• Construction Law Update - Summer 2017
  • August 8, 2017 | Author: Julia J. Nierengarten
  • Law Firm: Meagher & Geer, P.L.L.P. - Minneapolis Office
  • The Minnesota Court of Appeals recently decided an unemployment appeal that presented unique and important issues to employers who employ employees who work in more than one state. Superior Glass, Inc. is a Wisconsin company that employs people who work in both Wisconsin and Minnesota. Two such employees were Lucas Johnson and Shawn Strang, who both worked for Superior Glass in both states during 2015 and 2016. Superior Glass laid off both employees for a period of time in 2016, and they both claimed unemployment benefits in Minnesota because they both live there. The Department of Economic and Employment Development (DEED) used information regarding each employee's hours worked, as broken down by day and job, to determine how many hours each employee had worked in Minnesota. DEED then used this information to determine which calendar quarters each employee worked more than 50% of their hours in Minnesota. DEED concluded that these quarters constituted "covered employment" because "the employment during the quarter [was] performed primarily in Minnesota," and paid unemployment benefits based on their entire employment with Superior Glass during those quarters. DEED then informed Superior Glass that it would use the unemployment benefits paid to these employees to compute the future unemployment tax rate for Superior Glass. Superior Glass appealed DEED's eligibility determination for the two employees.

    The court of appeals affirmed DEED's eligibility determination. It concluded that, when an employee worked primarily--defined by the court as "chiefly or mainly"--in Minnesota during a calendar quarter, the employee's entire employment for that quarter is covered employment for the purposes of unemployment benefits and for computing future unemployment tax rates for employers. This will have an impact on any employer that employs people across state borders. If your employees work more than 50% of their time in a given quarter in Minnesota, all of the wages they earned during that quarter will be used to calculate both the employee's unemployment benefit and the employer's future unemployment tax rate. This will be true even if the quarters the employee worked in Minnesota are non-consecutive.

    The court also rejected Superior Glass's argument that the statute under which DEED made its eligibility determination subjects it to unconstitutional taxation because it favors commerce within a state over commerce between states. The court also rejected this argument, because it determined that the purpose of the DEED statute was not to inhibit commerce between states. It also rejected Superior Glasses argument that the statute subjects it to unconstitutional double taxation because no state or federal law prohibits double taxation.