receive the letter. You should keep proof that the written demand was delivered (e.g., certified mail receipt, fax confirmation sheet, printout of e-mail to employer, etc.). Once you make the written demand, you may wish to note the employer’s deadline for paying you on your calendar.
Make a Second Written Demand for the Payment of Wages and Statutory Penalties
If the deadline for payment has passed, and your former employer has still not paid your wages after a written demand, you may wish to deliver a second written demand for the wages. Although Minnesota law does not require you to make a second demand in all cases, it can be helpful to do so. In your second demand, you should recite the date of your first demand, state that you have not yet received payment, and give your former employer a final deadline for paying all of your earned but unpaid wages. In this second demand, you may also wish to demand all statutory penalties that are owed to you under the various statutes listed above.
The second demand letter is important especially if you quit. Under Minn. Stat. § 181.14, which governs employees who resigned, the employer’s deadline for paying you will differ slightly depending on when you quit, whether you are subject to a collective bargaining agreement, and whether the employer’s next regularly scheduled pay day was within five calendar days of your last day of employment. Statutory penalties do not begin to accrue until this deadline has run and you have made a written demand for payment. See Minn. Stat. § 181.14, subd. 2 (“Wages or commissions not paid within the required time period shall become immediately payable upon the demand of the employee. If the employee’s earned wages or commissions are not paid within 24 hours after the demand, the employer shall be liable to the employee for a penalty equal to the amount of the employee’s average daily earnings at the employee’s regular rate of pay or the rate required by law, whichever is greater, for every day, not exceeding 15 days in all, until such payment or other settlement satisfactory to the employee is made.”) (emphasis added). Therefore, to ensure that your demand triggers statutory penalties, you will want to send a second demand letter after twenty (20) days have passed since your final day of employment.
As with your first written demand, you should document how you deliver the second written demand to the employer. Again, it is best to deliver the second demand by at least two methods (e.g., by certified U.S. mail and fax). Keep copies of the letter and proof that the letter was actually delivered.
Calculate the Statutory Penalties Owed to You
Minnesota law provides that employees can recover certain damages when an employer fails to timely pay wages.
For employees who are terminated, section 181.13 provides that: “In addition to recovering the wages and commission actually earned and unpaid, the discharged employee may charge and collect a penalty equal to the amount of the employee’s average daily earnings at the employee’s regular rate of pay or the rate required by law, whichever is greater, for each day up to 15 days, that the employer is in default, until full payment or other settlement, satisfactory to the discharged employee, is made.” Minn. Stat. § 181.13(a). These statutory penalties begin to accrue if you are not paid within 24 hours of your written demand.
For employees that resign, section 181.14 provides that: “[T]he employer shall be liable to the employee for a penalty equal to the amount of the employee’s average daily earnings at the employee’s regular rate of pay or the rate required by law, whichever is greater, for every day, not exceeding 15 days in all, until such payment or other settlement satisfactory to the employee is made.” Minn. Stat. § 181.14, subd. 2. These statutory penalties begin to accrue after the deadline for payment (see discussion of section 181.14 above) and you have delivered a written demand for the unpaid wages.
For independent contractors who are commissioned salespersons, section 181.145 provides that: “the employer shall be liable to the salesperson, in addition to earned commissions, for a penalty for each day, not exceeding 15 days, which the employer is late in making full payment or satisfactory settlement to the salesperson for the commissions earned through the last day of employment. The daily penalty shall be in an amount equal to 1/15 of the salesperson’s commissions earned through the last day of employment which are still unpaid at the time that the penalty will be assessed.” Minn. Stat. § 181.145, subd. 3. These statutory penalties begin to accrue after you have delivered a demand for the unpaid commissions and the deadline for payment (see discussion of section 181.145 above) has run.
Double Damages for Unlawful Deductions: In cases where an employer has unlawfully made deductions from the employee’s paycheck, the employer is “liable in a civil action brought by the employee for twice the amount of the deduction or credit taken.” Minn. Stat. § 181.79, subd. 2.
Attorney’s Fees and Costs: If an employer fails to pay an employee wages, the court “shall order an employer . . . to pay to the aggrieved party reasonable costs, disbursements, witness fees, and attorney’s fees.” Minn. Stat. § 181.171, subd. 3.
Double Costs: Minnesota law permits employees to collect “double costs” when employers fail to pay the agreed-upon wages for 30 days after they are due and payment is demanded. See Minn. Stat. § 549.03 (“When any person who employed another to perform any labor or service neglects or refuses to pay the agreed price, or the reasonable value if there is no agreement, for 30 days after it is due and payment is demanded, and the payment is recovered by action, there shall be allowed to the plaintiff, and included in the judgment, all of the disbursements allowed by law and double the costs.”).
Other Relief: In cases where the employer has failed to pay wages, the court may also award “compensatory damages and other appropriate relief.” Minn. Stat. § 181.171, subd. 1.
Consider Filing a Complaint With the Minnesota Department of Labor & Industry
If you want to put added pressure on your employer, you can file a complaint for unpaid wages against the employer by contacting the Minnesota Department of Labor and Industry, Labor Standards Division. This division handles a broad range of wage and hour complaints and will typically send a demand letter to your former employer asking the employer to pay the amounts due.
Phone: 651-284-5070 or 1-800-342-5354
Website: http://www.doli.state.mn.us/LaborLaw.asp
Consider Hiring an Attorney to Pursue Your Claim
After calculating your damages and gathering the documents relevant to your unpaid wages, you should consider whether to hire a Minnesota unpaid wages attorney to pursue your unpaid wage claim. Some attorneys will charge you by the hour to review your case with you. Other attorneys may offer to take your case on a “contingency fee” arrangement, which means that in exchange for working on your case, the attorney will agree to keep a certain percentage of the wages that you might recover from your former employer. Yet other attorneys may offer to take your case on a “hybrid” basis – usually a combination of reduced hourly rates and contingent fees. Be sure to carefully review the qualifications of the attorney and get the agreement in writing.
Consider Pursuing Your Claim in Conciliation Court
If you decide that you do not wish to hire an attorney, or if you cannot afford to hire an attorney, you should consider bringing your claim in Conciliation Court if your claim against your former employer is for $10,000.00 or less. If you have claims higher than $10,000.00 but you still want to pursue a claim in Conciliation Court, you can do so but you will waive your right to recover more than $10,000.00. To pursue a claim in Conciliation Court, you should follow these steps:
1. Contact the Conciliation Court in the county where your former employer does business. The State of Minnesota court system has detailed instructions on how to initiate a claim.
2. You should complete and serve a Minnesota Conciliation Court Statement of Claim form on the former employer in order to initiate the claim. On the Statement of Claim form you should ask to recover the amount of your unpaid wages, applicable statutory penalties, the Conciliation Court filing fee, and double costs pursuant to Minn. Stat. § 549.03.
3. A hearing date will be set before a Conciliation Court judge, at which time you will be able to present documents and witnesses to prove your unpaid wage claim.
4. To prepare for the hearing, make sure to bring three (3) copies of any documents you want to use to prove your case. These documents may include proof that you sent written demands for unpaid wages, time cards or invoices, offer letter, employment agreement, commission plan, company policy, employee handbook, or any other documents that reflect the information regarding what the employer agreed to pay you.
5. You should bring a chart that outlines all of the unpaid wages, statutory penalties, and costs that you are seeking. This will help the judge remember the important details of your claims.
6. In order to establish your right to statutory penalties, you may want to bring copies of the relevant Minnesota unpaid wage statutes with you to the hearing.
7. During the hearing, the judge will ask you to summarize your claims, explain how much money you are owed, and prove that the wages were actually earned. You should practice telling your story.
8. You may want to bring a witness to the hearing who has knowledge of your claims and the payment practices of the employer. For example, a co-worker might be able to verify that you performed certain work or explain the employer’s practice for paying overtime pay or accrued PTO/vacation upon termination of employment. If a witness cannot attend the hearing, you can also submit a written statement from a witness.
If you think that you have a claim for unpaid wages that justifies hiring an attorney or exceeds the small claims court limit of $10,000.00, contact any of the Trepanier MacGillis Battina P.A. employment attorneys.
Attorney Craig W. Trepanier practices in the areas of labor and employment law, commercial litigation, and corporate law. Craig may be reached at 612.455.0502 or craig@trepanierlaw.com. Mr. Trepanier wishes to thank Kelly M. Dougherty, Jessica N. Hofrichter, and Ronan Slater for their contributions to this article.
Minnesota Unpaid Wages
Minnesota Unpaid Commissions
Minnesota Unpaid Vacation
Minnesota Unpaid Wage Attorney
Minnesota Unpaid Wage Lawyer
Minnesota Statute 181.13
Minnesota Statute 181.14
Minnesota Statute 181.145
Minnesota Demand for Wages