3-1500-5878-1
STATE OF MINNESOTA
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE MINNESOTA DEPARTMENT OF EMPLOYEE RELATIONS
In the Matter of the Proposed
Adoption of Department of Employee
Relations Rules Relating to Local REPORT OF THE
Government Pay Equity Compliance, ADMINISTRATIVE LAW JUDGE
Minnesota Rules, Parts 3920.0100 to
3920.1300.
The above-entitled matter came on for hearing before Administrative Law
Judge Allen E. Gi I es on N ov emb er 1 4, 1 9 9 1 at 9: 00 a .m. i n Room I 0 , Gr ou nd
Floor, State Office Building, 435 Park Street, St. Paul, Minnesota.
This Report is part of a rulemaking proceeding held pursuant to Minn.
Stat. 14.131 to 14.20, to receive public comment; to determine whether the
Minnesota Department of Employee Relations ("the Department") has fulfilled
all relevant substantive and procedural requirements of law applicable to the
adoption of the rules; to determine whether the proposed are needed and
reasonable, and; to determine whether or not modifications to the rules
proposed by the Department after initial publication constitute impermissible
substantial changes.
Catherine M. Keane, Special Assistant Attorney General, Government
Services Section, 525 Park Street, Suite 500, St. Paul, Minnesota 55103,
appeared on behalf of the Department. The Department hearing panel consisted
of the following persons: Linda M. Barton, Commissioner, Minnesota Department
of Employee Relations, Faith Zwemke, Pay Equity Coordinator, Dr. Charlotte
Striebel, Department Consultant, and Bonnie Watkins, Communications Director.
Approximately 75 people attended the hearing. Sixty-three of these
persons signed the hearing register and 17 persons provided oral testimony.
The following persons made oral comments at the public hearing: Jerry
Serfling, AFSCME Council No. 14; Charles Sprafka, Association of Minnesota
Counties; Margaret Boyer, Child Care Workers Alliance; Dave Erickson,
Minneapolis Building Trades; Tim Connors, I.U.O.E. Local No. 49; Jeanette
Sobania and Jim Genellie, Consortium of Metro Cities, Marge Adkisson,
Minnesota Library Association; Greg Bastien, Law Enforcement Labor Service;
Dennis Bible, City of Minneapolis; Miriam Kragness, R.O.I. Consultants; Robert
O'Connor, I.M. O'Connor and Associates; Dede Wolfson, Pay Equity Coalition;
Aviva Breen, Commission on the Economic Status of Women; Nina Rothchild,
former Commissioner, Minnesota Department of Employee Relations; Bernard
Steffen, Association of Minnesota Counties; and Joel Jamnik, League of
Minnesota Cities.
Written comments relating to the proposed rules were submitted to the
Administrative Law Judge by the following individuals, organizations and local
government agencies: County of Nobles, Department of Personnel; City of
Northfield; City of West St. Paul; Independent School District No. 77,
Mankato, Minnesota; Board of Education, Sleepy Eye Public Schools, Independent
School District No. 84; St. Paul Public Schools, Office of Superintendent,
Independent School District No. 625; City of Waseca; City of Willmar; County
of Anoka; City of Hopkins; City of Plymouth; St. Louis County Civil Service
Department; City of Moorhead; Commission on the Economic Status of Women; City
of Hutchinson; City of New Brighton; City of Cottonwood; Sauk Centre Public
Schools; Minnesota Teamsters Public and Law Enforcement Employees Union, Local
No. 320, Minneapolis, Minnesota; State Representative Wayne Simoneau;
Association of Minnesota Counties; American Federation of State, County and
Municipal Employees, AFL-CIO, Minnesota Council No. 65, Hibbing, Minnesota;
Minnesota AFSCME Council No. 14, Twin Cities Metropolitan Area; the League of
Women Voters of Minnesota; Rice Memorial Hospital, Willmar, Minnesota; Willmar
Municipal Utilities; Minnesota Nurses Association; International Union of
Operating Engineers of Minnesota; Minnesota Hospital Association; Minneapolis
Building and Construction Trades Council, AFL-CIO; League of Minnesota Cities;
Alice Cowley, Becker, Minnesota; Mary C. Kuehn, no address given; R. Richard
Helms, St. Paul, Minnesota; Nina Rothchild, Mahtomedi, Minnesota; East Metro
Women's Council, Lake Elmo, Minnesota; and The Consortium of Metro Cities,
consisting of the following cities: Anoka, Blaine, Brooklyn Center, Brooklyn
Park, Champlin, Eden Prairie, Fridley, Hopkins, Maple Grove, Maplewood, New
Brighton, New Hope, Orono, Plymouth, Prior Lake, Richfield, Robbinsdale,
Rosemount, St. Anthony Village, and St. Louis Park (hereinafter "Metro
Cities").
A total of 22 exhibits were made a part of the record at the public
hearing. Exhibits 1 through 14 were submitted by the Department and Exhibits
15 through 22 were submitted by public commentators.
The record remained open for the submission of written comments for ten
days following the date of the hearing to November 25, 1991. Pursuant to
Minn. Stat. 14.15, subd. 1 (1990), three business days were allowed for the
filing of responsive comments. At the close of business on December 2, 1991,
the rulemaking record closed for all purposes. The Administrative Law Judge
received 32 timely written comments from interested persons during the comment
period. Three untimely written comments were returned and not considered.
The Department submitted written comments responding to matters discussed at
the hearing and making changes in the proposed rules.
The Commissioner of the Minnesota Department of Employee Relations must
wait at least five working days before taking any final action on the rules;
during that period, this Report must be made available to all interested
persons upon request.
Pursuant to the provisions of Minn. Stat. 14.15, subd. 3 and 4, this
Report has been submitted to the Chief Administrative Law Judge for his
approval. If the Chief Administrative Law Judge approves the adverse findings
of this Report, he will advise the Commissioner of actions which will correct
the defects and the Commissioner may not adopt the rule until the Chief
Administrative Law Judge determines that the defects have been corrected.
However, in those instances where the Chief Administrative Law Judge
identifies defects which relate to the issues of need or reasonableness, the
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Commissioner may either adopt the Chief Administrative Law Judge's suggested
actions to cure the defects or, in the alternative, if the Commissioner does
not elect to adopt the suggested actions, she must submit the proposed rule to
the Leg islative Commissi on to Rev iew Administrative Rules for the Commissi on's
advice and comment.
If t he Comm iss i oner e I ec ts to adopt the sugge sted ac t i on s of t he Ch ief
Administrative Law Judge and makes no other changes and the Chief
Administrative Law Judge determines that the defects have been corrected, then
the Commissioner may proceed to adopt the rule and submit it to the Revisor of
Statutes for a review of the form. If the Commissioner makes changes in the
rule other than those suggested by the Administrative Law Judge and the Chief
Administrative Law Judge, then she shall submit the rule, with the complete
record, to the Chief Administrative Law Judge for a review of the changes
before adopting it and submitting it to the Revisor of Statutes.
When the Commissioner files the rule with the Secretary of State, she
shall give notice on the day of filing to all persons who requested that they
be informed of the filing.
Based upon all the testimony, exhibits and written comments, the
Administrative Law Judge makes the following:
FINDINGS_OF FACT
Procedural Reguirements.
1. On September 27, 1991, the Department filed the following documents
with the Chief Administrative Law Judge:
(a) A copy of the proposed rules certified by the Revisor of Statutes.
(b) The Order for Hearing.
(c) The Notice of Hearing proposed to be issued.
(d) A Statement of the number of persons expected to attend the hearing
and estimated length of the Agency's presentation.
(e) The Statement of Need and Reasonableness.
(f) A Statement of Additional Notice.
2. On October 14, 1991 , a Notice of Hearing and a copy of the proposed
Rules were published at 16 State Register 893.
3. On October 11, 1991, the Department mailed the Notice of Hearing to
all persons and associations who had registered their names with the
Department for the purpose of receiving such notice.
4. On October 17, 1991, the Department filed the following documents
with the Administrative Law Judge:
(a) The Notice of Hearing as mailed.
(b) The Agency's certification that its mailing list was accurate and
complete.
(c) The Affidavit of Mailing the Notice to all persons on the Agency's
list.
(d) An Affidavit of Additional Notice.
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(e) The names of personnel who will represent the Agency at the hearing
together with the names of any other witnesses solicited by the
Agency to appear on its behalf.
(f) A copy of the State Register containing the proposed rules.
(g) All materials received following a Notice of Intent to Solicit
Outside Opinion published in the State Register at 15 S.R. 2568,
June 3, 1991, and a copy of the Notice.
The documents were available for inspection at the Office of
Administrative Hearings from the date of filing to the date of the hearing.
5. The period for submission of written comment and statements remained
open through November 25, the period having been extended by order of the
Administrative Law Judge to ten (10) calendar days following the hearing. The
record closed on December 2, 1991, the third business day following the close
of the comment period.
Small Business Considerations in Rulemaking,
6. Minn. Stat. 14.115, subd. 2 provides that state agencies proposing
rules affecting small businesses must consider methods for reducing adverse
impact on those businesses. The proposed rules relate to politicial
subdivisions and other local public bodies acting as employers. The proposed
rules have no impact on small businesses as defined in Minn. Stat. 14.115,
subd. 1. The Administrative Law Judge finds that the requirements of Minn.
Stat. 14.115 do not apply to the proposed rules.
Impact on Agricultural Land,
7. Minn. Stat. 14.11, subd. 2 (1990), imposes additional statutory
requirements if the proposed rules have a "direct and substantial adverse
impact on agricultural land in the state." The Administrative Law Judge finds
that the proposed rules will not have a direct and substantial adverse impact
on agricultural land in the state.
NAture of the PrQposed Rules-and Statutory Authority
8. The proposed rules establish standards for determining compliance
with the local government Pay Equity Act. Minn. Stat. 471.991 - 471.999
(1990) hereinafter referred to as the "Pay Equity Act." The Minnesota
Legislature enacted the Pay Equity Act in 1984 requiring all the state's
political subdivisions to establish "equitable compensation relationships."
The law was modeled after a 1982 law requiring pay equity for state
employees. The Pay Equity Act is designed to address the problem of sex-based
wage disparities. The disparities are present in dual pay structures, with
one pay pattern for jobs performed mostly by men and another pattern, with
lower pay, for jobs performed mostly by women. Every political subdivision is
required to establish equitable compensation relationships between
female-dominated, male-dominated, and balanced classes of employees in order
to eliminate sex-based wage disparities in public employment. The Pay Equity
Act defines equitable compensation relationship to mean that the compensation
for female-dominated classes is not consistently below the compensation for
male-dominated classes Df comparable work value.
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9 . The Pay Equity Act applies to an estimated 163,000 employees and
1,600 political subdivisions In the State of Minnesota, primarily cities ,
counties and school districts. All jurisdictions were required to achieve pay
equity by December 31, 1991, seven years after the original law was passed by
the Legislature.
10. Beginning in 1984, the Minnesota Department of Employee Relations
was directed by the Legislature to provide technical assistance and guidance
to the political subdivisions. As part of its technical assistance program,
the Department issued a number of publications providing information on how
political subdivisions can reform their compensation structures so as to
accomplish equitable compensation relationships in their compensation plans.
The guidebooks were published in 1984 and were revised in 1990 to address
legislative changes. The Department has held numerous seminars to explain and
assist political subdivisions.
11. The Department assembled an Advisory Committee consisting of persons
whose interests were directly affected by the proposed rules -- public
employers and organizations representing public employers, employee
representatives, organizations and individuals with a sincere and dedicated
interest in the subject of these proposed rules. After a process of
negotiation and compromise among these dedicated "opposed" interests, these
rules were proposed.
Fiscal Note,
12. Minn. Stat. 14.11, subd. 1 requires a fiscal note if a proposed
rule will require local public bodies to incur costs higher than $100,000 in
either of the two years immediately following the adoption of a rule. Minn.
Stat. 14.11, subd. I provides in part as follows:
If the adoption of a rule by an agency will require the
expenditure of public money by local public bodies, the
appropriate notice of the agency's intent to adopt a rule
shall be accompanied by a written statement giving the
agency's reasonable estimate of the total cost to all
local public bodies in the state to implement the rule
for the two years immediately following adoption of the
rule if the estimated total cost exceeds $100,000 in
either of the two years.
13. The Department states in its Pay Equity SONAR that the rule does not
require any additional expenditures by local public bodies and therefore no
fiscal note is required. Pay Equity SONAR at 5.
14. Several commentators have taken issue with the Department's
assertion that the proposed rule will not cause local public bodies to incur
expenses in excess of the standard cited above. The City of Waseca in its
comments provided as follows:
The Department states that no fiscal impact analysis is
required. If the Department is allowed to change the
methodology employed for the past seven years to achieve
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compliance with the law, many cities will incur costs to
have their studies revamped, their plans revised, and to
appear for hearings after being found In non-compliance
by the department. Only the department can advise
whether a plan is in compliance given that it has created
a proprietary test for compliance rather than an
understandab le, 1 I near re I ationship test that would a Ilow
loc a 1 governmen t s to bring the I r p 1 an s I n tc, complianc e
Most units of local government rely on consultants to
develop their plans for pay equity compliance. Those
jurisdictions will incur additional expense to comply
with new rules. An additional expense would relate to
the inability to run the department's program and
distribute it. Under the model used for the past seven
years a determination of compliance could be ascertained
using a personal computer and off the shelf spread
sheets. Many municipalities may be unable to run the
department's program on their own equipment.
15. The St. Paul Public Schools also assert that the proposed rules will
have a fiscal impact in excess of $100,000. In its comments the St. Paul
Schools provided as follows:
While it proves difficult to accurately estimate the
actual cost related to the addition of this new
requirement, it is easy to see that providing higher
levels of pay sooner to those employees progressing
through range steps would produce substantial costs to
this jurisdiction and many others. The cost to St. Paul
Public Schools would easily exceed $100,000 in either of
the two years immediately following the adoption of this
rule, if the salary schedule test remains intact. The
Department of Employee Relations in their Statement of
Need and Reasonableness (SONAR) which supports these
proposed rules, declared that, "These rules do not
require any additional expenditures. Therefore, no
fiscal note is required." (SONAR p. 5) . The expectations
that complying with the proposed Salary Schedule Test
would not require any additional expenditures is simply
not consistent with the predictable effect of the
proposed rule discussed here.
16. The Metro Cities also challenged the Department's assertion that the
proposed rules will not require any additional expenditures:
The department must be assuming that all jurisdictions
are in compliance and will therefore not have to make any
additional payments to any class of employees in the next
two years. The proposed statistical analysis method is
not identical to the method used in the 1990 guidebook.
It is reasonable to assume that adoption of these rules
will require a number of jurisdictions to make changes in
their compensation systems since these systems are
probably based on the 1990 guidebook. These costs could
easily exceed $100,000.
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1 7 . Final Iy, the Civi I Service Department of St. Lou is County a l so
challenged the Department's assertion that local public bodies will not have
costs as a result of these rules in excess of $100,000.
18. The Department's response to these challenges is that any additional
expend i tures of publ ic money by jurisdictions to es tabl ish equi tab I e
compensation relationships are "required by the pay equity law itself" and
"not by the adoption of these proposed rules."
19. The Department' s argument that it is the Pay Equity Act it self that
has caused local jurisdictions to incur costs for establishing equitable
compensation relationships does not respond to the primary argument being made
by the St. Paul Public Schools and the other commentators above. They assert
t hat cri ter i a and tests newly int roduced by the_proposed rule wi I 1 c ause
jurisdictions to incur additional costs. Jurisdictions that have succeeded in
achieving equitable compensation relationships and others well on their way to
accomplishing the same according to Department guidelines in effect prior to
the proposed rules may have to incur additional costs as a result of the new
rules to be in compliance.
20. Thus, the Department' s asserti on that the Pay Equity Act is the 5ole
cause of additional expenses for jurisdictions is not supported by the
record. The Department has failed to respond to the claim that newly
i ntroduced tests and cri ter i a wi I 1 have an add itional f i sc al impact upon
jurisdictions.
21. The Departmen t included the following paragraph i n t he Not i c e of
Public Hearing relating to fiscal impact:
Adoption of these rules will not result in additional
spending by local public bodies in excess of $100,000 per
year for the first two years following adoption under the
requirements of Minnesota Statutes Section 14.11.
The Administrative Law Judge finds that this statement is inadequate to
satisfy the requirements of Minn. Stat. 14.11, subd. 1.
22. There are 1,600 political subdivisions in Minnesota. Because many
may be affected, the Administrative Law Judge finds that the proposed rules
will require statewide expenses exceeding $100,000 by local public bodies.
The Department should have informed the jurisdictions that the rules could
result in additional expenses exceeding $100,000.
23. The Administrative Law Judge concludes that the Department's failure
to include a Fiscal Note in the Notice of Hearing constitutes a defect in the
rule that will require republication or renotice of the proposed rules with an
adequate Fiscal Note in the Notice of Hearing.
Reasonableness of the Proposed Rules.
24. The question of whether a rule is reasonable focuses on whether it
has a rational basis. The Minnesota Court of Appeals has held a rule to be
reasonable if it is rationally related to the end sought to be achieved by the
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statute. Broen Memorial home v. Minnesota-Department of Human Services, 364
N.W.2d 436, 440 (Minn. Ct. App. 1985); Blocker Outdoor Advertising Company_v.
MinnesotA Department of Transportation, 347 N.W.2d 88, 91 (Minn. Ct. App.
1984). The Supreme Court of Minnesota has further defined the burden by
requiring that the agency "explain on what evidence it is relying and how the
evidence connects rationally with the agency's choice of action to be taken."
Manufactured_Houing Institute v., Petersen, 347 N.W.2d 238, 244 (Minn. 1984).
In support of the adoption of the proposed rules the Department has prepared a
Statement of Need and Reasonableness (SONAR). The Department has relied on
its SONAR and testimony at the public hearing addressing the highlights of the
proposed rules as its primary affirmative presentation of the need and
reasonableness of the proposed rule. The agency has also submitted
substantial comments following the hearing to supplement the presentation at
the public hearing.
25. The Findings in this Report do not address each part of the proposed
pay equity rules, rather the Findings primarily address those parts that
received significant public commentary or for which changes have been made
since publication in the State Register on June 3, 1991. After careful review
and consideration of the Department's Statement of Need and Reasonableness and
based upon the Department's oral presentation at the hearing, the
Administrative Law Judge finds that the Department has affirmatively
established the need and reasonableness of each part of the proposed rule
except as otherwise qualified or determined by the following Findings and
Conclusions.
26. The rule was initially published in the State Register on June 3,
1991 at which time the agency sought public comment regarding the proposed
rule. The same rule without change was published in the State Register again
on October 14, 1991 as a part of the notice for the hearing that occurred on
November 14, 1991. In response to comments received from the solicitation of
outside opinion and comments received during this rulemaking proceeding, the
agency has proposed some changes to the rule. The Administrative Law Judge
finds that each of the proposed changes is needed and reasonable and does not
constitute a substantial change.
27. As previously indicated, this Report will not discuss each rule
part. A part not commented on in this Report is hereby found to be needed and
reasonable and does not exceed the statutory authority for the promulgation
thereof.
ANALYSIS OF RULE PART$ -GeneRATING SIGNIFICANT PUBLIC CQMMENTARY
Qbjections Regarding Implementation of_New criteria-And TestS Contained-in the
Prpposed Rules.
28. The Pay Equity Act requires jurisdictions to have a fully
implemented compensation structure that provides equitable compensation
relationships by December 31, 1991, unless the Commissioner of Employee
Relations approves a later date. Minn. Stat. 471.9981, subd. 1. Since
approximately August, 1984 the Department has provided guidance and technical
assistance to local jurisdictions for implementing pay equity. The Department
has provided a document called "A Guide to Implementing Pay Equity in Local
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Government" Initi a Ily Issued in August, 1 984 and supplemented f ina IIy in
September, 1990. In June 1991, the Department published the proposed rules.
The proposed rules contain a number of criteria and tests of what constitutes
"equitable compensation relationships" that had not been previously published
by the Department.
29. Numerous commentators have objected to the Department making changes
at this late date because the changes go to the heart of the method of
determining what constitutes compliance (equitable compensation
relationships). Many jur I sd i c t i on s expressed frustrat i on over the fac t that
their compliance with the Pay Equity Act would be judged by standards which
will not be finalized until January 1992, at least one month after they have
has submitted its reports. The jurisdictions expressed concern that the
Department had made changes in the compliance standards at the eleventh hour,
making it infeasible or impossible for a jurisdiction to comply.
30. The County of Nobles commented that:
The timing of the rules is patently impossible . . . the
final form of the rules cannot be known until January.
However, local governments must be in compliance by
December 31.
The City of Cottonwood commented that "we are frustrated by the fact that we
are expected to comply with pay equity requirements when the rules have not
been finalized." Dennis Bible, of the City of Minneapolis, indicated that the
City of Minneapolis would have to reopen its collective bargaining agreements
in order to meet the new alary range test. The St. Paul Public Schools in
its comments pointed out that meeting the new salary range test would be
infeasible and that it would take several years to achieve compliance with the
requirements of that new test. The City of Waseca expressed concern about a
change that required the inclusion of the weighted male regression line in the
statistical model. The City of Waseca commented as follows:
For the past seven years local governments have conducted
studies and implemented pay plans using a straightforward
regression model that compared the components of a
reasonable relationship as defined in the statutes.
There is no authority or reason for the Department to
suddenly shift to a weighted model from its previous
position of a relationship between the value of the job
and the pay for the job as contemplated by the statutes.
Robert M. O'Connor testified regarding these issues at the public hearing and
in his written comments he provided as follows:
It is also important to note that the proposed compliance
test used methodologies that are significantly different
from those required since 1984. After several years of
efforts to achieve compliance according to those
requirements, the proposed rules will now hold the
agencies retroactively accountable for a completely
different set of requirements. For example, since 1984
local government agencies have been instructed by DOER to
calculate one overall regression line, with no weighting
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of classes based on the number of employees in them.
Hundreds of agencies invest in significant dollars to
redesign the pay systems and negotiate and implement
changes. They will now be evaluated using possibly
dozens of lines, with each job class weighted by the
number of employees in the class.
31. The Metro Cities also objected on the basis of timing and changes in
the proposed rules, stating:
We would like to support the testimony of Robert O'Connor
that there are significant differences in the new rules
from what jurisdictions have been basing their
compensation plans on in the past. The new rules do not
g ive jur isd i c t i on s any t i me to adj us t to the se new
factors prior to being found not in compliance.
The Metro Cities identified numerous "new factors" included in the rule for
the first time in 1991. They include the following:
Inclusion of part-time positions
Inclusion of benefits
Mini regression lines
Inclusion of years to maximum salary
Weighting of lines
Salary range test
Exceptional service pay
No more credit for "sore thumbs"
32. Other comments by the City of New Brighton, County of Anoka, Sauk
Center Public Schools and the Minnesota School Boards Association expressed
concern about the timing as weil as concern over the new criteria contained in
the rule. The commentators have asked that the Department delay the date on
which a jurisdiction would have to comply with the new criteria.
33. In its comments the Department responded by acknowledging that there
were changes in the proposed rules but because the Department had made every
effort to solicit input and inform affected parties "it is fair to require
jurisdictions to comply with these proposed rules." The Department explained
as follows:
I n i t i a 1 1y , i t should be noted that wh i I e the ru I e s do
include some change from the Department's guidelines on
pay equity, throughout the rule process, the Department
ha s s tr ived to be a s con s i s tent as pos s ib I e with those
guidelines. For example, the Department's 1990 Guidebook
listed 18 common questions from jurisdictions and the
proposed rule provides almost identical answers to 16 of
those questions.
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The Department also noted that the changes were considered by the Advisory
Committee and only addressed areas of compensation that jurisdictions should
have been paying attention to anyway. The Department concluded that all
affected parties have had fair notice of the proposed rules and ample
opportunity to comment.
34. The Administrative Law Judge finds that jurisdictions have been
reorganizing their compensation structures to eliminate sex-based wage
discrimination since 1984 applying guidelines and directions of the Department
disseminated to jurisdictions by way of the Department's "A Guide to
Implementing Pay Equity in Local Government."
35. The Administrative Law Judge finds that several of the criteria and
tests introduced by the proposed rules represent a departure from previous
guidelines or directions from the Department. Application of the criteria or
tests to a jurisdiction's compensation plan may render the jurisdiction out of
compliance even in circumstances where the jurisdiction complied according to
criteria and tests that the Department used before the proposed rules.
36. The criteria or tests were first presented formally with the
publication of the proposed rules in June 1991. Jurisdictions will have had
less than one-half year to comply with the newly introduced criteria and
tests.
37. This timing difficulty conflicts with the Department's
responsibility to promulgate the rule which it believes is the most
appropriate solution to the problem of pay inequity. The Department is
entitled to fashion a rule which reflects its policy judgments of what is
best, regardless of the prior guidelines.
38. The Administrative Law Judge concludes that the Department's
proposed rules have been demonstrated to be needed and reasonable on their
face.
39. It would be premature for the Administrative Law Judge to decide
whether the application of the rules to any particular set of facts is
appropriate or not. The Commissioner has discretion to establish an
alternative date in Minn. Stat. 471.9981, subd. 6(a). The impact of the
delays resulting from the earlier findings regarding the fiscal note, and the
difficulties of applying these rules to December 31, 1991 conditions, raise
questions about the enforcement of these rules. Those questions cannot be
answered at this time.
40. The Administrative Law Judge has discussed the reasonableness of
several of the criteria and tests introduced by the proposed rules in other
parts of this Report. Unless otherwise indicated or qualified the
Administrative Law Judge has found each of the newly introduced criteria and
tests needed and reasonable.
Part 3920.0100 Subpart 2, "Benefits.
41. The rule must define "benefits" because benefits are included in the
term "compensation" which is defined in subpart 3 of this part. The proposed
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rule originally defined benefits as follows:
"Benefits" means insurance programs to which a
jurisdiction contributes on behalf of an employee.
Benefits does not include pensions.
42. The City of Hutchinson, Nobles County, Minnesota Nurses Association,
Minnesota AFSCME Councils 14 and 65 and the Metro Cities objected to this
definition for a number of different reasons. For example, the City of
Hutchinson opposed the definition because it asserted that insurance and other
benefits are matters outside the normal definition of compensation and
therefore should not be included in these rules Nobles County pointed to the
fact that the Department has not previously included benefits, therefore,
including benefits in the rule at this time was arbitrary and capricious.
43. The Metro Cities in their comments thought that the definition was
confusing and failed to recognize the complexity of the various benefit plans
currently In place in local units of government. Metro Cities further
explained that as the language now stands all sorts of insurance premiums
could be included, for example, health, life, dental, short-term disability,
long-term disability, et cetera. The Metro Cities proposed that subpart 2 be
deleted and the following substituted for it:
Subpart 2. Benefits. "Benefits" means the dollar amount
of the maximum contribution of a jurisdiction toward
health insurance for which an employee is eligible.
"Benefits" does not include salary or the jurisdiction's
contribution to a pension plan, federal social security,
federal Medicare, unemployment compensation Insurance,
workers compensation insurance, or liability insurance.
44. The Minnesota Nurses Association thought that the definition was
much too narrow and did not include a number of "benefit" items that the
Minnesota Nurses Association considered as being compensation such as
severance pay, deferred compensation programs, vacation pay and sick pay.
The Nurses Association believed that excluding these items from benefits would
allow a local government the opportunity to provide these items to
male-dominated classes and deny them to female-dominated classes and thus
create a loophole to disadvantage female classes. Similar to the Minnesota
Nurses Association, AFSCME Councils 65 and 14 believe that the exclusion of
items that are customarily considered as benefits enables a recalcitrant
employer to manipulate the definition in favor of male-dominated classes.
45. At the public hearing the Department proposed to change the
definition as follows:
Subp. 2. Benefits. "Benefits" means health insurance or
heAlth self-interests programs to which a jurisdiction
contributes on behalf of an employee or an employee plus
dependents. Benefits does not include pensions__life
insurance, dental insurance , disability insurance or
other insurance program.
46. The Department has decided to limit the definition of benefits for
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pay equity purposes for the following reasons. Reporting benefits is the most
complex part of the reporting process because jurisdictions will have to
compare benefits available to male-dominated classes and benefits available to
female-dominated classes of comparable work value to determine whether
benefits must be included in their implementation report filed with the
Department. Limiting benefits to only health insurance simplifies reporting
and eases the administrative burden on the Department and on jurisdictions.
Manipulation of the other insurance programs such as life and disability in
order to maintai n sex-based compens ation dispar i ty is not very like Iy be c ause
of the small investment that local governments have in these other other
insurance programs and because of other checks and balances. Defining
benefits so as to include health insurance allows the agency or department to
capture the most significant part of the jurisdiction's benefit package which
is health insurance. Under the Department-managed public employment insurance
program (PEIP) which offers insurance programs to local governments in
Minnesota, in 1991, 94 percent of the total premiums paid by local governments
under the PEIP were for health insurance as opposed to life, disability,
dental, or accidental insurance components. Since health insurance is such
large component of the insurance programs made available to employees it is
reasonable to define "benefits" as health insurance.
47. The changes to the section made by the Department clarify the
Department's intention to limit benefits to health insurance and to exclude
other kinds of insurance such as life, dental, disability, et cetera from the
kinds of insurance programs considered as benefits. The inclusion of health
self-insurance programs and contributions for an employee's dependents have
been added to clarify that these are included in the definition of benefits.
48. The Administrative Law Judge finds that the limitation of benefits
to health insurance is reasonable because it simplifies reporting by local
government units and simplifies the administrative collection of this
information by the Department. The limitation is also reasonable because
health insurance constitutes 94 percent of the insurance contributions made by
local government units. Therefore, limiting the insurance to health insurance
captures 94 percent of the money spent on benefits by local government units.
It is also reasonable to exclude pensions from the definition of benefits
because the amount paid by local government units for pensions is often
determined by law and therefore a jurisdiction has no control over the amount
of these contributions.
49. The Administrative Law Judge finds the definition of benefits is
needed and reasonable and the changes which specify what types of insurance
are not covered are reasonable and do not constitute a substantial change.
50. The Administrative Law Judge notes that benefits is one of the
"newly introduced" criteria. The Administrative Law Judge believes that these
should be adopted because they represent the Department's policy judgments.
Minn. Rules Part 3920.0100, subpart 3. Compensation
51. The rule defines "compensation" to clarify what is meant by that
word in the statute and in the proposed rule. Compensation is a part of the
"equitable compensation relationship" concept of the statute. The Department
maintains that the proposed definition includes all the significant components
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of compensation over which jurisdictions have some control and which could be
influenced by past or present sex-biased practices. Under the definition of
compensation only three components are included as compensation; they are
salary, exceptional service pay, and benefits.
52. The Minnesota Nurses Association and AFSCME Councils 14 and 65
opposed the narrow definition of compensation for the same reasons that they
opposed the narrow definition of benefits -- that is, as the Minnesota Nurses
Association pointed out, the narrow definition of compensation would provide
another opportunity for an employer to pay male-dominated classes at a
separate rate in order to avoid pay equity. The AFSCME Councils 14 and 65
expressed a similar concern about the limited definition of compensation.
5 3 . Each of the components of compensation, salary, exceptional service
pay and benefits, is further limited and defined in the rules. The Department
explained that it excluded overtime pay, shift differentials, and uniform
allowances from the definition of compensation on the basis that it would be
difficult for a jurisdiction to manipulate these payments as a way to maintain
class-wide, sex-based rate disparities. The Department also excluded these
items from compensation for the following reasons: (a) There is no proof that
these items of compensation have had any significant impact on the overall
compensation differences between male-dominated and female-dominated classes;
(b) It would be administratively difficult for jurisdictions to report and
administratively difficult for the Department to monitor these items of
compensation; and (c) The Advisory Committee consensus was that reporting and
monitoring these payments were unnecessary and cumbersome.
54. At the public hearing, the Department proposed a change in the
definition of compensation as follows:
Subp. 3. Compensation. "Compensation" consists of
salary, exceptional service pay, and benefits.
Compensation does not include overtime pay, shift
differentials, or uniform allowances, as defined in items
A to C. Compensation also excludes any other payments
not defined as salary, benefits, or exceptional service
pay-
A. "Overtime pay" means payment to
employees for services performed in excess of the
normal work period and when the payments are
required by applicable state and federal overtime
laws. by an applicable collective bargaining
agreement.- or by written personnel policies.
55. This amendment acknowledges that both exempt and nonexempt employees
may receive overtime pay pursuant to a personnel policy or collective
bargaining agreement. The amendment acknowledges that in various situations,
overtime is paid to exempt employees because of an agreement or policy and not
as a means to discriminate or to hide sex-based wage disparities. The
Department argues that it is reasonable to exclude these payments for the same
reasons that payments of overtime are made as a result of state and federal
overtime laws.
56. The Minnesota Hospital Association objected to the inclusion of
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benefits particularly health insurance as a component of compensation. The
Minnesota Hospital Association reasoned that the purpose of the pay equity law
is to eliminate sex-based wage disparities in public employment. It is not
reasonable to include health insurance as a part of compensation because
health insurance is a function of an employee's work status -- full-time or
part-time and not a function of an employee's sex. The Hospital Association
further argued that adding health benefits as a part of compensation at this
late date seems to change the rules in the middle of the process.
57. The Administrative Law Judge finds the definition of compensation
needed and reasonable for the reasons articulated above. The Administrative
Law Judge also finds the change to include exempt employees is reasonable and
does not constitute a substantial change.
58. The Minneapolis Building and Construction Trades Council commented
at the hearing and also in its written comments that it was unclear whether
the definition of compensation would exclude other items of payment that its
members received that it believed should also be excluded. Other items that
should also be excluded are various types of availability "on-call" pay and
tool allowances. In the comments after the public hearing the Department
pointed out that such items would be excluded from compensation as noted in
the definition. The definition notes that compensation "excludes any other
payments not defined as salary, benefit or exceptional service pay."
Minn. Rules Part 3920.0100, Subpart 5. "Employee."
59. Several commentators expressed some concerns regarding the proposed
definition of "employee." In part the rule incorporates the definition of
employee contained in Minn. Stat. Ch, 179A (the Public Employer Labor
Relations Act, hereinafter PELRA) which states with some exceptions that an
employee is anyone working 14 or more hours per week and more than 67 calendar
days in a year. The Metro Cities expressed concern over the impact this
definition would have on its member cities reporting of benefits for its
employees. Metro Cities explained that several of its member Cities used the
services of students. Member cities sometimes employ a class of employees
(i.e., students) that may work over 67 days and 14 hours per week but still
are considered for purposes of health insurance part-time seasonal employees.
Including benefits for this category of employees would require that a city
alter its method of classifying these employees. The Metro Cities recommended
that Minn. Rules pt. 3920.0100, subp. 5, be revised to state as follows:
This definition of employee applies only to the
determination of salaries and not benefits.
60. The City of New Brighton also expressed concern about the inclusion
of part-time employees in pay equity reports. The City stated as follows:
Our concerns address the issue of requiring cities to
include part-time employees in pay equity plans. Since
the initial passage of the pay equity law, most cities
have prepared plans based upon salaries and benefits of
full-time employees only. The proposed rules,
guidelines, and tests that DOER is intending to use in
order to determine compliance required that cities also
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include part-time employees in their equity plans.
Therefore, we do not feel that the scope of pay equity
plans need to include part-timers to effectively
accomplish its purpose. Because part-time employees are
generally not covered by fringe benefits, the validity of
statistical comparisons with full-time employees for
"equity" purposes is questionable.
61. The opposite concern was expressed by other commentators. At the
public hearing, AFSCME representative Jerry Serfling, Margaret Boyer,
representing the Child Care Workers Alliance, opposed the exclusion of any
part-time workers from the benefits of the Pay Equity Act. Mr. Serfling
explained that even 'he PELRA definition of employee allows continuous
discrimination in wages and benefits for those persons who cannot be
represented by a union, usually those persons who work part-time or are
seasonal. He argued that use of the PELRA definition encourages employers to
utilize non-represented part-time workers.
62. Responding to these concerns the Department indicated that it was
necessary for it to use a cutoff point because it would be administratively
difficult to include all employees. The Department further asserts that it is
reasonable to use the PELRA cutoff point because the Legislature intended to
blend the Pay Equity Act and PELRA together. With respect to the Metro
Cities' and League of Minnesota Cities concern regarding the application of
benefits to part-time and seasonal employees, the Department asserts that a
jurisdiction will not be automatically out of compliance as a result of the
application of benefits to part-time and seasonal employees. In response to a
similar concern expressed by the Minnesota School Boards Association the
Department explained in a letter (Exhibit 12A) as follows:
Jurisdictions will not automatically be out of compliance
because they do not offer benefits to part-time
employees.
These are the circumstances which might lead to a
non-compliance finding: (1) part-time employee classes
are more likely to be female-dominated than
male-dominated; (2) part-time employee classes do not
include any full-time employees eligible for health
insurance; (3) there are male classes within ten percent
above or below the part-time female classes; (4) the
comparable male classes do receive health insurance; and
(5) the health insurance contribution amounts, when added
to salary maximums for all employee classes, are large
enough to show a consistent pattern of lower compensation
for female classes than for male classes.
63. The Department asserts that it is reasonable and necessary to
examine benefits for all eligible classes of employees to determine whether
there may be sex-based disparities in benefits which affect total
compensation.
The Administrative Law Judge finds that the Department has justified the
definition of employee by an affirmative presentation of facts; the proposed
definition of employee is needed and reasonable.
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Minn. Rules part 3920.0300 subpart 5 F. (1) Reporting minimum and maximum
Salary.
64. This section requires that for classes with an established hourly
wage, jurisdictions must multiply the minimum and maximum hourly wages by
173.3 to determine the minimum and maximum monthly wage. The Minneapolis
Building and Construction Trades Council argues that the proposed rule for
calculating monthly salary would penalize employees in the construction
building trades. Because employees in the construction-building trades do not
have year-round employment, and often have work that is seasonal or
intermittent, they often receive a higher hourly wage. Multiplying the hourly
rate by 173.3 would seriously inflate the earnings on the reporting form. The
Minneapolis Building and Construction Trades Council recommended that an
alternative be used. Instead of using the salary calculation proposed by the
Department, the monthly salary reported for a job class would be the base
hourly rate multiplied by the "average" straight time hours worked per month
by employees in a class.
65. The Department in its final comments has chosen to reject this
alternative. The Department explained as follows: "The fact that certain
traditionally male-dominated classes may earn a greater salary for working
less time than female-dominated classes earn for more "permanent" work, is not
a good reason to diminish the earnings of seasonal or intermittent workers for
purposes of determining equitable compensation relationships by averaging time
and reporting only base salary." The Administrative Law Judge finds the
Department's decision reasonable and appropriate. The rule, as proposed by
the Department, has been demonstrated to be reasonable.
Minn. Rule-PArt-3920.0100, SubpArt 9 ant 3920.0200. Jurisdiction .
66. Jurisdiction refers to the "political subdivision" "public employer"
or "governmental subdivision" responsible for establishing equitable
compensation relationships under the Pay Equity Act.
67. The Department received comments regarding the proposed definition
of "jurisdiction." The comments also are relevant to part 3920.0200 which
governs how the Department determines the responsible jurisdiction and in
particular subpart 3 which addresses the evidence the Department will consider
in making that determination. Marge Adkisson representing the Minnesota
Library Association proposed that the definition be changed so that the
jurisdiction responsible for establishing pay equity is also the jurisdiction
with the "final authority to adopt or veto the budget." The Minnesota
Hospital Association suggested that additional factors such as salary-setting
authority and whether bargaining units are separate from the city and county
should be considered in determining the appropriate jurisdiction for pay
equity.
68. The Department declined to adopt the proposal that the standard to
be used in determining the responsible jurisdiction be the jurisdiction with
"actual salary setting authority." The Department explained that it preferred
to hold the entity with "final budgetary approval authority" responsible for
pay equity because it is this entity which ultimately is in the best position
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to establish equitable compensation relationships. Finally, the Department
also declined to accept the suggestion that it define responsible jurisdiction
along bargaining unit lines. (For example, a hospital employee may be in a
different bargaining unit than a corresponding city or county employee. Is
this suff icient reason to exclude hospital employees from the city or county' s
pay equity report?). The Department stated as follows:
Many jurisdictions - even those without charitable
hospitals - must negotiate and bargain with several
different bargaining units and exclusive
representatives. The fact that there are separate and
different bargaining units does not necessarily mean that
there are different "employers".
Finally, all jurisdictions are required to establish
equitable compensation relationships across the entire
jurisdiction and not simply within bargaining units. The
purpose of this requirement is clear. Because bargaining
units are frequently organized by job type, many of which
have traditionally been male or female-dominated, many
gender-based pay inequities could be perpetuated if pay
practices were otherwise determined by in bargaining
units.
69. The City of Willmar along with affiliated government entities
Willmar Municipal Utilities and Rice Memorial Hospital - proposed that the
def in iti on of responsibl e jurisdicti on and evidence to be considered in
determining the responsible jurisdiction allow for separate pay equity
reporting when "the final budgetary approval authority is actually only a veto
power over the hospital board and the utility commission actions." This
circumstance was precisely the relationship between Rice Memorial Hospital,
Willmar Municipal Utilities and the City of Willmar. Rice Memorial Hospital
and Willmar Municipal Utilities establish budgets, setting salaries for
employees, and negotiate with various collective bargaining units. They
submit their budgets to the city council which only has the authority to veto
a proposed budget. Comments from each of the entities, the City of Willmar,
Willmar Municipal Utilities and Rice Memorial Hospital emphasized that they
were three distinct operating entities, each operating under its own pay
equity program.
70. Comments from the City of Luverne also expressed some concern about
the method the Department had proposed to determine the responsible
jurisdiction. The City of Luverne suggested that the Department's proposed
definition as the entity with "final budgetary approval" was too broad and
suggested that a Definition include the entity that "effectively controls
wages" to take into consideration the "realities" of the existence of joint
powers agreements.
71. The Department has chosen to define the responsible jurisdiction as
it is defined in PELRA, In PELRA, it is defined as the entity having final
budgetary approval authority. The Department has proposed to use the PELRA
definition because of the interrelationship between PELRA and the Pay Equity
Act. However, unlike the PELRA definition the Department's proposed
definition includes charitable hospitals based upon the recommendation of the
Attorney General's office.
72. The Department has proposed an amendment to their definition which
in part adopts recommendations made by the Minnesota Library Association and
the City of Luverne relating to joint powers agreements and "final budgetary
approval." The amendments also address charitable hospitals. The amendment
is as follows:
Subp. 9. Jurisdiction. "Jurisdiction" means a political
subdivision, governmental subdivision, or public employer
responsible for achieving equitable compensation
relationships under Minnesota Statutes, sections 471.991
to 471.999. For purposes of pay equity compliance,
jurisdiction means a public employer as defined by
Minnesota Statutes, section 179A.03, subdivision 15,
clause (c), except that jurisdiction also includes-may
also include charitable hospitals as defined by Minnesota
Statutes, section 179.35, subdivision 2.
If a charitable hospital does not have final budgetary
approval authority for employees in the hospital, the
juri sdiction for purposes of parts 3920.0100 to 3920.1300
is defined as the public employer with final budgetary
approval authority for employees in that hospital. If
the governing board -of -A joint power 5 agepcy -does not
have final budgetary approval authority for employees in
the joint powers agency. The jurisdiction for purposes of
parts 3920.0100 to 3920.1300 is defined as the public
employer with final budgetary approval authority for
employees in that joint powers agency.
73. The Administrative Law Judge finds that the Department's proposed
definition of jurisdiction and amendments to the definition are reasonable and
that the change does not constitute a substantial change.
Minn. Rules Part 3920.0300 Subpart 6. Comparision of Ben of Benefits
74. Jurisdictions are required to compare benefits received by
male-dominated and female-dominated classes of comparable work value. The
purpose of this comparison is to determine whether or not a female-dominated
class or classes receive different benefits that represent a disadvantage to
female-dominated class or classes. The Department asserts in its pay equity
SONAR that this subpart is needed to insure that the benefits component of
compensation is evaluated in accordance with the law's overall standard that
"compensation for female-dominated classes is not consistent with or below the
compensation for male-dominated classes of comparable work value.
75. The Metro Cities oppose this method of benefit comparison and
suggest that the comparison of benefits be done by comparing groups of
bargaining units and unrepresented employees instead of comparing benefits
across the entire jurisdiction. The Metro Cities explained that this method
of comparison more accurately reflects the reality of the way benefit packages
are established. The Metro Cities explained as follows:
This subpart does not reflect the way benefits are
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commonly established in the collective bargaining process
where differences in the way in which benefits are
structured in different cities. Inclusively, negotiating
packages are being designed to reflect the actual cost to
the employer for the total of salaries and benefits.
Employees in different bargaining units might agree to
different rates of increases in salary and benefits which
amount to the same increase in cost to their employer.
This is especially true with the advent of flexible
spending accounts. . . .
For cities where at least one group of employees
represented by a union pay equity compliance should be
judged bargaining unit by bargaining unit and separately
for all non-union employees, not across the city as a
whole.
76. The Metro Cities recommend that the proposed subpart 6 be deleted
and replaced with the following language:
Subpart 6. Benefits. the jurisdiction must report by
bargaining units and by unrepresented employee groups if
the jurisdiction's contribution limit for benefits is
different for any female-dominated classes within the
respective groups.
If differences exist, and if differences Tepresent a
disadvantage for any female-dominated class, the
jurisdiction must report the following information for
all classes in each affected group bargaining unit or
man-union employees):
A. Eligibility or lack of eligibility for benefits;
and
B. The dollar value of benefits prorated to
determine monthly value.
77. The Department responded in its post-hearing comments that
comparisons based on bargaining units is inconsistent with the pay equity
law. The Department further stated that limiting comparisons to
intra-bargaining unit compensation is inconsistent with the law's broad policy
goal to "establish equitable compensation relationships between
male-dominated, female-dominated, and balance classes of employees in order to
eliminate sex-based wage disparities in public employment in the state."
Minn. Stat. 471.992, subd. 1. The Department further stated that modifying
the comparison in this matter would allow employers to discriminate with
respect to benefits or total compensation between and among various unions or
unrepresented groups. The Department concluded that depending upon the gender
dominance of the classes within the bargaining units or unrepresented groups,
gender discrimination could be present and perpetuated.
78. The Administrative Law Judge finds that the Department's comparison
and proposed method of comparison of benefits is reasonable and consistent
with the Pay Equity Act.
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Minn. Rules Part 3920.0400, 3920.0500. 3920.0600 and 3920.0700, Compliance
review, Statistical analysis, Tool, AlternAtive Analysis test and other tests.
79. The central focus of this rule are the methods used for determining
whether a jurisdiction has complied with the Pay Equity Act's requirement of
establishing equitable compensation relationships. The tests used for making
such a determination are contained in these parts. In order for a
jurisdiction to be in compliance it must pass a "statistical analysis test"
described in Minn. Rules Part 3920.0500, or an "alternative analysis test"
described in 3920.0600, depending on the number of male-dominated classes and
depending on whether or not a jurisdiction has salary ranges,. In addition,
all jurisdictions must pass each of the "other" tests described in part
3920.0700. If a jurisdiction fails any of the tests that apply to it, then
the Department must find the jurisdiction not in compliance.
Failure-,to Include the Computer Program in the Proposed_Rule Does Not
Constitute a Defect.
80. In applying the statistical analysis test described in section
3920.0500, the Department will use a computer program to combine data and
perform the required calculations.
81. Numerous parties to this proceeding have recommended that the rules
not be approved because the Department did not publish in the State Register
or otherwise make available the actual computer program which the Department
will use to perform the statistical analysis test. Numerous jurisdictions
have questioned the integrity of the Department's compliance decisionmaking
based on a computer program that has not been subject to scrutiny or otherwise
validated by the rulemaking process. Without the program parties argue that
they cannot determine whether the program is valid for all applicable sets of
data. All the jurisdictions participating in this proceeding by providing
oral or written comments, have expressed reservation, concern and lack of
confidence in the Department's compliance determination process because of the
Department's failure to make available the computer program. The Metro Cities
have recommended that the rulemaking process be suspended until the computer
program is made available.
82. The Department contends that despite the fact that the actual
computer program it will use to make compliance decisions has not been
published, it has nevertheless published the entire compliance rule. The
Department argues that the entire statistical analysis process is described in
great detail in the rule, part 3920.0500. The computer program is simply the
tool the Department will use to perform the analysis (or the calculations)
described in the rule. Therefore, the Department asserts that it Is not
required to publish the computer program in the rule or incorporate it by
reference.
83. The Department explained that it is in the process of making changes
to the computer program, converting the program into a format that would be
understandable and useful to most of the jurisdictions. Moreover, the program
is still being revised to take into consideration the changes to the rule that
have been made in this rulemaking proceeding. When the rule revisions are
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final, the computer program will be distributed to all those persons who are
Interested in obtaining it. The Department explained that it is not making
any changes in the computer program which would cause a change in the
statistical analysis rule itself.
84. The Administrative Law Judge finds that the computer program that
performs the statistical analysis required by Minn. Rule pt. 3920.0500, is not
before the Administrative Law Judge at this time and has not been offered for
review and evaluation by the parties in this proceeding. The Administrative
Law Judge finds that this pre-enforcement challenge to the use of the computer
program is premature.
85. The Department can only use the mathematical computations data
described in the statistical analysis test as set forth in the rule. Thus, if
the computer program interprets or adds to the mathematic computations in the
rule, then the Department may be subject to a challenge that it is ignoring
its own rule or is using an unpromulgated interpretive rule. However, this
proceeding is not the appropriate time to determine whether the computer
program measures what it purports to measure, whether the program's use for
the data sets combined is valid, or most important, whether the program only
measures or combines data in the manner specifically identified in the
statistical analysis test rule. These are applications issues which are more
appropriate for an enforcement-type proceeding. What is at issue in this
proceeding is the need and reasonableness of the rule itself, not the
program.
Challenges to the Validity of the Statistical Model.
86. The Administrative Law Judge has considered all arguments,
assertions and claims regarding the statistical model including any that are
not specifically discussed in this Report. Except as otherwise qualified or
limited hereafter, the Administrative Law Judge finds that the statistical
model used by the Department for the statistical analysis test is reasonable
and needed and consistent with the Pay Equity Act.
Adoption of the validity of the Statistical Model.
87. Minn. Rules 3920.0500, subp. 2, establishes that an underpayment
ratio of 80% or more as the basic definition of "not consistently below." If
the rate of male underpayment is at least 80% of the rate of female
underpayment, then the jurisdiction passes the statistical test.
88. The Minnesota Teamsters and AFSCME Councils 14 and 65 objected to
the use of the 80% rule for determining the "consistently below" standard.
They argued that the 80% underpayment ratio standard would allow employers to
underpay and discriminate against a significant percentage of female
classifications. The Department responded that the 80% standard for the
underpayment ratio is the same as the "four-fifths rule" used as a federal
standard in employment discrimination cases. The Department also argued that
the standard is reasonable because it sets the level of acceptable difference
which is used in related law and because it allows jurisdictions flexibility
for incorporating non-gender-related influences into pay processes. The
Administrative Law Judge finds that the use of the 80% standard for
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establishing what constitutes "not consistently below" is reasonable and
needed.
Use of thy W-ei ghted Male_Regression Line
89. In the analysis of data determining predicted pay, the statistical
model utilizes a weighted male regression line in Minn. Rule part 3920.0500,
subpart 4 C. The International Union of Operating Engineers, Local No. 49,
opposed the use of weighted male regression lines stating that weighting the
I ines by the number of ma I e empIoyees has no intrins i cva Iue in the f itting of
a linear regression line to represent the relationship between job evaluation
ratings and salary. Singling out male classes for this treatment is
inconsistent with the intent of the Legislature. The City of Waseca expressed
its opposition to the use of weighted male regression lines as follows:
The use of a male only, weighted regression analysis does
not comport with the statutory charge to establish
reasonable relationships between classes. A weighted
regression analysis by the number of persons in a job
class has nothing to do with paying persons based on the
value of the job performed in relationship to what other
jobs are paid. That is, the purpose of the statute is to
have the job valued, not to value the number of persons
in a particular job category.
St. Louis County and the Metro Cities also opposed the use of the weighted
male regression line.
90. Whether or not to use weighted male regression lines was an issue of
controversy in the advisory committee meetings. After substantial discussion
the conclusion was made that the regression line should be weighted. The
Department stated a number of reasons for this decision in its Pay Equity
SONAR at page 39, including (1) concept of class has little meaning without
the reference to the existence of employees in class; (2) if the Department
used an unweighted line, class size could easily be manipulated to a degree
that would defeat the purpose of the law; and (3) the Legislature did not
intend the Department to ignore employees in classes because it required
jurisdictions to report the number of employees in classes as a part of the
original report. After consideration of the arguments on the issue the
Administrative Law Judge is persuaded that the Department has acted reasonably
by weighting the regression line. The Administrative Law Judge finds that the
weighted regression line used for the determination of predicted pay has been
demonstrated to be needed and reasonable.
use of the Statistical Analysis Test in Jurisdictions with and_without Salary
Ranges.
91. The League of Minnesota Cities has expressed a concern about the
application of the statistical analysis to jurisdictions where some classes
have salary ranges and some do not. The League of Minnesota Cities argues
that it is unreasonable and inconsistent to apply the statistical analysis in
these cases because the statistical analysis treats reported salaries as
"maximums." The League suggests that the rule be modified so that the
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computer model first be used for purposes of screening into compliance as many
jurisdictions as possible under this method. It then proposes that with
jurisdictions where there are only four to five male classes, the alternative
analysis should be used where there are no salary ranges for 20 percent or
more of the classes.
92. The Department declined to adopt this suggestion. The
Administrative Law Judge finds that the Department has explained a reasonable
rationale for its decisions regarding which analysis should apply to various
types and sizes of jurisdictions in the Department's SONAR at pages 28-34.
The Administrative Law Judge finds that the Department's decision to not adopt
the League of Minnesota Cities suggestion is reasonable.
Use of Balanced Classes in the Statistical Analysis Test.
93. The Metro Cities have recommended inclusion of balanced classes in
the s tat I st I ca I analys I s , spec I f I ca I 1y I n the ca Icu I at I on of the regre s s I on
lines. Metro Cities cite the law's reference to balanced classes in Minn.
Stat. 471 .992, subd. I , and the "reasonable relationship" language In Minn.
Stat. 471.993, subd. 2 as support for its proposal.
94. The Department responded in its comments that balanced classes are
excluded from the statutory definition of "equitable compensation
relationship" and excluded from the plans local governments were required to
develop. The Department further argues that an "all-jobs" regression line
other than a male jobs regression line would have a dramatic impact on
equitable compensation relationships. Instead of comparing female
compensation to male compensation, the Department would be comparing female
compensation to a standard which could already have incorporated sex-based
wage disparities.
95. The Administrative Law Judge finds that the Department's decision to
not use balanced classes in the calculation of regression lines is reasonable
and appropriate.
Expanding-the Window for Predicted Pay Determination.
96. In order to determine predicted pay for the female class being
analyzed, the Statistical Analysis Test requires that a window be drawn which
includes at least 1/5 of all the male classes of comparable job value in the
jurisdiction. Minn. Rule pt. 3920.0500, subpart 4, item A, subitem (4),
authorizes that the window drawn for comparison of male and female classes be
expanded to ensure that classes of dissimilar job value wi 1 1 be compared.
Dave Erickson, representing the Minneapolis Building and Construction Trades
Council, testified at the public hearing recommending deletion of the
requirement that windows include one-fifth of male classes in the
jurisdiction. He stated that this procedure would "ensure that classes of
dissimilar value will be compared" and that it would "skew the line upward."
97. The Department responded stating that its procedure was preferable
because it allows for averaging of pay for male classes with less emphasis on
the compensation for any one male class. The Department explained that this
is one of the provisions which reduces pressures on the collective bargaining
Minn. Rule part 3920.0700 subpart 4 Salary Range Test
103. Several commentators expressed concern regarding the proposed salary
range test. The salary range test is one of the "other" tests that all
jurisdictions must pass. This test measures the length of time required for
female-dominated classes to reach the maximum of the applicable salary range
as compared to male-dominated classes. The Department explains in its pay
equity SONAR that it is possible for a jurisdiction's compensation structure
to pass both the statistical analysis and alternative analysis tests yet still
assign consistently lower compensation to female classes by manipulating
movement through pay ranges. Neither of these tests measures or evaluates how
classes of employees move through salary ranges. Minn. Stat. 471.9981, subd.
5a(6) requires a jurisdiction to include in its implementation report the
.amount of time and employment required to qualify for the maximum" of a
salary range, In order to give this requirement effect, the Department argues
that it is necessary to utilize the salary range test.
104. The St. Paul Public Schools opposed the salary range test because
the test contained disqualifying criteria not previously considered by the
Department. In addition, St. Paul Public Schools argued that the salary range
test conflicts with the Pay Equity Act and the Minnesota Public Employment
Labor Relations Act (PELRA), Minn. Stat. 179A.01 - 179A.30. In support of
the conflicts argument, the St. Paul Public Schools explained that the speed
of movement toward a maximum salary range is a subject that is routinely
negotiated in labor contracts and is not a sex-based wage disparity. The St.
Paul Public Schools provided the following comments:
The Department of Employee Relations before the recent
rulemaking process did not suggest that years to range
maximums would be or could be considered in their
compliance determination.
Discussions surrounding pay equity have addressed pay
levels, levels of benefits and the corresponding work
values. It seems neither feasible nor reasonable to
require jurisdictions to alter salary structures to
comply with a test that was not proposed until this year
and will not be adopted until after the reporting
deadline.
In St. Paul Public Schools, there are approximately 30
bargaining units, and by law the School District must
bargain any changes to the structure of compensation.
The Minnesota Public Employment Labor Relations Act
(PELRA), Minn. Stat. 179A.01 - 179A.30 requires public
employers to meet and negotiate with the good faith
intent of entering into an agreement on the terms and
conditions of employment. The Pay Equity Act and Minn.
Stat. 471.992, Equitable Compensation Relationships,
states that the Pay Equity Act is subject to the
bargaining requirements of PELRA. Each employee
organization has its own individual philosophy and needs
regarding bargaining issues. Some organizations bargain
for greater distance between new hire and maximum salary,
and others bargain for less difference. The differences
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include not only pay levels, but the number of steps in a
range and the number of years to progress through that
range. Any difference in years to maximum salary between
male-dominated and female-dominated classes is related to
bargaining unit preference, and bears only a coincidental
relationship to the gender of the incumbents. In a
jurisdiction without the obligation to bargain these
changes, the circumstances may be different.
The St. Paul Schools went on to conclude that the salary range test should be
eliminated from the rules because the concept is newly introduced and cannot
pos s Ib 1y be comp 1 Ied with f or the January 1 992 compliance report. As an
alternative the St. Paul Public Schools recommend that the requirement be
phased in over a specified period of time such as three bargaining cycles.
This would allow jurisdicti on s to i ncorporate compens ation structure issues
into their bargaining positions in an attempt to effect the necessary
changes.
105. A substantially similar argument was made at the public hearing by
Dennis Bible, Director of Labor Relations for the City of Minneapolis. He
asserted that the salary range test is "new" to the pay equity compliance
scheme and represents a departure from the Department's past practice. He
said that originally salary ranges were not "significant" and now they are of
"substantial import." He argued that had the City of Minneapolis known this,
it could have tried to remedy the problem in the last contract negotiations,
but now its only option is to reopen negotiations. He recommended that the
Department postpone the implementation of the salary range test.
106. The League of Minnesota Cities also opposed the salary range test
asserting that it was inconsistent with the Pay Equity Act's requirement that
the Pay Equity Act be subject to good faith bargaining between employers and
employees under PELRA. The League of Minnesota Cities stated as follows:
Differences in salary range length are almost always a
result of collective bargaining. There is no support in
the law to indicate that the Legislature intended to undo
differences between employees due to good faith
collective bargaining. In fact, quite the opposite is
true and this is reflected in the law itself and in the
SONAR.
There is specific language in the Pay Equity Act stating
that it is "subject to sections 179A.01 to 179A.25"
(Minn. Stat. 471.992, subd. 1). If this were not true,
this would be a less persuasive argument. You will note
that in section VI, 3920.0100, subpart 5, 1 2 of the
SONAR, DOER agrees that there is an "intentional
interaction" between MPELRA and the Pay Equity Act due to
the direct reference of being "subject to the sections
179A.01 to 179A.25" and six other references to MPELRA
and the Pay Equity Act. That should indicate that
allowance must be given for variations in pay (and
benefit) practices due to collective bargaining.
107. In response to these objections to the salary range test, the
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Department argued that the salary range information is required to be
contained in the implementation reports of the jurisdiction as a result of a
change in the law made by the Legislature in 1990. The Department further
stated that:
Because this information must be reported, it must be
concluded that the Department must evaluate this
information when making determinations about whether
jurisdictions have established "equitable compensation
relationships
It is true that in its current form, the salary range
test was not included in any of the Department's
guidebooks on pay equity. However, jurisdictions have
known since the law was amended in 1990 that they would
be required to report the amount of time required to
reach the maximum. Therefore, they were on notice that
this information would be evaluated in some way.
108. In addition, the Department noted that information regarding the
salary range test was made available at training sessions in the Fall of 1990
and that earlier guidebooks noted that "pay structure" was an important aspect
of the achieving equitable compensation relationships.
109. The Administrative Law Judge finds that the proposed salary range
test is reasonable and consistent with the Pay Equity Act and that it is
necessary to apply the salary range test to compensation plans that have
passed the statistical and alternative analysis test.
110. The Administrative Law Judge finds that the salary range test
represents a departure from previous guidelines or directions from the
Department. From 1984 until 1991, the salary range test was not considered by
the Department. Application of the salary range test to a jurisdiction's
compensation plan may render the jurisdiction out of compliance, even in
circumstances where the jurisdiction complied according to criteria and tests
that the Department used before these proposed rules.
111. The salary range test was first presented formally by the Department
in the publication of the proposed rules in June 1991. Jurisdictions will
have had less than one-half year to bring their compensation structures into
compliance with the salary range test.
112. The salary range test represents the Department's policy judgment of
what constitutes the best rule. As such, it can be adopted so long as the
Department demonstrates its reasonableness, which has been done in this case.
113. Questions of the reasonableness of enforcing the test under the
timing circumstances of this rule must be deferred until a later case, after
the uncertainties of Departmental (and possibly legislative) choices have been
resolved. See Finding 39, above.
114. The Metro Cities also expressed reservations regarding the salary
range test. The Metro Cities proposed that the salary range test should not
apply to female or male-dominated classes across the jurisdiction but should
instead apply only to classes of employees in bargaining units or groups of
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classes among unrepresented employees. In response to this proposal the
Department explained that modifying the test in this manner would allow
employers to discriminate with respect to movement within salary ranges
between and among various unions or unrepresented groups. Depending upon the
gender dominance of the classes within the bargaining units or unrepresented
groups, gender discrimination could be present and perpetuated even if there
was no apparent discrimination in the frequency or amount of underpayment of
compensation based upon the evaluation of the salary range maximums done in
the alternative or statistical analysis test. Finally, the Department argued
that the proposal would also be inconsistent with the Pay Equity Act. The Pay
Equity Act does not provide for an evaluation of a jurisdiction's pay
practices within individual bargaining units or unrepresented groups only.
Instead, the Pay Equity Act contemplates that a jurisdiction must establish
equitable compensation relationships across the entire jurisdiction.
115. The Administrative Law Judge finds that the Department's explanation
of its basis for rejecting the Metro Cities salary range proposal is
reasonable.
Minn. Rules Parts 3920.08OO and 3920. 0900, Compliance NotifiCation -
Reconsideration,
116. The International Union of Operating Engineers Local No. 49 asserts
that the Pay Equity Act and in particular Minn. Stat. 471.992 specifically
refers to collective bargaining and market considerations in its establishment
of equitable compensation relationships. The International Union of Operating
Engineers Local No. 49 argues that this language requires the Department to
include strikes, lockouts and collective bargaining history as possible
factors before a decision of noncompliance is reached and that these factors
should also be considered "constraints" under Minn. Rule 3920.0900, subp. 9G.
That provision allows a jurisdiction to demonstrate "constraints" that have
impaired its ability to establish equitable compensation relationships.
117. The Department responded stating that Minn. Stat. 471.9981, subds.
5A, and 6, suggest that whether a jurisdiction is determined to be in
compliance is based upon implementation reports analyzed and evaluated by the
Commissioner of Employee Relations. The Department argued that no requirement
is made that the Commissioner evaluate the impact of collective bargaining
agreements or market considerations in the initial determination of
compliance. With respect to the constraints question, the Department stated
that on reconsideration, pursuant to proposed Minn. Rule pt. 3920.0900, subp.
9G, there is no limit or limitation on the "constraints" that a jurisdiction
may demonstrate. Therefore, if it desires a jurisdiction may demonstrate
various market considerations and collective bargaining history as constraints
it has faced.
118. All the commentators representing jurisdictions subject to these
rules and the Association of Minnesota Counties, the League of Minnesota
Cities, the Metro Cities, and Mr. Robert M. O'Connor, expressed concerns about
the compliance notification process and in particular about the timing of the
Department's compliance notification as provided by part 3920.0800. In
addition, several of these commentators also have requested that the
Department consider factors other than a jurisdiction's compensation
relationships before issuing a finding of noncompliance. At the hearing Mr.
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Bernard E. Steffen, representing the Association of Minnesota Counties and
Anoka County, proposed an amendment to the rule that would allow informal
pre-compliance conferences. The following language was proposed as an
amendment to Minn. Rule 3920.0800, subpart 3:
Subpart 3. Jurisdictions not in compliance. If a
jurisdiction is not in compliance, the department must
send an initial determination of noncompliance to the
jurisdiction along with a detailed description of the
basis for the finding and specifice recommended actions
to achieve compliance Following this initial
dReermination. the department And the jurisdiction may
meet in-aa effort-to, reAch an-agreement on plan to
achieye- compliAnce following
qerm n
in t-hevent thede-partment-and the juri5diction -ore able
to aaree that the jurisdictign is in compliance, the
department shall Issue a notice of Compliance, In thy
event that the jurisdictiQn is not in compliance and the
par t i 5 _,re abl e _ to_ ayree on_a p I an -by whc ON the
juri5diction would achieve compliance, the parties shall
detail the specific a@ticn-s to-he taken, An_litlm,ted
cost of compliance, a date by,which ;Qmpliance must be
achieved to ty id a pepar .y. and , date by which the
.jar subcec must submit A revaled report for- exartattion
by the department.
In the event that the.parties are unable to reach an
agreerment- on a plan mpliance, the department
-to onti eve
must provide a detailed description of the basis for the
finding, specific recommended actions to achieve
compliance, an estimated cost of compliance, a date by
which compliance must be achieved to avoid a penalty, and
a date by which the jurisdiction must submit a revised
report for reexamination by the department.
The revised report must consist of the same information
required in the original implementation report, except
the information must be revised to be current as of the
date by which compliance must be achieved to avoid a
penalty. A date by which the jurisdiction must submit a
revised report must be 30 days after the date by which
compliance must be achieved to avoid a penalty.
In setting the date by which compliance must be achieved
to avoid a penalty, the department must consider the
basis for the noncompliance finding and the actions
recommended to achieve compliance. A,IvrildACti,R Xtlth
reac he5- Ap -agreement with -!he , dep@rtm nt p - ant to hi5
-vi @ -t-
@ec t i QR w-tl I -De -dgt-ermi DeA-@be-i i @tK-e - u 1" @_the
jori5fjLtiQR fDel_pQt_Sattlfy-t4e_terMl Qf this
agreement.
The proposed precompliance conference would allow a jurisdiction to respond to
a proposed finding that it was not in compliance before the finding goes into
effect. The concern expressed by the commentators is that the publication of
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a finding of noncompliance would lead to adverse publicity and have negative
effect on employee relations. As Mr. Steffen stated in his written comments:
In local government, the initial determination sends the
strongest message to citizens. In the sphere of local
politics, an accusation by one public body against
another is tantamount to a determination of guilt. Such
an accusation is politically embarrassing and lowers the
morale of citizens and employees. The accusation also
encourages private discrimination lawsuits alleging that
the jurisdiction's salary practices have disparate impact
on women. See Minn. Stat. 471.997 (1990). The fact
that noncompliance with the mathematical test will result
in an accusation of noncompliance with the statute also
makes it more difficult to negotiate pay systems with the
employees represented by unions.
119. Several commentators argued that in order to avoid this, a
jurisdiction should have an opportunity to present defenses for not achieving
equitable compensation relationships such as market factors, recruitment and
retention difficulties before it is found out of compliance.
120. In response the Department concluded that these parties wece
requesting that the Department consider factors other than a jurisdiction's
actual compensation relationships as a part of its initial determination. The
Department declined to accept the proposal, on the basis that the proposal was
inconsistent with the framework established by the Pay Equity Act for making
compliance decisions. The Department argued that the Pay Equity Act
contemplates that the initial compliance decision will be based solely upon
the basic compensation information submitted in a jurisdiction's
implementation report. Minn. Stat. 471.9981, subd. 5A and subd. 6A. The
Department explained that the Pay Equity Act contemplates three separate steps
in the compliance determination and review process: (1) compliance
determination; (2) reconsideration; and (3) requests for suspension of
penalty. The Department further explained that the statute also specifies the
evidence the Department may consider at each step. For these reasons, the
Department concluded that it could not agree to consider evidence other than a
jurisdiction's actual compensation relationships in making its initial
compliance determination.
121. Although the Department declined to accept the pre-compliance
conference type proposals recommended by the jurisdictions, it did acknowledge
the concerns by jurisdictions that they could be determined not in compliance
based upon a "data entry error" by the Department. To alleviate this concern
the Department proposed to include a "data review" step in the initial
compliance process. The Department proposes to amend part 3920.0400 by
inserting a new subpart as follows:
Subpart 3. Data review Before completing the
compliance review the department must mail to each
jurisdiction a printout showing the data derived from
jurisdictions implementation report which will be used
-
in determining compliance for that jurisdiction the
department may- not make a compliance decision for a
period of 14 days after the date shown on the printout.
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mailed to the jurisdiciction If a jurisdiction submits
period that any of those_data_ are in error the
department must review the datat and correct any bona fide
data entry error(s) befor eeeemaking a compliance decision.
The Department explained that the proposed amendment allows jurisdictions
to point out data errors and if the jurisdiction's concerns are bona fide the
Department will correct the error.
122. The Administrative Law Judge finds that the Department's refusal to
adopt a precompliance conference proposal as recommended by commentators is
reasonable. The Administrative Law Judge has considered the arguments raised
in support of the precompliance conference proposal. After consideration, the
Administrative Law Judge is persuaded that the Pay Equity Act does not
contemplate conferences of this kind at the initial stage of the process.
Therefore, the Department's decision is reasonable and consistent with the Pay
Equity Act.
123. The Department's proposed amendment would allow "data review" prior
to a determination of compliance by the Department to ensure that no
jurisdiction will be found out of compliance simply because of a data entry
error on the part of the Department. The amendment is reasonable and
adequately addresses the "data entry error" concerns expressed by several of
the commentators. The amendment does not constitute a substantial change.
Based upon the foregoing Findings of Fact, the Administrative Law Judge
makes the following:
CONCLUSIONS
1. That the Department of Employee Relations gave proper notice of the
hearing in this matter.
2. That the Department has fulfilled the procedural requirements of
Minn. Stat. 14.14, subds. 1, la and 14.14, subd. 2, and all other
procedural requirements of law or rule, except as noted at Findings 21-23.
3. That the Department has demonstrated its statutory authority to adopt
the proposed rules and has fulfilled all other substantive requirements of law
or rule within the meaning of Minn. Stat. 14.05, subd. 1, 14.15, subd. 3
and 14.50 (i)(ii).
4. That the Department has documented the need for and reasonableness of
its proposed rules with an affirmative presentation of facts in the record
within the meaning of Minn. Stat. 14.14, subd. 2 and 14.50 (iii).
5. That the amendments and additions to the proposed rules which were
suggested by the Department after publication of the proposed rules in the
State Register do not result in rules which are substantially different from
the proposed rules as published in the State Register within the meaning of
Minn. Stat. 14.15, subd. 3, and Minn. Rule 1400.1000, Subp. 1 and 1400.1100.
6. That the Administrative Law Judge has suggested action to correct the
defects cited in Conclusion, 2 as noted at Findings 21-23.
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7. That due to Conclusion 2, this Report has been submitted to the Chief
Administrative Law Judge for his approval pursuant to Minn. Stat. 14.15,
subd. 3.
8. That any Findings which might properly be termed Conclusions and any
Conclusions which might properly be termed Findings are hereby adopted as
su ch .
9. That a finding or conclusion of need and reasonableness in regard to
any particular rule subsection does not preclude and should not discourage the
Department from further modification of the proposed rules based upon an
examination of the public comments, provided that no substantial change is
made from the proposed rules as originally published, and provided that the
rule finally adopted is based upon facts appearing in this rule hearing
record.
Based upon the foregoing Conclusions, the Administrative Law Judge makes
the following:
RECQMMENDATIQN
It is hereby recommended that the proposed rules be adopted except where
specifically otherwise noted above.
Dated this day of December, 1991.
ALLEN E. GI ES
Administrative Law Judge
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