947 N.W.2d 847
Minn. Ct. App.
2020

Jessica Hagen, on behalf of herself and others similarly situated, Appellant, vs. Steven Scott Management, Inc., Respondent.

A19-1224

STATE OF MINNESOTA IN COURT OF APPEALS

Filed July 13, 2020

Reyes, Judge

Hennepin County District Court File No. 27-CV-19-533

A.L. Brown, Joshua R. Williams, Marcus L. Amon, Capitol City Law Group, LLC, St. Paul, Minnesota (for appellant)

Andrew E. Tanick, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Minneapolis, Minnesota (for respondent)

Considered and decided by Bjorkman, Presiding Judge; Reyes, Judge; and Florey, Judge.

S Y L L A B U S

Under the plain language of Minn. Stat. § 177.23, subd. 10 (2018), the time during which an on-site employee of a residential building who receives a principal place of residence as full or partial compensation is “available to perform duties” but is not actually “performing any duties of employment” is not compensable time under the Minnesota Fair Labor Standards Act.

Under the plain meaning of Minn. R. 5200.0120, subp. 2 (2019), an employee who is required to remain on site or so close that they cannot use their time effectively is “working while on call,” and is therefore entitled to compensable “hours worked,” per Minn. R. 5200.0120, subp. 1 (2019).

O P I N I O N

REYES, Judge

Appellant challenges the summary-judgment dismissal of her claims that respondent violated the Minnesota Fair Labor Standards Act (MFLSA), Minn. Stat. §§ 177.21-.35 (2018), and the Payment of Wages Act (PWA), Minn. Stat. §§ 181.01-.1721 (2018), arguing that the district court erred by determining that (1) respondent‘s use of rent credits as compensation for property caretaking does not violate the MFLSA; (2) respondent‘s use of rent credits as compensation does not constitute a deduction from wages in violation of the PWA; and (3) respondent‘s failure to pay for time spent on call and on site does not violate the MFLSA. We affirm.

FACTS

Appellant Jessica Hagen has worked as a property caretaker since April 2015 at an apartment complex owned by respondent Steven Scott Management, Inc. (Scott). Hagen lived at the complex during the time she worked as a property caretaker. During her assigned shifts,1 Scott requires Hagen to be on call at times; Scott provides Hagen with a cellphone and requires her to be able to return to the complex within 20 minutes if the need

arises. Scott also requires Hagen to be on site for parts of her on-call shifts, such as when tenants move in or out of the complex. During this on-site on-call time, there are periods when Hagen has to be on site but also has to wait before she can perform required duties. Scott does not compensate Hagen for time spent on call but not performing duties.

Scott compensates Hagen primarily with rent credits at a rate equivalent to $8.50 per hour worked. If and when Hagen works more than 99.75 hours in a month, Scott compensates Hagen with a paycheck at the hourly rate.

Hagen sued Scott, alleging (1) failure to pay minimum wage, in violation of the MFLSA, in violation of Minn. Stat. § 177.24; (2) improper deduction from wages, in violation of Minn. Stat. § 181.79 of the PWA; and (3) failure to “pay for all straight time worked,” including time spent on call and time spent on site waiting to work, in violation of Minn. Stat. §§ 181.101, .13, .14 of the PWA and Minn. R. 5200.0120, subp. 1, promulgated under the MFLSA. Scott filed a motion for summary judgment.

The district court granted Scott‘s motion for summary judgment and dismissed Hagen‘s complaint with prejudice. It determined that (1) the MFLSA allows for rent credits as a means of paying the minimum wage; (2) caselaw forecloses Hagen‘s claim that, under the PWA, Scott improperly deducted the rent credit from her wages; and (3) Hagen‘s on-call time spent waiting to work but not working is not compensable under section 177.23, subdivision 10, of the MFLSA or Minn. R. 5200.0120, subp. 2. This appeal follows.

ISSUES

  1. Did Scott violate the MFLSA by paying Hagen with rent credits?
  2. Did Scott violate the PWA by paying Hagen with rent credits?
  3. Is Hagen‘s time spent on call and on site available to perform duties but not actually performing any duties compensable under the MFLSA or MFLSA rules?

ANALYSIS

“We review a district court‘s summary judgment decision de novo. In doing so, we determine whether the district court properly applied the law and whether there are genuine issues of material fact that preclude summary judgment.” Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn. 2010) (citation omitted).

When interpreting statutes, our goal is to give effect to the legislature‘s intent. Milner v. Farmers Ins. Exch., 748 N.W.2d 608, 613 (Minn. 2008). When the language of a statute is clear and unambiguous, we apply its plain meaning. In re Buckmaster, 755 N.W.2d 570, 576 (Minn. App. 2008). We also construe agency rules according to their plain meaning, which we interpret de novo. See, e.g., St. Otto‘s Home v. Minn. Dep‘t of Human Servs., 437 N.W.2d 35, 39, 43 (Minn. 1989) (stating interpretation of regulations presents question of law and reviewing plain meaning of agency rule).

A district court should grant summary judgment when the record shows an absence of genuine issues of material fact and when the moving party is entitled to judgment as a matter of law. See Minn. R. Civ. P. 56.01. A material fact is one that will affect the result or outcome of the case. Zappa v. Fahey, 245 N.W.2d 258, 259-60 (Minn. 1976).

The moving party has the initial burden to demonstrate an absence of genuine issues of material fact. Thiele v. Stich, 425 N.W.2d 580, 583 (Minn. 1988). We view the evidence in the light most favorable to the nonmoving party. STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W. 2d 72, 76-77 (Minn. 2002). If the moving party meets its burden, the burden then shifts to the nonmoving party to show a material fact exists to preclude summary judgment. Bixler by Bixler v. J.C. Penney Co., 376 N.W. 2d 209, 215 (Minn. 1985).

Neither party argues that Minn. Stat. §§ 177.23, .28, subd. 3(2), or Minn. R. 5200.0070 (2019), .0120 are ambiguous, and we conclude that they are not ambiguous. We therefore apply their plain meaning. See Minn. Stat. § 645.16 (2018).

I. Scott did not violate the MFLSA by paying Hagen with rent credits.

Hagen argues that the MFLSA does not allow employers to pay their employees wages using rent credits, and that, even if it does, a genuine dispute of material fact precludes summary judgment. We disagree.

Minn. Stat. § 177.23, subd. 4, defines “wage” as

compensation due to an employee by reason of employment, payable in:

(1) legal tender of the United States;

(2) check on banks convertible into cash on demand at full face value;

(3) . . . direct deposit to the employee‘s choice of demand deposit account; or

(4) an electronic fund transfer to a payroll card account . . . .

Even though section 177.23, subdivision 4, does not include rent credits in its definition of “wage,” Minn. Stat. § 177.28, subd. 3(2), authorizes the commissioner of labor and

industry to adopt rules “defining and governing . . . allowances as part of the wage rates for board, lodging, and other facilities or services furnished by the employer and used by the employees.” See also Minn. Stat. § 177.23, subd. 3 (defining “commissioner”). The Minnesota Rules in turn allow an employer to “credit toward the minimum wage the cost of the lodging” if “the employee must accept that lodging as a condition of employment.” Minn. R. 5200.0070, subp. 1. The lodging cost “shall be credited toward the minimum wage . . . at the rate of the fair market value of the lodging.” Minn. R. 5200.0070, subp. 3.

Hagen and Scott dispute whether Scott requires Hagen to live at the complex as a condition of her job. Hagen‘s employment contract provides that “[y]our compensation will be paid to you in the form of Rent Credit . . . Rent Credit is available and offered by [Scott] to an employee who is a resident of a property managed by [Scott]. The employee must be a resident of the property where he/she works and must be in a position that requires the employee to live on site in order to qualify for rent credit.”

Hagen acknowledges that, according to her work contract, “[i]n order to receive the rent-credit I have to live in a property managed by [Scott].” Moreover, Hagen acknowledges that “[Scott] has never provided me, or any other caretaker that I am aware of, the option of being paid in any other form than a rent-credit.” Since Scott compensates Hagen with rent credits, which an employee may not receive unless they are in a position that requires them to live on site, the record, even when viewed in the light most favorable to Hagen, shows that Scott requires Hagen to live on site. Hagen may not “rest on mere averments” to the contrary. See DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997). Similarly, Hagen‘s averment that she knew of a different caretaker who Scott did not

require to live on site is unsubstantiated and insufficient to preclude summary judgment. See id.

Hagen argues that, even if Scott requires her to live on site, a genuine dispute of material fact exists on whether the rent credit represented the fair market value of the lodging. Scott submitted a copy of Hagen‘s lease agreement showing that Hagen agreed to pay $1,370 per month for an apartment with a garage. The lease establishes a presumption of fair market value. In re Schnabel, 612 F.2d 315, 318 (7th Cir. 1980) (“In the absence of evidence of reasonable value for the use and occupancy of the premises it is presumed that the proper compensation for use and occupancy is the amount of rent fixed in the lease.” (citing Wiemeyer v. Koch, 152 F.2d 230, 234 (8th Cir. 1945))).2 Hagen did not contest the authenticity of the lease. Thus, Scott met its burden as the moving party of establishing the absence of a genuine issue of material fact. See Thiele, 425 N.W.2d at 583. Because Hagen did not submit any evidence regarding the fair market value of her apartment, she cannot avoid summary judgment.

Hagen argues that section 177.28, subdivision 3(2), does not allow for rent credits to entirely replace wages paid, but she concedes that Scott paid her for hours worked in excess of 99.75 hours in a month via a paycheck, which the record demonstrates occurred several times. Also, because neither party asserts that sections 177.23, .28, subdivision 3(2), or rule 5200.0070 are ambiguous, we need not assess Hagen‘s policy-based argument

that rent credits violate the MFLSA‘s purpose of protecting employees’ buying power. See Rohmiller v. Hart, 811 N.W.2d 585, 591 (Minn. 2012) (stating we will “look past the plain language of an unambiguous statute” only when the plain language “utterly confounds a clear legislative purpose”). In sum, because Scott requires Hagen to live on the premises and compensates Hagen with rent credits at fair market value, Scott did not violate the MFLSA by paying Hagen with rent credits.

II. Scott did not violate the PWA by paying Hagen with rent credits.

Hagen argues that the PWA prohibits an employer from making deductions from an employee‘s wages, in the form of rent credits, to recover rent debt. We disagree.

Under the PWA, an employer shall not “make any deduction . . . from the wages due or earned by any employee . . . to recover any [] claimed indebtedness . . . unless the employee, after the . . . claimed indebtedness has arisen, voluntarily authorizes the employer in writing to make the deduction.” Minn. Stat. § 181.79, subd. 1(a). “Such authorization shall not be admissible as evidence in any civil or criminal proceeding.” Id. “Any agreement entered into between an employer and an employee contrary to this section shall be void.” Minn. Stat. § 181.79, subd. 1(c).

We have previously determined that the limitations in section 181.79 do not apply when a caretaker who lived on site agreed to receive rent credit as part of his wages. Johnson v. Sitzmann, 413 N.W.2d 541, 543, 545 (Minn. App. 1987) (“Minn. Stat. § 181.79 does not apply to those deductions under appellant‘s employment contract where appellant consented.”), review denied (Minn. Dec. 22, 1987). Here, Hagen agreed to receive rent credits in exchange for her work as a property caretaker. Johnson controls.

Hagen argues that Scott may not rely on her consenting to receiving payment via rent credit as a defense to a claim under section 181.79 because subdivision 1(c) provides that such agreements are void. But section 181.79, subdivision 1(c), provides that only agreements “contrary to this section” are void. As we held in Johnson, section 181.79 does not apply when the caretaker agrees to be compensated in the form of rent credits. 413 N.W.2d at 545.

Hagen also contends that the district court improperly considered the rent-credit agreement in connection with the motion for summary judgment because section 181.79, subdivision 1(a), provides that agreements such as her work contract “shall not be admissible as evidence in any civil or criminal proceeding.” But in Johnson, we affirmed the district court‘s summary-judgment dismissal based, in part, on the existence of a rent-credit agreement between the landlord and the caretaker despite citing to section 181.79, which includes the inadmissibility language. See id. at 545.3

III. Hagen‘s time spent on call and on site available to perform duties but not actually performing any duties was not compensable time under the MFLSA.

Hagen argues that section 177.23, subdivision 10, and rule 5200.0120 required Scott to pay her for all on-call time. We review each provision in turn.

A. Section 177.23, subdivision 10

Hagen contends that her on-call conditions of carrying a work cell phone and remaining within 20 minutes of the premises qualify as performing compensable duties under section 177.23, subdivision 10, because “being on-call is a duty performed by the employee.” We disagree.

Because we agree with the parties that section 177.23, subdivision 10, is unambiguous, we apply its plain meaning. See Minn. Stat. § 645.16. For an on-site employee of a residential building who lives on the premises at which they work and is compensated with a principal place of residence, “hours worked” includes time when the employee “is performing any duties of employment, but does not mean time when the caretaker . . . is on the premises and available to perform duties of employment and is not performing duties of employment.” Minn. Stat. § 177.23, subd. 10.

Here, Hagen‘s on-call conditions rendered her available to perform her duties of employment, but they are distinct from those duties, which include receiving work assignments and quickly responding to them. Therefore, we hold that, under the plain language of section 177.23, subdivision 10, the time during which an on-site employee of a residential building who receives a principal place of residence as full or partial compensation is “available to perform duties” but is not actually “performing any duties of employment” is not compensable time.

B. Rule 5200.0120

Hagen next argues that the district court erred by determining that, as a matter of law, her time spent on call was not compensable, because whether she could use her on-

call time effectively presented a question of fact under Minn. R. 5200.0120, subp. 2, that precluded summary judgment. Hagen‘s argument is unavailing.

The MFLSA rules distinguish between compensable and non-compensable on-site and on-call time and provide that, “[a]n employee who is 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.” Minn. R. 5200.0120, subp. 2. Though no precedential Minnesota caselaw addresses the distinction between being able to use one‘s time effectively or not, we may look to persuasive precedent applying the Federal Labor Standards Act (FLSA).4 The FLSA rules analogously provide that, “where the conditions placed on the employee‘s activities are so restrictive that the employee cannot use the time effectively for personal pursuits, such time spent on call is compensable.” 29 C.F.R. § 553.221(d) (2019).

Hagen argues that the MFLSA rules focus on proximity to work premises to determine whether an employee can effectively use the on-call time, whereas the FLSA considers conditions more generally, one of which is proximity, to determine whether an employee can do so.5 Hagen concludes that, under the purportedly less employer-friendly MFLSA, a court would be more likely to find Hagen‘s 20-minute proximity condition as

preventing her from effectively using her time. The FLSA rules, however, provide a broader definition of hours worked that is more generous to the employee, not the employer. By considering more than just proximity, the FLSA rules identify more ways that an employee cannot use their time effectively, and thus more ways that an employee‘s time is compensable. See 29 C.F.R. § 553.221(d); Minn. R. 5200.0120, subp. 2. Accordingly, courts determining time not to be compensable under the FLSA rules would be even less likely to find time compensable under the MFLSA rules.

The district court applied analogous federal caselaw6 assessing even more restrictive on-call requirements and determined that, as a matter of law, Hagen could use her time effectively while on call and did not work while on call. See Myers v. Baltimore County, 50 F. App‘x 583, 587 (4th Cir. 2002) (holding non-compensable on-call time park security personnel spent at park because they could use time for personal pursuits like watching television, eating, and sleeping); Kelly v. Hines-Rinaldi Funeral Home, Inc., 847 F.2d 147, 148 (4th Cir. 1988) (holding non-compensable on-call time funeral-home employees spent living in an apartment and required to answer the phone at any hour and pick up corpses if necessary); Sletten v. First Care Med. Servs., 2000 WL 1196199, at *11-12 (D. Minn. Mar. 20, 2000) (holding, under both FLSA and MFLSA, non-compensable on-call time paramedics spent staying within five minutes of work site because they could still use their time for personal pursuits); Leonard v. Carmichael Props. & Mgmt. Co., 614 F. Supp.

1182, 1185-86 (S.D. Fla. 1982) (holding non-compensable on-call time apartment-complex maintenance employee spent carrying pager and remaining close to complex because he could use time for personal pursuits like grocery shopping, attending church, and meeting with friends).7

Here, Hagen‘s on-call conditions of carrying a cell phone and remaining within 20 minutes of the premises are factually analogous to the cases in which federal courts have held non-compensable on-call time with more-restrictive on-call conditions than those present here.

We hold that, under the plain meaning of Minn. R. 5200.0120, subp. 2, an employee who is required to remain on site or so close that they cannot use their time effectively is “working while on call,” and is therefore entitled to compensable “hours worked,” per Minn. R. 5200.0120, subp. 1. Applying the reasoning of federal cases that examine a comparable, if not more permissive, rule to analogous facts, we conclude that the district court properly determined that, as a matter of law, Hagen could use her time effectively and is therefore not entitled to compensation for time spent on call and on site available to perform duties but not actually performing any duties.

Hagen‘s contention that she submitted an affidavit demonstrating how “this on-call scheme affected her personal life” and prevented her from using her personal time effectively does not affect our analysis because the district court assumed her affidavit averments to be true and applied analogous caselaw holding non-compensable time spent under comparable restrictions. Nor are we persuaded by Hagen‘s argument that the general provision of Minn. R. 5200.0121, subp. 3 (2019), defining compensable time prevails over the specific provisions of Minn. R. 5200.0120, subp. 2, which defines when on-call time is compensable. See Minn. Stat. § 645.26, subd. 1 (2018) (providing specific provisions prevail over general provisions if in conflict); see also In re Stadsvold, 754 N.W.2d 323, 328-29 (Minn. 2008). (“[D]istinctions in [statutory] language in the same context are presumed to be intentional, and we apply the language consistent with that intent.”).

D E C I S I O N

Under the plain language of section 177.23, subdivision 10, the time during which an on-site employee of a residential building who receives a principal place of residence as full or partial compensation is “available to perform duties” but is not actually “performing any duties of employment” is not compensable time.

Under the plain meaning of Minn. R. 5200.0120, subp. 2, an employee who is required to remain on site or so close that they cannot use their time effectively is “working while on call,” and is therefore entitled to compensable “hours worked,” per Minn. R. 5200.0120, subp. 1.

The district court therefore did not err by dismissing Hagen‘s complaint at summary judgment after determining non-compensable Hagen‘s time spent on call and on site but not actually performing duties.

Affirmed.

Notes

1
Scott assigns Hagen on-call shifts at least once per week, every fifth weekend, and two holidays each year.
2
Although no Minnesota state case addresses this proposition, we find persuasive caselaw from the Seventh and Eighth Circuits. See State v. McClenton, 781 N.W.2d 181, 191 (Minn. App. 2010) (“[A]lthough we are not bound to follow precedent from other states or federal courts, these authorities can be persuasive.”), review denied (Minn. June 29, 2010).
3
While the parties dispute whether compensating an employee in the form of rent credits could be characterized as deductions from wages to recover indebtedness, the issue is immaterial because agreed-upon rent-credit payments do not violate section 181.79, regardless of whether they constitute deductions. See id. at 545.
4
We acknowledge that “the FLSA is not dispositive . . . because it is structured differently than the MFLSA.” Milner, 748 N.W.2d at 614. However, to the extent Minnesota rules are modeled after federal rules, federal cases are “helpful and instructive but not necessarily controlling” in interpreting the Minnesota rules. See Johnson v. Soo Line R.R., 463 N.W.2d 894, 899 n.7 (Minn. 1990).
5
The parties do not dispute, and we agree, that using time effectively for an employee‘s “own purposes” or “personal pursuits” are equivalent.
6
“A federal court‘s interpretation of Minnesota law is not binding on this court, though it may have persuasive value.” TCI Bus. Capital, Inc. v. Five Star Am. Die Casting, LLC, 890 N.W.2d 423, 431 (Minn. App. 2017).
7
Our review of additional federal caselaw yields the same result. See, e.g., Dinges v. Sacred Heart St. Mary‘s Hosps., 164 F.3d 1056, 1057, 1059 (7th Cir. 1999) (holding on-call hours non-compensable when emergency medical technician required to carry pager and arrive at hospital within seven minutes); Andrews v. Town of Skiatook, 123 F.3d 1327, 1329, 1332 (10th Cir. 1997) (same, within five minutes); Berry v. County of Sonoma, 30 F.3d 1174, 1178, 1187 (9th Cir. 1994) (holding on-call hours non-compensable when coroner required to carry pager and respond within 15 minutes).