June 14, 2018 | Category: Compliance, Health Insurance, Minimum Wage, News

In an unanimous decision, the Nevada Supreme Court has finally defined what constitutes “health benefits” for the purpose of paying the lower-tier minimum wage in Nevada.

The Court, in MDC Restaurants, LLC, et al. v. Eighth Judicial District Court, 134 Nev. Adv. Op. 41, 2018 Nev. LEXIS 42 (May 31, 2018), determined that employers who want to pay an employee the lower-tier minimum wage, currently $7.25 per hour, must provide health insurance at least equivalent to the $1 per hour that the employee would otherwise receive. Seems pretty straight forward, but what does that mean?

Nevada’s Minimum Wage Amendment — Some Background

The Minimum Wage Amendment (“MWA”) was enacted following voter ballot initiatives in 2004 and 2006 (titled “The Raise the Minimum Wage for Working Nevadans Act”). The MWA established a two-tier minimum wage in Nevada. The lower-tier minimum wage is equal to the federal minimum wage, which is currently $7.25 per hour, and applies if an employer offers qualifying health benefits. Otherwise, the higher-tier minimum wage, currently $8.25 per hour, applies.

The only definition of what constitutes “health benefits” in the MWA is a provision that states that for the lower-tier minimum wage to apply the health benefits can cost no more than 10% of the employee’s gross taxable income from the employer.

Since the passage of the MWA, employers have made every effort to comply with its provisions, despite the many ambiguities. Nevertheless, the health benefits issue has been one that has remained a thorn in the side of employers for more than a decade.

The Court’s Decision — Equivalent to Additional $1 per Hour

The Court, in determining the meaning of “health benefits” as used in the MWA, found that “[w]hen voters passed the MWA they sought to provide higher wages to employees, or in the alternative, health insurance …” The Court noted that there is nothing in the text or purpose of the MWA that suggests that the two tiers are not equivalent. As the Court explains, “the [minimum wage] tiers are different means to the same end …”

The Court reasoned that because the MWA provides for two tiers in furtherance of the same purpose, common sense would dictate that an employer who pays the lower-tier minimum wage must offer health benefits that, at the very least, fill the $1 gap in value between the lower-tier minimum wage and the upper-tier minimum wage. Thus, “health benefits” must mean the equivalent of an additional $1 per hour in wages to the employee, in the form of health insurance.

Therefore, in order for an employer to pay an employee the lower-tier minimum wage, the employer must offer health benefits to the employee and the employee’s dependents at a cost to the employer of at least one additional dollar per hour in wages and at a cost to the employee of no more than 10% of the employee’s gross taxable income from the employer.

Further litigation is likely to determine how these requirements will work in practice.

What This Means for Employers

Nevada employers will need to review the health plans currently offered to employees to ensure they meet the minimum criteria for “health benefits” outlined by the Nevada Supreme Court.

Are you, as the employer, paying at least $1 an hour in wages toward the health insurance plan being offered to each of your employees? Is the total cost of the health insurance plan to the employee (and his/her dependents) no more than 10% of the employee’s gross taxable income? If the answer to both of these questions is YES, then your health plan likely meets the minimum criteria for “health benefits” and you can pay the lower-tier minimum wage. If not, you are going to have to pay the higher-tier minimum wage.

As always, it is advisable for employers to consult with legal counsel (and NAE) on these new requirements to ensure you remain in compliance. NAE will continue to monitor this issue and provide updates on the latest developments.