Today, the Nevada Supreme Court issued its long-awaited decision in MDC Restaurants LLC v. District Court, which resolves two critical issues related to interpretation of and compliance with Nevada’s 2006 Constitutional Minimum Wage Amendment (“MWA”). The MWA established a two-tiered minimum wage to encourage employers to make health benefits available to Nevada employees. A copy of the court’s decision can be found here. Sutton Hague Law Corporation filed an Amicus Brief in the case on behalf of the National and Nevada Restaurant Associations. The Supreme Court’s decision ultimately benefits employers.
In 2006, the MWA became effective and amended the Nevada Constitution by establishing a two-tier minimum wage for employees in the state. Under the MWA, Nevada employees are guaranteed a base wage for hours worked (currently $8.25 per hour), however, the MWA also allows employers who provide qualifying health benefits to an employee to pay the employee a lower hourly wage ($7.25 per hour) if the employer offers qualified health benefits (the “lower-tier” wage).
Following adoption of the MWA, the Nevada Labor Commissioner issued interpretive regulations for MWA compliance, including NAC 6081.102(1), which states that “to qualify to pay an employee the lower-tier minimum wage … the employer must offer a health insurance plan.” As such, employers reasonably concluded that so long as a qualifying plan was offered, they could pay employees the lower-tier minimum wage even if the employees declined to participate in the plan. The regulations quickly became the subject of dispute as attorneys for employees argued that employers could only avail themselves of the lower-tier wage rate if the employees actually accepted the qualifying plan by enrolling in coverage.
The Nevada Supreme Court granted a petition for a writ of mandamus in MDC Restaurants LLC v. District Court to address this and other related issues. The Court used a “plain language” approach stating that where the constitutional language is clear on its face, the Court will not go beyond the language to determine the voter’s intent.
The language of the MWA states:
“Each employer shall pay a wage to each employee of not less than the hourly rates set forth in this section. The rate shall be five dollars and fifteen cents ($5.15) per hour worked, if the employer provides health benefits as describes herein, or six dollars and fifteen cents ($6.15) per hour if the employer does not provide such benefits.”
Nevada Constitution Article 15 § Section 16 (emphasis added).
Looking to the plain language, the Court concluded that employers need only offer qualified health benefits to pay the lower tier minimum wage—not actually enroll the employee in a health benefit plan. The Court reasoned that the applicable definition of “provides” is found within Subsection A:
“If the employer provides health benefits, then the employer may pay the lower-tier minimum wage. 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…”
While attorneys for the employees urged the Court to look outside the MWA for a definition of “provides,” the Court concluded that even accepting an outside definition such as “supply for use, deliver, give, or supply” would not guarantee use. The Court determined that because the language states that the employer must “make health insurance available,” Nevada employers need only offer the health benefits and it is up to the employee to take advantage of the rights provided.
The Court also resolved the question of whether the MWA mandate that health benefit premiums be capped at 10% of the employee’s gross taxable income includes tips, bonuses or other compensation. The Court again looked to the plain language of the provision and held that tips are not included in the calculation of gross taxable income. The Court reasoned that the language of the MWA prohibits employers from counting tips as part of the minimum wage to the employee, and thus the MWA’s 10% cost cap can only pertain to compensation and wages paid by the employer to the employee—excluding any tips earned by the employee.
Lessons for Employers
Today’s decision will ultimately ensure that employers who offer a qualifying health benefit plan can lawfully take advantage of the MWA’s lower-tier minimum wage rate whether or not an employee accepts the health benefits offered. Sutton Hague is proud to have been a part of this case on behalf of the restaurant industry.
It is critical that employers who wish to pay the lower-tier minimum wage under the MWA perform due diligence to ensure that any offered health benefit plan satisfies all of the requirements of a qualifying plan under the terms of the MWA and its implementing statutes and regulations. Employers should also be aware that under the Nevada Administrative Code, employers have an obligation to maintain written documentation that the employee has declined the offered health benefit coverage.
This important case and related issues will be one of the topics discussed at the next SHLC monthly webinar on November 2, 2016, with special guest speaker, Nevada Labor Commissioner Shannon Chambers. To sign up for the webinar please visit https://suttonhague.com/events or call any of our offices.