Missouri’s Proposition B – More than Just a Minimum Wage Hike

When Missouri voters went to the polls on November 6, they considered and passed (by a fairly wide margin) Proposition B, a proposed increase to the state’s minimum wage.  Most voters understandably believed that raising the state’s minimum wage was the only change proposed. The ballot title seen by Missouri voters was:

Do you want to amend Missouri law to:

increase the state minimum wage to $8.60 per hour with 85 cents per hour increase each year until 2023, when the state minimum wage would be $12.00 per hour;

exempt government employers from the above increase; and

increase the penalty for paying employees less than the minimum wage?

State and local governments estimate no direct costs or savings from the proposal, but operating costs could increase by an unknown annual amount that could be significant. State and local government tax revenue could change by an unknown annual amount ranging from a $2.9 million decrease to a $214 million increase depending on business decisions.

The “fair ballot language” – which was available from the Missouri Secretary of State’s website and at the polling place (though not on the ballot itself) – stated:

A “yes” vote will amend Missouri statutes to increase the state minimum wage rate as follows:

          $8.60 per hour beginning January 1, 2019;

          $9.45 per hour beginning January 1, 2020;

          $10.30 per hour beginning January 1, 2021;

          $11.15 per hour beginning January 1, 2022; and

          $12.00 per hour beginning January 1, 2023.

The amendment will exempt government employers from the above increases, and will increase the penalty for paying employees less than the minimum wage.   

A “no” vote will not amend Missouri law to make these changes to the state minimum wage law.

If passed, this measure will have no impact on taxes.

In Missouri, ballot titles and summaries are just that: titles and summaries of a specific change in the actual language of statutes or provisions of the Missouri Constitution.  Unless a voter read an initiative petition for Proposition B or visited the Missouri Secretary of State’s website prior to the election and viewed the “full text” of the proposed statutory changes, they would not have known what the actual changes to Missouri’s wage and hour statutes would entail.  Unfortunately for Missouri employers, the foregoing ballot title and summary either obscured or entirely omitted three important changes to the Missouri Minimum Wage law that will almost certainly make wage and hour lawsuits more attractive for employees and their attorneys.

Treble Damages

First, the “increased penalty” which is referenced, though not explained, by either the ballot title or summary makes Missouri wage and hour lawsuits significantly more lucrative for employees and their attorneys.  Prior to the passage of Proposition B, the Missouri Minimum Wage Law (“MMWL”) required employers to re-pay both the amount of wages to which the employee was entitled plus an equal amount as “liquidated damages.”  In practice, this meant that an employee who was not properly paid under the MMWL would be entitled to receive double the amount they were owed.  This was generally consistent with the federal Fair Labor Standards Act (“FLSA”) which allows for similar double “liquidated damages” for underpayment of wages.  Employees who brought MMWL claims often saw little advantage to bringing a state claim in Missouri rather than a federal claim under the FLSA.

Proposition B changed that “penalty” so that now employers would owe employees both the “full amount of the wage rate and an additional amount equal to twice the unpaid wages as liquidated damages[.]”  In other words, the employer is now liable for treble – or three times – the amount of the unpaid wages.  In class actions involving dozens or hundreds of employees, the change from double to treble damages makes these kinds of lawsuits significantly more appealing.  Employee plaintiff’s attorneys will now likely see little benefit in bringing an FLSA claim for wage and hour violations, and opt to bring only an MMWL lawsuit.

These new MMWL-only claims likely will be brought in Missouri state court; not federal court.  Missouri state courts often struggle with overloaded dockets, are considered more likely to certify class actions, and are staffed with fewer legal assistants to assist judges in ruling on discovery and pre-trial motions. The practical effect for employers defending a MMWL claim will be more lengthy litigation in a less hospitable forum.

Overtime Included

Second, despite the language in the ballot title and summary, the increased penalty described above is not limited to instances where the employer fails to pay minimum wages; it also applies to unpaid overtime claims.  The statutory change behind Proposition B states that the new treble damages provision applies to “[a]ny employer who pays any employee less wages than the wages to which the employee is entitled under…section 290.500 to 290.530[.]”  Those provisions address not only the minimum wage required by law, but also the requirement that employers pay non-exempt employees overtime for hours worked over 40 in a workweek.  See § 290.505, RSMo.

As employers are well-aware, determining whether an employee is properly classified as “exempt” under the FLSA and MMWL often can be difficult; and certainly is more difficult than simply ensuring that all employees are paid at least minimum wages.  Most employees classified as exempt usually are paid at least minimum wage; the problem for employers is the non-payment of overtime to a misclassified employee. If an employer improperly classifies an employee as “exempt” from the MMWL’s overtime requirements, it is liable for the amount of unpaid overtime worked but not paid.  Because the new treble damages provision applies to misclassification cases involving unpaid overtime, it will make these cases much more attractive as well.  As noted above, these misclassification cases likely will be filed in Missouri state court, where the complicated, fact-intensive nature of classification issues will have to compete with other cases on an already crowded docket.  The likely result will be fewer favorable results for employers on class certification and dispositive motions brought prior to trial.

Three Year Statute of Limitations

Finally, the new statute extends the statute of limitations from two to three years.  Once again, nothing in the ballot title or summary gave voters notice of this important change to Missouri law.  The FLSA allows for a statute of limitation of three years only in circumstances where the plaintiff can show that the employer “willfully” violated the FLSA; that is, the employer was aware of their obligation to pay either minimum wage or overtime but knowingly disregarded that obligation.  But nothing in Proposition B limits the three year statute of limitations on these claims to willful violations.  A plain reading of the statutory language adopted by Proposition B indicates that the three year statute may apply to all MMWL claims regardless of the employer’s knowledge or intent.  This change will also make MMWL claims more attractive than FLSA claims.

Given that the new increases in minimum wages (which are now higher than the federal minimum wage and even the minimum wage in most surrounding states) will occur automatically to track cost-of-living, many well-intentioned Missouri employers may inadvertently fail to pay the new minimum wage through ignorance – not greed.  But this ignorance will be no defense to application of a three year statute of limitations under the MMWL once Proposition B takes effect.

What Missouri Employers Can Do

Missouri employers now have more incentive than ever to carefully monitor employee pay and correctly classify employees as “exempt” or “non-exempt.”  Proposition B has made almost every Missouri employer a more inviting target for MMWL claims.  Especially in the case of exemption classification, Missouri employers would be well advised to consult with experienced counsel immediately to ensure employees are being properly classified.  When it comes to paying Missouri employees correctly, Proposition B has made the prospect of being “penny-wise but pound foolish” an expensive one.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in wage and hour matters for over sixty years and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.