Nevada Supreme Court Interprets Health Benefits Under The Minimum Wage Amendment

By Kamer Zucker Abbott

June 18, 2018

On May 31, 2018, the Nevada Supreme Court issued an important decision interpreting health benefits under Nevada’s Minimum Wage Amendment (MWA). In MDC Restaurants, LLC v. The Eighth Judicial District Court and Paulette Diaz, et al., the Court ruled that in order to pay the lower minimum wage, an employer must offer health benefits at least equivalent to the one dollar per hour in wages that the employee would otherwise receive under the MWA.

The MWA establishes a two-tiered minimum wage in Nevada: a lower-tier for an employer who provides health benefits and a one-dollar higher tier for an employer who does not provide health benefits. The specific amounts are adjusted annually and announced by the Labor Commissioner; currently, the upper-tier is $8.25an hour and the lower-tier is $7.25 an hour. An employer qualifies for the lower-tier if it makes health insurance available to an employee and his/her dependents at a total cost to the employee for premiums not more than 10 percent of the employee’s gross taxable income.

In MDC Restaurants, four employees sued their employer arguing that the health insurance offered did not qualify for the lower-tier minimum wage because it did not comply with Nevada statutes addressing employer-provided insurance benefits. The employees argued that their employer should be required to comply with Chapters 689A and 689B of the Nevada Revised Statutes that mandate coverage for expenses such as hospice care, prescription drugs, cancer treatment, the management and treatment of diabetes, severe mental illness, and alcohol or drug abuse. The Nevada Supreme Court rejected this argument, agreeing with the employer that NRS 689A and 689B do not set the constitutional standard for the quality of health insurance required for the lower-tier minimum wage.

In seeking a constitutional standard for “health benefits,” the Court returned to the purpose of the MWA and found that both tiers are a means to the same end – fighting poverty by providing either a higher wage or a lower wage with health benefits. As such, “common sense dictates that an employer who pays the lower-tier minimum wage must offer health benefits that, at the very least, fill the one-dollar gap in value between the $7.25 per hour lower-tier minimum wage and the $8.25 per hour upper-tier minimum wage.” Thus, the Court concluded that “health benefits” means “the equivalent of one extra dollar per hour in wages to the employee, but offered in the form of health insurance as opposed to dollar wages.” This interpretation, explained the Court, “ensures that employees may receive an equal benefit under either tier of the MWA, in furtherance of the MWA’s stated purpose of fighting poverty.”

Thus, under MDC Restaurants, an employer is qualified to pay the lower-tier minimum wage in Nevada if: (1) it offers a benefit to the employee in the form of health insurance of a value greater than or equal to the wage of an additional dollar per hour; and (2) it covers the employee and the employee’s dependents at a total cost to the employee for premiums of not more than 10 percent of the employee’s gross taxable income from the employer.

The good news about this decision is that it gives employers much more flexibility than the employee/plaintiffs wished to impose. The Court refused to apply specific and precise standards upon the quality of “health benefits” an employer must provide to qualify for the lower-tier minimum wage. The Nevada Legislature had also tried to impose such restrictions upon Nevada employers via Assembly Bill 175, which was passed in June 2017 but vetoed by Governor Sandoval.

It is possible that the Nevada Legislature may take this issue up again and/or that the Labor Commissioner may change its regulations as the Court rejected its definition of “health benefits” under Nevada Administrative Code 608.102 as “unworkable.” In the meantime, however, Nevada employers using the lower-tier minimum wage shouldassess the health benefits they are offering to employees to ensure that those benefits meet the requirements set forth above. Please contact a KZA attorney about these issues if you have questions or need assistance. As always, we will continue to keep you updated on MWA developments.