Watch Out! Audits of State of Minnesota Contractors Are Increasing

Audits of Minnesota contractors with affirmative action plans or equal pay certificates are on the rise.

In Minnesota, no department or agency of the state can accept any bid or proposal on a contract or agreement for goods and services in excess of $100,000 from any business having more than 40 full-time employees, unless the MDHR Commissioner has received an affirmative action plan (AAP) for that business for the employment of minority employees, women, and qualified disabled persons. Minn. Stat. § 363A.36, subd. 1. The department or agency also cannot execute any such contract or agreement until the AAP has been approved by the Minnesota Department of Human Rights (MDHR) and the business has been issued a Certificate of Compliance. Id. Certificates of Compliance are valid for a four-year period.

In 2015, the MDHR actively audited employers holding Certificates of Compliance. According to MDHR statistics posted on December 31, the MDHR issued over 350 audit letters to state contractors in 2015.

The MDHR also actively audited employers holding the relatively recent Equal Pay Certificates of Compliance. In 2014, Minnesota enacted a new statute requiring companies with 40 or more full-time employees executing a contract for goods or services with the state in excess of $500,000 to hold a current Equal Pay Certificate or certify in writing that it is exempt. Equal Pay Certificates are valid for a four-year period. Minn. Stat. § 363A.44, subd. 1. The MDHR has the authority to audit a covered contractor’s compliance with this requirement and may require the contractor to produce information with respect to (1) its number of male employees, (2) its number of female employees, (3) average annualized salaries, (4) performance payments, benefits, or other elements of compensation, (5) average length of service, and (6) other information as needed to determine compliance. Minn. Stat. § 363A.36, subd. 8. In 2015, the MDHR initiated 21 such audits.

Takeaway: Employers who are covered state contractors in Minnesota should be actively prepared to respond to a MDHR audit letter regarding its AAP and/or Equal Pay Certificate and should regularly be reviewing its programs to ensure ongoing good faith efforts to comply with these laws.