Nevada’s Trio of Cases: State Supreme Court Resolves Questions on the Minimum Wage Amendment

On October 27, 2016, the Supreme Court of Nevada issued decisions in a trio of cases resolving important questions about Nevada’s Minimum Wage Amendment.

Nevada’s Minimum Wage Amendment

In 2006, the Minimum Wage Amendment amended the Nevada Constitution by establishing a two-tiered minimum wage for employees. Nevada employers that provide qualifying health benefits to employees are eligible to pay a lower minimum wage, which is currently $7.25 per hour. Those employers that do not offer qualified health benefits are required to pay a higher minimum wage of $8.25 per hour. For an employer to be eligible to pay the lower-tier minimum wage, the health benefits must be provided at a total cost to the employee for premiums of not more than 10 percent of the income earned by the employee from that employer.

Over the years, the Office of the Nevada Labor Commissioner has issued interpretative regulations on the 2006 Minimum Wage Amendment, and employees and employers alike have challenged these interpretations. The Nevada Supreme Court’s recent trio of decisions addresses some of these discrete issues.

MDC Restaurants LLC v. Eighth Judicial District Court, et al. 

In the first case, MDC Restaurants LLC v. Eighth Judicial District Court, et al., 132 Nev. Adv. Op. No. 76 (October 27, 2016), the court concluded that employers need only offer or make qualified health benefits available to pay the lower-tier minimum wage rate under the 2006 Minimum Wage Amendment. The unanimous decision settled the recurring question about whether an employer only had to offer a qualified health benefit plan, or whether the employee had to actually enroll in the health benefit plan for the employer to be eligible to pay the lower-tier minimum wage rate.

In addition, the employees in the case argued that their tip income should not be included in calculating whether health insurance constitutes 10 percent of the compensation they earn from their employer because tips are not “income” paid by the employer to the employees (and are not subject to standard employment withholdings). The court agreed with the employees, and unanimously held that tips are not included in the calculation of total compensation earned from the employer. In making its determination, the court reasoned that the 2006 Minimum Wage Amendment prohibits employers from counting tips as part of the minimum wage paid to an employee.

The 2006 Minimum Wage Amendment, the court stated, “prohibits employers from counting tips as part of the minimum wages they provide to the employee: ‘[t]ips or gratuities received by employees shall not be credited as being any part of or offset against the wage rates required by this section.’ Nev. Const. art. 15, § 16(A). Under the plain language of this constitutional provision, the Minimum Wage Amendment’s 10-percent cost cap can only pertain to compensation and wages paid by the employer to the employee, which necessarily excludes any tips earned by the employee.”

Perry v. Terrible Herbst, Inc.

In the second decision, Perry v. Terrible Herbst, Inc., 132 Nev. Adv. Op. No. 75 (October 27, 2016), the court was asked to determine whether the two-year statute of limitations contained in Nevada Revised Statutes (NRS) 608.260 for statutory minimum wage claims, or the catchall four-year statute of limitations in NRS 11.220, applies to claims asserted under the 2006 Minimum Wage Amendment. (The 2006 Minimum Wage Amendment did not specify a statute of limitations for the right of action it established.)

The court held that the two-year statute of limitations period applies to claims brought by an employee against an employer to remedy any violation of the 2006 Minimum Wage Amendment to the Nevada Constitution. Since the 2006 Minimum Wage Amendment is devoid of any time frame within which an employee must bring such an action, the court concluded that applying the two-year statute of limitations period in NRS 608.260 is consistent with Nevada statutory minimum wage law.

Nevada Yellow Cab Corp. v. Eighth Judicial District Court

The final case in this series, Nevada Yellow Cab Corp. v. Eight Judicial District Court, 132 Nev. Adv. Op. No. 77 (Oct. 27, 2016), affects taxicab drivers. In a 2014 decision, Thomas v. Nevada Yellow Cab Corp., 130 Nev. Adv. Op. 52, 327 P. 518 (2014), the Nevada Supreme Court held that taxicab companies were required to pay drivers the state’s minimum wage because the 2006 Minimum Wage Amendment to the Nevada Constitution repealed the long-standing exception for taxicab drivers from the application of the statutory minimum wage requirements. Two separate class actions followed this decision and taxicab drivers sought back wages for their work performed prior to the Thomas decision.  

In a unanimous decision, the court held that the Thomas decision applies retroactively. Nevada’s constitutional minimum wage requirements became effective on the day that the 2006 Minimum Wage Amendment was enacted in 2006. Thus, the Nevada Supreme Court did not create new law in 2014; it simply declared what the law was.

Key Takeaways 

There are several instructive points to appreciate from this trio of recently decided cases:

• Employees must bring minimum wage claims within two years, not four.
• Employers need only offer qualified health benefits to be eligible to pay the lower-tier minimum wage rate irrespective of whether an employee elects coverage. However, employers must maintain records of when employees in fact decline coverage.
• When calculating whether the benefits offered are less than 10 percent of the employee’s total gross taxable income earned from their employer, tips are not to be included in that calculation.
• The Nevada Constitution’s minimum wage requirements became effective on the day the 2006 Minimum Wage Amendment was enacted.