By Deanna L. Forbush and Jeremy Thompson

We've been reporting on litigation surrounding Nevada's minimum wage all year. Although some issues remain unresolved, we now have important guidance from the state's highest court on the scope of the term "provide" under the minimum wage law as well as which statute of limitations applies to wage claims. The following article provides an overview of the court's ruling.

First, A Brief Review

Nevada's minimum wage law is unique in many ways. For example, unlike many states that have a statutory minimum wage, Nevada's current minimum wage was established by constitutional amendment. Article 15, Section 16, of the Nevada Constitution contains a provision that authorizes a two-tier minimum wage; the provision is commonly referred to as the Minimum Wage Amendment (MWA).

Under the MWA, if an employer provides "health benefits," an employee earning minimum wage may be paid $1 an hour less than the upper-tier minimum wage if the premium he is charged for health benefits doesn't exceed 10% of his gross taxable income from the employer. The amendment reads in pertinent part:

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 [$5.15] per hour worked, if the employer provides health benefits as described herein, or [$6.15] per hour* if the employer does not provide such benefits. 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 at a total cost to the employee for premiums of not more than 10% of the employee's gross taxable income from the employer.

*Under the MWA's automatic index/increase mechanisms, the minimum wage was raised in 2014 to $7.25 for lower-tier employees and to $8.25 for higher-tier workers.

Although the plain language of the MWA appears straightforward and understandable, questions about the meaning and definitions of the terms "health insurance," "provides," and "gross taxable income from the employer" have arisen. Further complicating the enforcement of the law is the fact that it is silent on which statute of limitations is applicable to MWA claims.

Several Nevada employees have initiated class action lawsuits under the MWA in which they alleged a variety of claims, including that they were paid the lower-tier minimum wage without being "provided adequate health benefits" or were charged health benefits premiums that exceeded "10% of their gross taxable income from their employer."

In a separate action, a group of employees claimed that because the MWA doesn't contain a statute of limitations, Nevada's catchall 4-year statute of limitations, rather than the closely analogous 2-year statute of limitations in Nevada Revised Statutes (NRS) § 608.260, applies to minimum wage claims.

Employees Make Their Cases

In the first case, the employees alleged that "provide" means more than merely offering health benefits, and to qualify for the lower-tier minimum wage, an employee must actually "enroll" in the employer-offered health insurance plan, not merely be provided an opportunity to enroll.

The employees also argued that when calculating the 10% cap on health premiums that may be lawfully assessed, an employer may not include tip income in an employee's "gross taxable income from the employer" because customers, not the employer, generally pay tips and Nevada law prohibits employers from crediting or offsetting tips against employees' regular wage rates.

Earlier this year, a state district court judge ruled in the employees' favor, finding that an employer cannot lawfully pay the lower-tier minimum wage unless the employee actually enrolls in its health insurance plan, even if the employer is able to produce evidence that it offered the employee health insurance benefits but he declined coverage. The court also found that for MWA purposes, an employee's gross taxable income "from the employer" doesn't include gratuities.

In the other case, the court held that the 2-year statute of limitations applicable under NRS § 608.260 is more closely analogous to the MWA, and it therefore applies to all MWA claims. Both cases were appealed to the Nevada Supreme Court, which was tasked with determining:

1. What "provide" means under the MWA;
2. The definition of "gross taxable income from the employer"; and
3. The applicable statute of limitations under the MWA.

Supreme Court's Rulings

Handing employers a major victory, the Nevada Supreme Court unanimously concluded on October 27 that the term "provide," as it's used in the MWA, means "offer," not "enroll." That's a significant distinction with major economic ramifications for Nevada employers whose payrolls include minimum wage employees. However, the court also affirmed the district court's determination that employers may not include tips when calculating the 10% health premium cap on employees' gross taxable income.

In a separate but related decision issued on October 27, the supreme court affirmed the lower court's determination regarding the applicable statute of limitations for MWA claims. In reaching the decision that a 2-year statute of limitations should be applied to claims brought under the MWA, the court held that "when a right of action does not have an express limitations period, we apply the most closely analogous limitations period," and "applying the NRS [§] 608.260 limitations period [to the MWA] is consistent with Nevada minimum wage law."

Both decisions were made retroactive to the MWA's enactment on November 28, 2006. All things considered, the Nevada Supreme Court has handed Nevada employers a major victory in two closely watched cases in which health insurance and minimum wage issues intersected. Perry v. Terrible Herbst, Inc.

More to Come

That isn't the end of the story, however, as an additional component of the MWA analysis remains undecided. In another pending case, the Nevada Supreme Court is being asked to determine the meaning of "health insurance" under the MWA.

The issue arose when a group of employees filed a class action lawsuit in which they asserted that the health benefits their employers offered in order to pay the lower-tier minimum wage didn't constitute "health insurance" under the MWA.

A district court judge found that as it's used in the MWA, the term "health insurance" means a health benefits plan that complies with NRS §§ 689A, 689B, and 608.1555-608.1585, which were promulgated prior to the enactment of the MWA and require coverage for everything from treatment of the physiological effects of drugs and alcohol to erectile dysfunction drugs and hormone replacement therapy. The judge concluded that because the employers' plans didn't satisfy certain requirements in those statutes, they couldn't pay their employees the MWA's lower-tier wage rate.

The case before the Nevada Supreme Court will answer the question of what "health insurance" under the MWA is supposed to look like. Briefing continues in that case, so stay tuned for the final key to analyzing your obligations under the MWA. Until then, if you're currently paying the lower-tier minimum wage, we urge you to review your health insurance plans for compliance with the MWA and related state statutes and regulations.

Deanna Forbush, editor of Nevada Employment Law Letter, can be reached at dforbush@mpplaw.com. Jeremy Thompson can be reached at jthompson@mpplaw.com.