By: Mary M. Krakow, Employment & Labor Law Group
Fredrikson & Byron P.A.
Phone: (612) 492-7164
E-mail: mkrakow@fredlaw.com

February 2007

Employers know they must comply with numerous state and federal laws. They also know that failure to do so can lead to significant monetary damages and/or other penalties, either by way of employee claims or enforcement actions initiated by state and/or federal agencies. This article highlights three often-overlooked and potentially costly employment requirements.

THE OVERPAID EMPLOYEE AT TERMINATION

A Typical Factual Situation

Employee Jim resigns his employment effective June 30th, having used his full annual allotment of four weeks of vacation even though, per the company’s vacation policy, he only had accrued two weeks’ worth. The company’s payroll department calculates Jim’s final paycheck, deducting the two weeks of unearned vacation. Upon noticing the deduction, Jim demands reimbursement.

Applicable Rules and Penalties

It is unlawful for a Minnesota employer to deduct from an employee’s earned wages except in very limited circumstances. A deduction for used but unearned vacation is unlawful unless a statutory exception applies. One such exception is if the employee, after having used the vacation, voluntarily authorizes the deduction in a written document that meets statutory requirements. As employers well know, however, the likelihood that Jim will give voluntary written authorization is slim-to-none.

A more likely exception is if the employee, before taking the unearned vacation, voluntarily authorizes in writing that the employer may deduct the vacation cost from his or her wages at regular intervals or upon termination of employment if the time is not earned.

An employer who violates these rules will be liable in a civil action for twice the amount deducted. The employer also may be liable for a statutory penalty, plus attorneys’ fees for failure to promptly pay a separated employee all wages earned and owing.

Avoiding the Mistake

The simplest way to avoid this mistake is not to allow employees to use unearned vacation. If such use is allowed, before advancing the time require employees to sign an agreement whereby they authorize the company to deduct from their wages, when they leave the company, the amount of any vacation time that was advanced but not earned at the time they leave.

AT-WILL EMPLOYMENT

A Typical Factual Situation

By Betty’s third day in her job--which requires lifting and carrying boxes ranging from 10 to 40 pounds--the company notices that Betty frequently picks up only part of each box, requiring her to make many more trips than other employees. When the manager meets with her, Betty discloses for the first time that she has a back condition that limits lifting to under 20 pounds, something she did not disclose during the job interview. The manager tells Betty she is terminated effective immediately based on his belief that, since Betty is an at-will employee, she can be terminated at any time.

Applicable Rules and Penalties

In Minnesota, employees are presumed to be employed “at-will.” This means employees may quit or be terminated with or without advance notice for any or no reason. But, there are many limitations on “at-will” status. For example, an individual employment agreement for a defined time period or collective bargaining agreement provisions may override an employer’s right to terminate at-will. Employer promises, whether spoken or written, in an employee handbook, personnel manual, or offer letter, also may limit the employer’s right to terminate at-will.

Federal and state discrimination laws place many limitations on an employee’s at-will status. For example, both the federal Americans with Disabilities Act (“ADA”) and the Minnesota Human Rights Act (“MHRA”) require employers with 15 or more employees to “reasonably accommodate” “qualified disabled employees,” unless the accommodation would cause the employer “undue hardship.” The protections of both laws apply to all employees, regardless of length of employment, and applicants are not required to disclose a “disability” or other protected class status during the hiring process.

Employees who believe they have been wrongly terminated may initiate individual lawsuits or, if applicable, file a charge of discrimination with the federal Equal Employment Opportunity Commission (“EEOC”) or Minnesota Department of Human Rights (“MDHR”). In a federal discrimination claim, an employee may recover up to $300,000 for compensatory and/or punitive damages, the amount of any actual damages (such as back pay), attorney’s fees and costs, and reinstatement. In a MHRA claim, an employee may recover triple the amount of actual damages, unlimited damages for mental anguish or suffering, up to $8,500 in punitive damages, unlimited civil penalties, attorney’s fees and costs, and reinstatement.

Avoiding the Mistake

Employers need to train managers and supervisors on the many exceptions to “at-will” employment so they do not inadvertently violate other laws. This includes training managers and supervisors regarding the company’s obligation to reasonably accommodate the physical, mental, and emotional limitations of qualified disabled employees. Employers must follow good personnel practices, including documentation of performance and conduct problems, even with new employees.

THE INJURED EMPLOYEE WHO NEEDS MORE LEAVE

A Typical Factual Situation

Robert has been absent for 12 weeks for injuries suffered in a car accident, and he has used all available paid vacation and sick time. Applicable policies (e.g., federal Family and Medical Leave Act, company personal leave, etc.) say that 12 weeks is the amount of leave allowed. Knowing that Robert has used all the time available under the company’s written policies, the manager tells Robert he is terminated; the company needs to fill the position, since it has been working short-handed.

Applicable Rules and Penalties

Employees who cannot return to work at the conclusion of their 12 weeks of FMLA or company-provided personal leave due to a continuation of their medical condition may be entitled to additional leave under the ADA and MHRA. Employers need to determine how much leave can be provided on a case-by-case basis, taking all of the facts into consideration--including, for example, past practice and the potential for setting precedent.

Before terminating an employee due to a medical limitation, obtain updated medical information regarding the employee’s ability to work, prognosis for returning to work, and any work restrictions. The employer also should communicate with the employee (i.e., engage in the “interactive process” required by the ADA and MHRA) to determine when he or she might be able to return to work and any restrictions that may apply. The company also should review its past practice and written policies regarding additional leave. The company should terminate only when it is able to show that continuing to allow the employee to remain on leave or working within prescribed medical limitations is an “undue hardship.”

In a federal or Minnesota disability discrimination claim, a successful employee may recover the same monetary and non-monetary damages as set forth above.

Avoiding the Mistake

Employers should follow the applicable rules set forth above and, when in doubt, consult with legal counsel.

Employers with questions regarding any of these situations or any other employment dilemma are encouraged to call their employment lawyer for assistance.