Friday, April 22, 2016

You Can't Make This Stuff Up: The Unintended Employment Law Issues with Paying Employees in Meth

*This is the first in a recurring series of “You Can’t Make This Stuff Up” posts.  One fun part of working in the employment law or HR world is getting to track new and interesting employment law developments and navigate situations that sometimes are stranger than fiction. In our “You Can’t Make This Stuff Up” posts, we’ll bring to your attention some of the strange and sometimes unbelievable situations that employers and employees face.*

In recent “stranger than fiction” news, a Mankato employer was raided Thursday by Minnesota drug agents because it allegedly gave its employees an unusual bonus: meth.  While the criminal law implications are obvious, it takes an experienced employment attorney or HR professional to get in the weeds (pun intended) and to note some potential wage and tax issues posed by the unusual method of paying employees with illicit drugs.  Under the federal Fair Labor Standards Act and many state laws, wages must be paid in cash or by a negotiable instrument – not, of course, drugs.  Also, any payment to an employee for services is taxable W-2 income, and it’s a real head scratcher to try to figure out how an employer might accurately value an illicit drug and comply with employee withholding and employer tax obligations.  It also may be just as challenging to figure out how the value of an illicit drug payment might impact overtime pay obligations.  Where a bonus is non-discretionary, it must be included in an employer’s calculation of a non-exempt employee’s regular hourly rate for overtime purposes.

So, let this reported incident serve as a reminder that the FLSA can crop up in unexpected places and that, just in case you ever wondered, you really shouldn't pay employees in the form of an illegal drug! 

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