Gift Giving

Q: Can the city provide gift cards to individuals participating in city programs as a thank you or incentive to participate?

LMC: No, a city cannot give gift cards to residents who participate in city programs. While showing thanks for their participation may be a goal for the city, there are factors to consider when using public funds. The city must have legal authority to use funds in a proposed way and the funds must be used to further a public purpose.

There is no Minnesota statute or other implied authority that allows cities to give funds using gift cards, or to make payments with gift cards, to residents for participation in city programs. Cities have several explicit payment options and most commonly use checks or electronic transfers. Providing gift cards to residents who participate in city programs also does not satisfy the public purpose expenditure test because for an activity to further or promote a public purpose, it should benefit the community in a way that directly relates to government functions. The Minnesota attorney general has issued opinions finding that gifts from a public entity lack consideration and therefore lack public purpose.

The Minnesota Office of the State Auditor is a great resource for questions regarding cities’ use of gift cards. You can find additional information on the State Auditor’s website at bit.ly/giftcardpolicy.

Answered by Staff Attorney Lexi Wentworth: lwentworth@lmc.org.

Risk Management

Q: Are liability waivers valid?

LMC: A liability waiver can help protect the city from liability if someone is injured as a result of the city’s negligence. A waiver can also help the city establish an assumption of risk defense.

There is never a guarantee that a court will uphold a liability waiver, but a properly drafted waiver is generally valid. Waivers should be written in clear and unambiguous language ensuring the parties are aware of the risks they are assuming and the rights they are waiving. Waivers cannot be overly broad, i.e., a waiver cannot waive liability for injuries resulting from the willful, wanton, or intentional misconduct of the city.

In 2022, the Minnesota Supreme Court in Justice vs. Marvel, LLC, ruled that an exculpatory clause in a waiver is subject to strict construction. A waiver that releases a city from “any and all claims” is not enforceable against a claim for negligence. Rather, the waiver must specifically provide that it releases the city from liability for the city’s “negligent” acts. Cities should consult with their attorney when using waivers. Waivers can also be submitted for review to the League’s Contract Review Service; learn more at lmc.org/contractreview.

Answered by Risk Management Attorney Chris Smith: csmith@lmc.org.

Employee Compensation

Q: I hear people refer to exempt and nonexempt employees, but what does that mean?

LMC: These references are important under both the federal and Minnesota Fair Labor Standards Acts (FLSA), because they help employers define employees who are “exempt” from the overtime provisions of those laws. Nonexempt employees who work more than 40 hours in one work week must be paid overtime for all additional hours.

To be exempt, employees must meet both of two separate tests: a duties test determining whether an employee’s primary duty meets the definition of the particular exemption, and a salary basis test. The League offers overview information on both the duties test and the salary basis test in the FLSA: Determining Exempt v. Nonexempt Status memo at lmc.org/flsaexemptions.

In 2019, the U.S. Department of Labor (DOL) raised the salary threshold effective Jan. 1, 2020, for what is often referred to as the “white collar” exemption, from $455 per week to $684 per week (equivalent to $35,568 annually). The DOL has proposed raising this salary threshold again to $900-$1,000 per week, which would be equivalent to $46,800-$52,000 per year. It also proposed possible adjustments to the exempt duties test. The proposed rule may be released fall 2023, but has been delayed several times already in 2023, so League staff will continue to monitor this for cities.

While an effective date and what the actual amendments might look like remains to be determined, cities may find it prudent to have a listing of exempt employees at the ready to determine what salary and/or duties changes would need to be made to meet any DOL salary or duties changes.

Answered by Interim Human Resources Director Joyce Hottinger: jhottinger@lmc.org.