Employee Paid in Rent Credits for Hours Worked, but Not Time Spent On-Call; Minnesota Supreme Court Calls Foul

We don’t often see cases discussing the Minnesota Fair Labor Standards Act (MFLSA) reaching Minnesota’s highest court.  So, when we see one concerning the treatment of different types of wages and types of work performed, we pay attention.  In a recent case decided by the Minnesota Supreme Court, Hagen v. Steven Scott Management, Inc., the plaintiff, who was also a tenant of the defendant, was paid for her part-time work as a caretaker for the defendant’s apartment complex.

In exchange for her work, the plaintiff was paid in rent credits at a rate of $8.50 an hour, up to the monthly amount of her rent.  If she worked over the number of hours required to cover her rent, she was then paid in cash for any additional hours worked.  While most of her hours worked were during regular shifts, she was also required to be on call several times per month.   While she was on call, she was required to stay within 20 minutes of the apartment complex, was prohibited from drinking alcohol, and her daily activities were frequently interrupted by calls from tenants who would call the cell phone she was required, by the defendant, to always carry with her while on call.

However, instead of paying her for all time spent on call, the defendant only paid the plaintiff for the times she was actually performing work on behalf of the defendant.  After some time working in this arrangement, Hagen brought suit against Scott Management for failure to pay the Minnesota minimum wage, improper deductions from her wages, and failure to pay for all time worked, including the time spent working on call.  After having her case dismissed on summary judgment at both the district court and appellate court levels, the Supreme Court granted Hagen’s petition for review.

After finding that rent credits qualify as wages under the MFLSA, and that the rent credits did not constitute improper deductions from Hagen’s wages (because they were her wages) the Court evaluated whether Hagen’s time spent on-call should have been considered hours worked.

The MFLSA states that for on-site employees who reside on employer premises, “the term ‘hours worked’ includes time when the employee is performing any duties of employment, but does not mean time when [the]employee] is on the premises and available to perform duties of employment and is not performing duties of employment.”  However, Minnesota Rule 5200.0120 states that employees required to remain on the employer’s premises or so close to the premises that the employee cannot use the time effectively for the employee’s own purposes is working while on call.

The Court stated that the question to be answered was “whether the mere act of being on call was considered a duty of Hagen’s employment.”  The Court noted that working on an on-call basis was listed as an essential duty in her job description.  The Court held that the determination of whether the defendant’s on-call restrictions made it so that she could not use her time effectively was a factual determination, thus not appropriate to be resolved at the summary judgment stage.  Because of this, the case was sent back down to district court for a decision to be made by a jury.

This is a decision that should keep Minnesota employers on their toes, and re-evaluate the way employees are restricted during their on-call hours.  The federal Fair Labor Standards Act is usually more restrictive than the MFLSA, so it attracts the attention of most Minnesota employers.  However, Minnesota employers need to be just as wary of the requirements of the MFLSA, as the ramifications of a violation can have a serious impact on an employer.  If you, or your organization, need assistance in making sure you’re in compliance with wage and hour laws, contact Wiley Reber Law, for employment advice that works.