Can an employer pay an employee in rent credits versus money? On August 11, 2021, the Minnesota Supreme Court held that rent credits are “wages” (not improper deductions) under the Minnesota Fair Labor Standards Act (MFLSA). In Hagen v. Steven Scott Management, Inc., the employee was an on-site property caretaker. She received rent credits as wages, and thus, was primarily compensated with rent credits towards her monthly rent.
The Court held that while the MFLSA definition of “wage” is limited, its provision, “subject to the allowances permitted by the commissioner” means that permissible wages are those which are listed in Minn. Stat. 177.28 and authorized by the Minnesota Department of Labor and Industry (MNDOLI). Because the lodging allowance rule (Minn. Rule. 5200.0070) authorizes an employer to take a credit towards minimum wages for the cost of lodging if the employee accepts it as a condition of employment, the plaintiff’s rent credits qualified as wages under the MFLSA.
The takeaway? Employers who have on-site caretakers may “pay” an employer in rent credit in lieu of wages, so long as the lodging rule is followed (with an employment contract that makes it clear the employee will live on-site and they will be compensated in the form of rent credit).