Last year I wrote about the case of Caldas v. Affordable Granite & Stone, Inc. (AGS), in which I explained how the Minnesota Supreme Court held that the employees who actually did work for the City of Minneapolis were not the intended beneficiaries of the prevailing wage provision of the construction contract.
I am happy to report that my friend, attorney Justin Cummins, almost singlehandedly pushed through new legislation to amend the applicable statutes, Minn. Stat. sections 181.13 and 181.14, to overturn this decision and provide greater protections for Minnesota employees as it relates to their pay. The laws, as amended, can be found here.
The amendments themselves do a number of things. First, they clarify that employees who are hired to do the work are the intended beneficiaries of a prevailing wage rate provision in a contract between the employer and a third party, or when otherwise set by law. So when someone hires a your company to perform a service, and the contract or some other law provides for how much you will be paid, you have the right to seek relief.
Second, the amendments also restore an employee's substantive right to sue an employer when it fails to pay wages or commissions the employee has earned. The Minnesota Supreme Court had previously held that these were nothing more than "timing" statutes that did not provide a party with a substantive claim to recover these amounts.
Third, the amendments define when wages and commissions have actually been earned. As crazy as it sounds, employment lawyers used to fight over this and the courts did not apply our common sense understanding in most cases. Now, wages and commissions are earned when the employee was not paid for all time worked.
Finally, the amendments clarify that employers cannot deduct amounts from your final paycheck for alleged amounts owed to it by the employee. Occasionally, employers would come up with any number of excuses not to pay an employee what they were owed at the conclusion of employment.
This is all good news for Minnesota employees.
Showing posts with label unpaid wages. Show all posts
Showing posts with label unpaid wages. Show all posts
Wednesday, May 22, 2013
Sunday, October 14, 2012
Who's Entitled to the Prevailing Wage? Not the People Doing the Work...
The Minnesota Supreme Court recently engaged in some mental gymnastics to deprive some employees doing work for the City of Minneapolis the right to have a jury decide whether they were paid the prevailing wage for their work. The opinion in the case of Caldas v. Affordable Granite & Stone, Inc. (AGS) can be found here.
The City had hired the plaintiffs' employer, AGS, to repair some flooring in the Minneapolis Convention Center. Per the City's requirements, the contract between AGS and the City expressly stated that AGS's employees would be paid the "prevailing wage" for the work they were doing on behalf of the city. The 13 plaintiffs in this case argued that they were engaged in putting in the new floor, which entitled them to approximately $44 per hour which was the prevailing wage for the work. AGS argued that the plaintiffs were engaged in janitorial work. Two audits by the City into complaints by the plaintiffs found that they had been properly characterized as performing janitorial work.
The plaintiffs sued claiming breach of contract, among other things. Because the plaintiffs were not parties to the contract between the City and AGS that contained the prevailing wage requirement, they had to argue that they were intended third party beneficiaries to that contract. AGS, naturally, argued the plaintiffs were not intended beneficiaries so it could avoid paying these folks the prevailing wage. The court's decision turned on whether these plaintiffs were intended third party beneficiaries or not.
The test that is commonly used in Minnesota to determine if someone is a third party beneficiary states:
Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and ... the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
So what does that legalese mean? Essentially, when a beneficiary of a contract is not expressly named in the contract, the court can look at the circumstances surrounding the contractual provision at issue to determine who, if anyone, may have been an intended beneficiary of the contract. If you are not an intended beneficiary, you cannot sue to enforce the contract.
So at this point you have to be asking yourself this question: If a prevailing wage provision was not meant to benefit the employees of AGS who were going to do the work , who the heck was it intended to benefit?
And that would be a great question. And logic would dictate that your instincts were correct. And you would be in good company in reaching that conclusion because the City of Minneapolis itself argued to the court that the plaintiffs were intended third party beneficiaries of the prevailing wage agreement.
But if you were a member of the Minnesota Supreme Court, you would have ended up on the losing end of this argument. The court held that AGS's promise to pay the prevailing wage was a "general promise to comply with the law, which does not confer upon AGS employees the right to enforce the law." The court went on to state that the City, not the employees, had a right to enforce that provision by conducting audits or investigations into whether AGS was complying with the prevailing wage provision of the contract. The City conducted those audits, concluded the plaintiffs were paid properly, and that was the end of it.
My feeling is that it was easy for the court to dismiss this case because the City itself had already concluded that these plaintiffs were properly classified and properly paid. As such, they did not present a compelling case that they had suffered some type of horrendous injustice. When the facts of a particular case do not engender some level of sympathy, it is often difficult to persuade the court that your side should win. But the problem here was that the only issue before the court was whether these folks were intended beneficiaries. It was a jury's job to first determine whether the provision had been breached.
Two of the six justices who decided the case dissented. In addressing the question of whether these plaintiffs were intended beneficiaries of the contract, they asked this question: “If Affordable Granite & Stone’s promise to pay its employees the prevailing wage for their work on the Convention Center was not meant to benefit these appellants, for whose benefit was it intended?”
For those of us who do this for a living, we think that is a really good question.
The City had hired the plaintiffs' employer, AGS, to repair some flooring in the Minneapolis Convention Center. Per the City's requirements, the contract between AGS and the City expressly stated that AGS's employees would be paid the "prevailing wage" for the work they were doing on behalf of the city. The 13 plaintiffs in this case argued that they were engaged in putting in the new floor, which entitled them to approximately $44 per hour which was the prevailing wage for the work. AGS argued that the plaintiffs were engaged in janitorial work. Two audits by the City into complaints by the plaintiffs found that they had been properly characterized as performing janitorial work.
The plaintiffs sued claiming breach of contract, among other things. Because the plaintiffs were not parties to the contract between the City and AGS that contained the prevailing wage requirement, they had to argue that they were intended third party beneficiaries to that contract. AGS, naturally, argued the plaintiffs were not intended beneficiaries so it could avoid paying these folks the prevailing wage. The court's decision turned on whether these plaintiffs were intended third party beneficiaries or not.
The test that is commonly used in Minnesota to determine if someone is a third party beneficiary states:
Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and ... the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
So what does that legalese mean? Essentially, when a beneficiary of a contract is not expressly named in the contract, the court can look at the circumstances surrounding the contractual provision at issue to determine who, if anyone, may have been an intended beneficiary of the contract. If you are not an intended beneficiary, you cannot sue to enforce the contract.
So at this point you have to be asking yourself this question: If a prevailing wage provision was not meant to benefit the employees of AGS who were going to do the work , who the heck was it intended to benefit?
And that would be a great question. And logic would dictate that your instincts were correct. And you would be in good company in reaching that conclusion because the City of Minneapolis itself argued to the court that the plaintiffs were intended third party beneficiaries of the prevailing wage agreement.
But if you were a member of the Minnesota Supreme Court, you would have ended up on the losing end of this argument. The court held that AGS's promise to pay the prevailing wage was a "general promise to comply with the law, which does not confer upon AGS employees the right to enforce the law." The court went on to state that the City, not the employees, had a right to enforce that provision by conducting audits or investigations into whether AGS was complying with the prevailing wage provision of the contract. The City conducted those audits, concluded the plaintiffs were paid properly, and that was the end of it.
My feeling is that it was easy for the court to dismiss this case because the City itself had already concluded that these plaintiffs were properly classified and properly paid. As such, they did not present a compelling case that they had suffered some type of horrendous injustice. When the facts of a particular case do not engender some level of sympathy, it is often difficult to persuade the court that your side should win. But the problem here was that the only issue before the court was whether these folks were intended beneficiaries. It was a jury's job to first determine whether the provision had been breached.
Two of the six justices who decided the case dissented. In addressing the question of whether these plaintiffs were intended beneficiaries of the contract, they asked this question: “If Affordable Granite & Stone’s promise to pay its employees the prevailing wage for their work on the Convention Center was not meant to benefit these appellants, for whose benefit was it intended?”
For those of us who do this for a living, we think that is a really good question.
Thursday, February 9, 2012
Things At Work Aren't Always As Clear As They May Seem
The Eighth Circuit Court of Appeals released an opinion today in which it affirmed the dismissal of Karen Chambers' lawsuit against The Travelers Companies, Inc. Chambers was employed by the insurer as a managing director and oversaw six underwriters in her department. In 2007, Travelers' human resources department received a complaint that Chambers had a "controlling" management style, brought personal stress to the department, made inappropriate religious comments and sold religious items in the office. Travelers chose to conduct a "climate survey" of Chambers' department to see if others shared these opinions.
It turns out they did. According to the court's opinion, the employees who reported to Chambers described their work environment as dysfunctional, team morale as low or non-existent, and Chambers' management style as "blame and shame" (I personally had never heard of that one before, which is remarkable). They also stated they felt pressured into purchasing religious items she sold for missionary trips so they wouldn't be on her "bad side."
Travelers reported their findings to Chambers in a meeting. They provided her with some of the information from the climate study and asked for her response. Chambers was not receptive to the criticism. Chambers was subsequently placed on a written warning for her behavior.
According to the opinion, Travelers subsequently discovered that Chambers had taken family members on business trips and may have expensed their meals and drinks to the comapny. She was then terminated.
Chambers brought suit claiming that the employees who disciplined her defamed her in the written warning and by telling her that she was being terminated for "continuing issues." She also sued for breach of contract, claiming she was entitled to a $30,000 bonus for the year 2007.
The court affirmed the district court's decision to throw Chambers' claims out of court. Specifically, the court noted that Travelers and its employees had a "qualified privilege" to make the allegedly defamatory statements. A qualified privilege exists where an individuals is making a statement "upon a proper occasion, from a proper motive and based on reasonable or probable cause." Oftentimes, communications between an employer's agents made in the course of investigating or punishing an employee for misconduct will be protected by the qualified privilege. However, where the employee can show "actual malice," that is, the statement was made from "ill-will and improper motives, or causelessly or wantonly with the purpose of injuring the employee," the privilege will be lost.
Chambers argued that the employees who investigated the incidents did not conduct a thorough investigation and therefore they acted with actual malice. The court held that pointing to instances where Travelers might have done a better job in its investigation does not meet the actual malice standard. However, if Chambers could have provided evidence that the individuals was skewed or slanted their findings, or were biased in some way, Chambers likely would have presented sufficient evidence to get her claim in front of a jury. The take-away from this claim is that negative (and arguably defamatory) statements made during an investigation by an employer into alleged misconduct are typically privileged and no claim for defamation will exist.
The court also threw out her claim for the $30,000 bonus. Specifically, the court cited Travelers' policy which stated that the bonus payment Chambers was seeking "are discretionary awards used to reward superior performance." The court held that when a contract term (here the bonus policy) leaves a decision to the discretion of one party - here, Travelers had the discretion whether to award the bonus - a court won't second guess that discretionary decision. In addition, Travelers' policy stated that an employee is eligible for the bonus only if they are employed on the date the bonuses were distributed. Chambers had been fired by that time. Therefore, the court threw out that claim as well. The take-away from this claim is that you need to review your employer's compensation policies carefully. Those policies are often very one sided in favor of the employer and do not always entitle you to the bonus or other compensation you feel you have earned.
If you have questions about any of these issues, feel free to contact me at your convenience.
It turns out they did. According to the court's opinion, the employees who reported to Chambers described their work environment as dysfunctional, team morale as low or non-existent, and Chambers' management style as "blame and shame" (I personally had never heard of that one before, which is remarkable). They also stated they felt pressured into purchasing religious items she sold for missionary trips so they wouldn't be on her "bad side."
Travelers reported their findings to Chambers in a meeting. They provided her with some of the information from the climate study and asked for her response. Chambers was not receptive to the criticism. Chambers was subsequently placed on a written warning for her behavior.
According to the opinion, Travelers subsequently discovered that Chambers had taken family members on business trips and may have expensed their meals and drinks to the comapny. She was then terminated.
Chambers brought suit claiming that the employees who disciplined her defamed her in the written warning and by telling her that she was being terminated for "continuing issues." She also sued for breach of contract, claiming she was entitled to a $30,000 bonus for the year 2007.
The court affirmed the district court's decision to throw Chambers' claims out of court. Specifically, the court noted that Travelers and its employees had a "qualified privilege" to make the allegedly defamatory statements. A qualified privilege exists where an individuals is making a statement "upon a proper occasion, from a proper motive and based on reasonable or probable cause." Oftentimes, communications between an employer's agents made in the course of investigating or punishing an employee for misconduct will be protected by the qualified privilege. However, where the employee can show "actual malice," that is, the statement was made from "ill-will and improper motives, or causelessly or wantonly with the purpose of injuring the employee," the privilege will be lost.
Chambers argued that the employees who investigated the incidents did not conduct a thorough investigation and therefore they acted with actual malice. The court held that pointing to instances where Travelers might have done a better job in its investigation does not meet the actual malice standard. However, if Chambers could have provided evidence that the individuals was skewed or slanted their findings, or were biased in some way, Chambers likely would have presented sufficient evidence to get her claim in front of a jury. The take-away from this claim is that negative (and arguably defamatory) statements made during an investigation by an employer into alleged misconduct are typically privileged and no claim for defamation will exist.
The court also threw out her claim for the $30,000 bonus. Specifically, the court cited Travelers' policy which stated that the bonus payment Chambers was seeking "are discretionary awards used to reward superior performance." The court held that when a contract term (here the bonus policy) leaves a decision to the discretion of one party - here, Travelers had the discretion whether to award the bonus - a court won't second guess that discretionary decision. In addition, Travelers' policy stated that an employee is eligible for the bonus only if they are employed on the date the bonuses were distributed. Chambers had been fired by that time. Therefore, the court threw out that claim as well. The take-away from this claim is that you need to review your employer's compensation policies carefully. Those policies are often very one sided in favor of the employer and do not always entitle you to the bonus or other compensation you feel you have earned.
If you have questions about any of these issues, feel free to contact me at your convenience.
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