September 23, 2014
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Nebraska Legislature – Proposed Bills Could Affect Employers Withholding Wages

Two Nebraska bills have been proposed which would hold employers more accountable for withholding employee wages and provide employees with more protection. The Business and Labor Committee held hearings on LB 177 and LB 560 on February 4 and has not yet taken further action.

Senator Jim Smith introduced LB 177 which proposes to allow the Commissioner of Labor to seek enforcement of the Nebraska Wage Payment and Collection Act by investigating employers who have violated the act and could assess a civil penalty up to $1,000. This bill gives the Commissioner the power to:

• investigate
• hold hearings and
• subpoena records and witnesses.

If an employer willfully violated the Act, then the Commissioner could hold the employer liable to the affected employee for waiting time damages. These damages would be 50 percent of the wages owed.

This bill would give employees a different avenue to recover unpaid wages. Currently employees can only recover unpaid wages if they bring a civil suit after 30 days of a missed pay day.

In addition the Commissioner would be obligated to report a noncompliant employer to the county attorney. A violation would be Class IV misdemeanor. Under the current law, only a fine can be levied against employers who fail to provide an employee with an itemized statement, if a request was made.

During the hearing Sen. Smith offered an amendment to the proposed bill which would drop the Labor Commissioner’s ability to issue a $1,000 penalty.

The second bill, LB 560 introduced by Senator Heath Mello, proposes amendments to several acts. The bill would amend the Nebraska Fair Employment Act, the Wage and Hour Act, the Nebraska Wage Payment and Collection Act, and the Employee Classification Act.

LB 560 would amend the Nebraska Fair Employment Act to give the Commissioner of Labor the power to hold hearings and subpoena witnesses. It would also require every employer and labor organization that is subject to Fair Employment Act to keep and maintain employment records for five years.

The Nebraska Wage Payment and Collection Act would be amended to require employers give a 30-day notice to an employee before altering the employee’s wages. Currently the Act only requires a 30-day notice before altering an employee’s regular paydays. Also, the bill would require employers to provide an itemized statement detailing wages and the deductions made. This is different from the current rule which requires an employer to only supply an itemized statement after a request from an employee. Senator Mello’s bill would also give the Commissioner of Labor power to investigate and subpoena records and

witness related to enforcement of the Act. It also requires the county attorney to prosecute violators.

LB 560 would also prohibit retaliation by employer against an individual for participating in any investigation or hearing under the Nebraska Wage and Payment Act, The Wage and Hour Act, and the Employee Classification Act.

Several groups supported the two bills during the hearings, while each bill received a letter in opposition. The Labor Commissioner took a neutral position on both bills because more employees would need to be hired to carry out the investigations. A fiscal note is attached to both bills and estimates a cost between $149,148 and $165,345 for each of the next two years.

While LB 560 contains very similar amendments as LB 177, no formal discussions about combining the bills have taken place.

Nebraska employers should keep an eye on these proposed bills, as their effect on employment laws could be severe.

Another PTO payout challenge under the Nebraska Wage Payment and Collection Act

Nebraska employers know that unused vacation time must be paid out to an employee within two weeks of termination, or on the net regular payday, whichever is sooner.  In 2008, a judge of the Lancaster County Court applied that payout requirement to paid time off (PTO) as well, but the decision was overturned on appeal to the District Court.  The issue is being tested again, this time in Douglas County by a judge who ruled that PTO is the same as vacation time and must be paid out.

The roots of the dispute are in the Nebraska Supreme Court’s interpretation of the Wage Payment and Collection Act (Neb. Rev. Stat. § 48-1228, et seq.).  In Roseland v. Strategic Staff Management, 272 Neb. 434 (Oct. 2006) the Court held that vacation time was an earned benefit that could not be forfeited, regardless

of company policy.  Seeking to prevent the spread of that analysis to other types of paid leave, the Legislature passed a bill in 2007 amending the Nebraska Wage Payment and Collection Act to say that:

 “[p]aid leave, other than earned but unused vacation leave, provided as a fringe benefit by the employer shall not be included in the wages due and payable at the time of separation, unless the employer and the employee or the employer and the collective-bargaining representative have specifically agreed otherwise.”

In Gallentine v. B&R Stores, Inc. (Case No. CI 07-4892, June 18, 2008) (click for link) the District Court of Lancaster County overruled the county court and held that, because of the amendment, an employer could determine by its policy whether accrued but unused PTO would be paid out on separation, and the policy said it would not be.  In doing so, the court relied on statements in the legislative record of the 2007 amendments by Senator Abbie Cornett stating that PTO time was not intended to be considered vacation pay.

Earlier this month, a judge of the Douglas County Court again addressed the issue and held that an employer’s refusal to pay out PTO on separation deprives employees of an earned benefit, which the judge believed was contrary to the intent of the 2007 amendments and the Act.  Norton v. Payflex Systems USA, Inc., Cas No. CI 10-22919 (Sept. 7, 2011)(click for link) .

An appeal to district court will certainly follow in the Norton case, but employers with PTO policies are encouraged to re-examine those policies and stay tuned for further developments.

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