Back to the Jan-Feb 2022 issue

Employee Compensation Laws Cities Need to Know

By Laura Kushner

Numerous state and federal laws deal with the technical aspects of employee compensation such as minimum wage laws, overtime requirements, how often you must pay employees, and what you can and cannot deduct from pay.

Payroll, calendar, and a stack of moneyWhen it comes to broader issues, like equity and wage discrimination, however, there are just a few primary laws for a city to know about and understand.

Minnesota’s pay equity law

Minnesota is one of the few states with a pay equity law, the Local Government Pay Equity Act (LGPEA). The theory behind pay equity is that women tend to hold jobs that are underpaid. Pay equity means that the criteria employers use to set wages must be sex-neutral.

The LGPEA requires local governments to analyze their employee pay structure for evidence of gender inequity and file a report with the State of Minnesota Local Government Pay Equity Coordinator every three years. The report must show the city has achieved the required level of pay equity.

To file this report, the city must purchase or develop a job evaluation system that assigns points to each job classification (for example, police officer, maintenance worker, administrative assistant, etc.) based on categories like responsibility level, working conditions, and skills required. Once the points are assigned, the employer establishes a pay system that generally pays higher salaries to the people in job classifications with higher points.

One of the key components of pay equity is ensuring that a job classification that is primarily made up of female employees is paid at least as much or more than a job class made up primarily of male employees with lower points.

One typical example of a pay equity issue occurs when a city pays the job classification of maintenance worker (usually primarily male) more than the job classification of city clerk (often primarily female). In most job evaluation systems, the maintenance worker job classification receives fewer points than the city clerk job classification. You’ll want to make sure your pay is in line with that.

Governor’s salary cap law

Another law unique to Minnesota is known as the “governor’s salary cap law” because it limits local government compensation to 110% of the salary paid to the governor of Minnesota. Adjustments are made annually based on the Consumer Price Index.

This law’s definition of salary includes most forms of compensation with a few exceptions, such as benefits also provided to the majority of other full-time employees, as well as certain insurance and pension benefits.

Cities can apply for a waiver that exempts a position from the salary cap law by showing the position requires special expertise and requires a higher salary to attract or retain a qualified person.

Equal Pay Act

At the federal level, a close cousin of the Minnesota Local Government Pay Equity Act is the Equal Pay Act. According to the Equal Employment Opportunity Commission (EEOC), this law “requires men and women in the same workplace be given equal pay for equal work. The jobs need not be identical, but they must be substantially equal. Job content (not job titles) determines whether jobs are substantially equal.”

One of the most important differences between the federal Equal Pay Act and Minnesota’s LGPEA is that the federal law does not require the job evaluation/point system or ongoing reporting by employers.

Lily Ledbetter Fair Pay Act

In 2009, the federal Lily Ledbetter Fair Pay Act was enacted. It expands upon the Equal Pay Act and prohibits pay discrimination because of sex as well as other protected categories. It also prohibits discrimination among workers performing dissimilar work in equivalent jobs, whereas the Equal Pay Act addressed only sex discrimination between workers performing substantially the same jobs.

One of the key parts of this law is that each discriminatory paycheck restarts the statute of limitations period. In the past, the statute of limitations would begin to run at the time the employer made compensation decisions.

General discrimination and civil rights laws

Compensation differences based on race, color, religion, national origin, age, disability, genetic information, marital status, familial status, other protected categories, and/or retaliation also violate various laws. EEOC data shows that wage discrimination claims based on race were more common than those based on sex between 2010 and 2020.

Several states have passed laws that prohibit employers from asking applicants about past salary history, in part to avoid sex/gender, race, and other discrimination. Similar legislation has been introduced in Minnesota but has not passed, although efforts to pass such legislation will likely continue in the future.

Laura Kushner is human resources director with the League of Minnesota Cities. Contact: or (651) 281-1203.