Nevada’s Minimum Wage Amendment in the Nevada Constitution has been cause for several Nevada Supreme Court decisions over the last few years. Most recently, the Supreme Court issued three opinions, which will affect nearly all employers in Nevada. Here are the results from these cases and how they affect employers:
To pay the lower minimum wage of $7.25 per hour instead of $8.25 per hour, employers need only offer health benefits. Employees do not have to be enrolled in the benefits for employers to pay the lower minimum wage.
The Nevada Constitution uses both the words “provide” and “offer” when describing what an employer must do with health benefits to pay the lower minimum wage. The specific language is,
The rate shall be [$7.25] per hour worked, if the employer provides health benefits as described herein, or [$8.25] per hour if the employer does not provide such benefits. Offering health benefits within the meaning of this section shall consist of making health insurance available to the employee for the employee and the employee’s dependents at a total cost to the employee for premiums of not more than 10 percent of the employee’s gross taxable income from the employer.
The Nevada Supreme Court determined that “offering” clarifies what it means to “provide” health benefits and that all an employer needs to do is offer qualifying health benefits in order to pay the lower minimum wage. We have been advising clients of this for several years, but it is vindicating for employers to have a Nevada Supreme Court decision eliminating any doubt.
A two-year statute of limitations applies to claims under the Minimum Wage Amendment.
The Minimum Wage Amendment in the Nevada Constitution allows employees to sue employers that violate the Amendment, but it does not specify a statute of limitations for those claims. The Supreme Court agreed with the district court that a two-year statute of limitations applies, as opposed to a four-year period that the plaintiff was arguing for. This is a great decision for employers because it limits the scope of possible minimum wage claims to two years.
When calculating whether the cost of insurance results in a qualifying plan to pay the lower minimum wage, employers may not consider tips as part of the employee’s income.
One of the requirements for health benefits to qualify for payment of the lower minimum wage is that the total cost of the insurance premiums to the employee cannot exceed 10% of the employee’s gross taxable income “from the employer.” Although taxable income from an IRS perspective includes tips, because the language in the amendment specifically says income “from the employer” and tips are not paid by the employer, the Nevada Supreme Court held that tip income cannot be considered to determine the 10% maximum for the cost of insurance premiums.
The problem here is that a Nevada Administrative Code section, NAC 608.104(2), says that tip income can be included. Therefore, the Nevada Supreme Court decision has rendered that Administrative Code provision invalid. Employers that have been including tips as part of the determination whether the premium does not exceed 10% of the employee’s income will now have to reevaluate that calculation.
All of these decisions are retroactive to the enactment of the Minimum Wage Amendment and don’t merely apply going forward.
In rendering these decisions, the Nevada Supreme Court concluded that it was merely clarifying what existing law has been since the Minimum Wage Amendment took effect in 2006. It is not creating new law. Therefore, all of these decisions are retroactive to 2006 as opposed to only applying going forward. Because the holdings regarding “offering” health benefits and the two-year statute of limitations are employer favorable, the fact that the decisions are retroactive makes no difference. But, the tip holding could be a basis for a lot of new litigation. Now (at least going back two years), a tipped employee could have a claim that the health benefits offered by the employer do not qualify to pay the lower minimum wage if those tips were necessary for the calculation that the premium does not exceed 10% of the employee’s gross taxable income.
Here are links to copies of the cases if you would like to read them for yourself: