When an employer fails to pay wages, it can leave an employee wondering how to collect these unpaid wages – especially if the amount owed is too small to hire an attorney to collect. There are several steps employees can follow to collect unpaid wages in Minnesota.
Step 1: Determine the Amount of Wages Owed
Following your resignation or termination, you should determine what wages, commissions, bonuses, vacation time or other pay you may be owed. You should review any offer letter, employment agreement, commission plan, company policy, employee handbook, or any other documents in your possession that reflect everything the employer agreed to pay you. 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 will be subject to penalties if it does not pay them according to its agreement with the employee. 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.
Step 2: Determine Whether the Employer Made Any Unlawful Deductions
Sometimes an employer will try to make deductions from your paycheck for certain items that are not allowed under Minnesota law. In Minnesota, an employer may not make deductions from wages earned by an employee for any indebtedness unless the employee after the loss has occurred or the indebtedness has arisen voluntarily authorizes the employer in writing to make the deduction, unless the employee is held liable in court for the loss or the debt. 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. § 181.179, subd. 2. 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).
Step 3: Determine When the Wages are Owed
The employer has a certain amount of time to pay wages to employees that 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. 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. If you were an independent contractor and a commissioned salesperson, and you or the employer gives five days’ written notice, you must be paid no later than three working days after your last day of work. If no written notice is given, you must be paid no later than six days after your last day of work. If you were entrusted with the collection or handling of money or property, the employer has ten days to pay you.
Step 4: Make a Written Demand for the Unpaid Wages
An employee should promptly make a demand in writing for unpaid wages when they become due. A written demand is best done in a letter to the employer, addressed to the individual who handles the payment of wages. Include your name, contact information, position, a clear demand for the unpaid wages, a reference to the Minnesota law the covers your unique situation: Section 181.13 (terminated employee), Section 181.14 (employee resigned), Section 181.145 (independent contractor commissioned sales person), and Section 181.79 (unlawful deductions), attach any helpful documentation, and identify where you would like the employer to send any payments. You should deliver the written demand using two methods of delivery (i.e., certified mail and fax, etc.).
Step 5: Make a Second Demand in Writing for the Payment of Wages and Any Statutory Penalties
If the deadline for payment has passed, and your former employer has still not paid your wages, it would be wise to make a second written demand for the wages. 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 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. Similar to 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 (i.e., by certified mail and fax).
Step 6: Calculate Any Damages Owed to You
Minnesota law allows employees to collect liquidated damages, attorney’s fees and costs, and other relief when employers fail to pay wages. For employees, the law provides that employees may collect the amount of the employee's average daily earnings for up to 15 days that the employer is in default. For independent contractors who are commissioned salespersons, the law provides that the independent contractor may collect 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 is 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. When an employer unlawfully makes deductions from an employee’s paycheck, the employer is liable for twice the amount of the deduction taken.
Step 7: Consider Hiring an Attorney to Pursue Your Claims
After calculating your damages and gathering the documents relevant to your unpaid wage claim, you should consider whether to hire an attorney to pursue your unpaid wage claims. 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” which means that in exchange for working on your case, the attorney will agree to collect a certain percentage of the wages that you recover from your former employer. Yet other attorneys may offer to take your case on a “hybrid” basis – usually a combination of hourly rates and contingent fees. Be sure to carefully review any legal services agreement before agreeing to hire an attorney.
Step 8: 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. You can contact the Conciliation Court in the county where your former employer does business in order to initiate an action for your unpaid wages. The State of Minnesota court system has detailed instructions on how to initiate a claim. 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. When preparing for your hearing, make sure to follow the Conciliation Court’s instructions on how to present your evidence.