2023 Minnesota Legislature Updates for Employers

June 16, 2023

In the session just ended, the Minnesota legislature made significant changes to employment laws. This email briefly summarizes important changes. Arthur Chapman invites you to attend a webinar on June 29, 2023 at 1:30 p.m. We will discuss some of these changes in more detail. Register for the webinar here.  

Effective May 25, 2023: 

Sexual Harassment and Sexual Abuse Settlements 
Financial settlement of a sexual harassment or sexual abuse claim cannot be provided as wages or severance pay. This means no withholding will be taken, and the payment must be recorded on IRS Form 1099.

Minnesota Nursing Home Workforce Standards Board
A new board has been created to set minimum employment standards (including wages) for nursing homes.

Effective July 1, 2023: 

Non-compete agreements with employees banned
Non-compete agreements entered on or after July 1, 2023 that prevent employees from working for a competing employer will be void and unenforceable, and employees may have their attorney fees paid by employers who violate the law. Non-compete agreements that were entered before July 1, 2023 may still be enforced but probably only with damages that can be proved, not with court orders to stop the employee from violating the agreement. Non-disclosure / confidentiality agreements and agreements that prevent employees from soliciting customers or employees are still enforceable, and employers can continue to have employees sign these agreements for now. Federal agencies, including the Federal Trade Commission and National Labor Relations Board (“NLRB”), are taking actions that may impact the legality of non-solicitation and confidentiality agreements, and the NLRB has placed significant restrictions on employers’ ability to require confidentiality of the terms of severance and settlement agreements. Non-compete agreements entered by a business owner selling a business or related to the dissolution of business are still enforceable.

Practical takeaways for employers:
•    Going forward, do not have employees sign agreements that prevent them from working for another employer.
•    If you have employees sign agreements that re-affirm previous non-compete agreements, we recommend that you modify the agreements to fit within the new law.
•    If you need agreements to protect customer and employee relationships and confidential information, use non-solicitation agreements instead of non-compete agreement.
•    If you believe that you need the terms of a separation or severance agreement to be confidential, discuss the needs and NLRB restrictions with legal counsel.

Practical takeaways for employees: 
•    If you have a non-compete agreement and are moving to new employment, have the agreement reviewed by a lawyer.

Expanded protections for pregnant and lactating employees
•    Minnesota employers must give reasonable paid break time to employees who need to express milk. The breaks may be breaks already provided to the employee and employers must make reasonable efforts to provide a clean, secure, private, non-bathroom space with outlet for expression of milk.  
•    Minnesota employers with fifteen or more employees were already required to provide “automatic” accommodations to pregnant employees that include seating, more frequent breaks, and limits on lifting over 20 pounds. These accommodations must be granted without health care provider advice, and an employer cannot claim that these accommodations cause undue hardship.  Effective July 1, 2023, the legislature expanded the “automatic” accommodations to include longer breaks, and all employers with one employee or more must make these accommodations. 
•    Upon the advice of a health care provider, an employee may already request of an employer with fifteen or more employees reasonable accommodations for conditions related to pregnancy that go beyond the “automatic” accommodations, and employers must grant reasonable accommodations that do not cause the employer undue hardship. Previously, the Legislature has provided examples of reasonable accommodations that included temporary transfers to a less dangerous position. Effective July 1, 2023, additional examples of reasonable accommodations include a temporary leave and change of work schedule or assignments. Requests for other reasonable accommodations must also be considered in an interactive process between employers and employees. The requirement to provide accommodations now applies to all employers with one or more employees.  
•    By July 1, 2023, employers must inform employees of their rights to accommodations related to pregnancy and expression of milk in English and the employee’s primary language:
         o At the time of hire;
         o When an employee asks; and
         o In an employee handbook if the employer has one. 

The language for the notice (in English and the five most common languages spoken in Minnesota) will be provided by the commissioner of the Minnesota Department of Labor and Industry.  

Expanded parenting leave requirement
Minnesota employers with 21 or more employees have been required to give new parents up to 12 weeks of unpaid leave for prenatal care, pregnancy related health conditions, birth or adoption, and bonding after birth or adoption. To be eligible, employees had to have worked half time for 12 months before the leave.  

Effective July 1, 2023, this requirement applies to all employers and all employees, including new employees and employees who work less than half time.

Expanded definition of retaliation
Many Minnesota statutes prohibit employers from retaliating against an employee for exercising their rights under employment laws.  Effective July 1, 2023, the Legislature has expanded the retaliation sections of many of these statutes to emphasize that employers must not interfere with employees’ abilities to exercise their rights and must not threaten, discriminate against, discipline, or terminate employees for exercising their rights.
Effective August 1, 2023:

Employers cannot require employees to listen to employer positions on religion and politics
Employers cannot require employees to attend meetings or listen to communications regarding the employer’s opinions about political and religious matters, including about joining or supporting a labor organization. This provision is headed for a legal challenge on preemption and First Amendment grounds.

Impacts on employment of adult use recreational cannabis legalization
Minnesota recently legalized recreational cannabis for adults (cannabis generally remains a Schedule I controlled substance under federal law). It also made some significant changes to the Drug and Alcohol Testing in the Workplace Act (“DATWA”) related to cannabis testing.

Two Practical Take-Aways:
1.    Focus On What Happens At Work: You may discipline or terminate an employee for impairment, use, or possession at work.
2.    Limited Right to Discipline: You may almost never decline to hire a job applicant, or discipline, terminate, or discriminate against an employee, for testing positive for cannabis.

Drug Testing: 
•    Employers who want to test any employee or job applicant for cannabis must have a written policy that meets previously existing statutory requirements and specifically addresses cannabis testing.
•    An employer must not request or require a cannabis test on an “arbitrary or capricious basis.”
•    The new law places limits on the circumstances under which certain employees and applicants may be tested.   Job applicants generally should not be tested for cannabis, unless the job is a safety sensitive position and in certain other limited circumstances.
Contractor liability for subcontractor compensation obligations
In all contracts or agreements entered into, renewed, modified or amended after the effective date, general contractors will be liable for unpaid wages to employees or independent contractors of subcontractors at any tier. 

The definition for what constitutes a “construction contract” subject to this new provision is broad, and includes construction, reconstruction, erection, alteration, remodeling, repairing, maintenance, moving, or demolition of any building, structure, or improvement, or relating to the excavation of or development or improvement to land. 

•    Home improvement contracts between a contractor and owner of an owner-occupied dwelling are exempt, as are home construction contracts for one- or two- family dwelling units.
•    Large-scale project sites that result in the construction of more than 10 one- or two-family dwellings are still subject to the provision.
•    Unionized contractors subject to collective bargaining agreements that contain grievance procedures are also exempt.

In order to meet these obligations, general contractors have the right to request payroll information from subcontractors to ensure they are paying their workers (this includes both employees and independent contractors).
•    Subcontractors are directed to provide a response within 15 days that contains “sufficient information to apprise the contractor or subcontractor of such subcontractor's payment of wages and fringe benefit contributions to a third party on the workers' behalf.” 
•    However, there is no enforcement or penalty for failure to provide a response specified in this section.

General contractors are not allowed to transfer or limit their liability under this section. The sole remedy for contractors who pay out on wage claims to workers of subcontractors is to pursue legal action. 

Effective January 1, 2024: 

Paid sick and safe leave
Employees who work at least 80 hours a year in Minnesota will be entitled to earn and use paid time off at the employee’s regular rate of pay for the employee’s own illness or injury, to care for an ill or injured family member or other close person, to address domestic abuse, sexual assault, or stalking experienced by the employee or a family member or close person, due to certain public emergencies, and for business closures or school or day care closures due to weather.  

Employees will earn paid sick and safe time at the rate of one hour for every thirty hours worked up to 48 hours per year. Employees may carry over earned and used time up to a total of 80 hours per year.  Employers may front load hours under certain circumstances rather than tracking carryovers.

Employers may not require employees to find a replacement to use earned sick and safe time, and the law places limitations on when and what documentation employers may request to verify the need for leave. Employers may request reasonable notice, but there are limits on the amount of notice that may be required. 

Employers will be required to provide notice to employees (in English and the employee’s primary language) of their rights to earned sick and safe time by providing notice in a handbook, if the employer has a handbook, and through other means (e.g., providing a written or electronic copy of a notice to employees, posting a poster, etc.) and by stating the amount of sick and safe time that has been earned and used on each pay stub. 

Employers may meet the requirements of the law if they have a paid time off policy that is at least as generous and meets the requirements of the earned sick and safe time law.

Prohibition on inquiries into pay history
Employers will be prohibited from asking about or encouraging an applicant to share the applicant’s compensation history for the purpose of setting or negotiating compensation. Applicants may freely share their compensation information and, if they do, the employer may consider it. Employers may still ask applicants about the applicants’ compensation expectations.

Certain Employers Must Create and Implement an Ergonomics Plan
Licensed health care facilities, meatpacking plants, and warehouse distribution centers must create and implement an ergonomics program to minimize the risks of musculoskeletal disorders in employees. 

Veterans’ Poster
Employers with 50 or more employees will be required to post a poster created by the state regarding veterans’ benefits and services.

Effective January 1, 2026: 

Paid family and medical leave benefits begin for Minnesotans on January 1, 2026.  A new Family and Medical Benefit Insurance Division of the Department of Employment and Economic Development will administer the program, which will be funded by Minnesota employers and employees.

How much leave is provided?
Eligible employees may receive up to 12 weeks of serious health condition leave per year, and up to 12 weeks of other leave per year.  However, employees may not take more than 20 weeks of leave per year.

What is serious health condition leave?
Serious health condition leave is leave for an employee to address their own serious health condition, including pregnancy and mental health conditions.  

What other types of leave are provided?
Bonding Leave – time for a biological, adoptive, or foster parent to bond with a newly born, adopted, or placed child. This leave must be taken within 12 months of the birth, adoption, or placement.

Family Care Leave – time to care for a covered family member who has a serious health condition. “Family member” includes, among others, a child, parent, spouse, domestic partner, sibling, grandchild, grandparent, daughter or son in law, and individuals with a relationship with the employee such that the relationship creates an expectation in reliance that the employee would care for the individual whether or not the employee and the individuals live together.

Safety Leave – time to address certain needs relating to the sexual assault, domestic abuse, or stalking of the employee or the employee’s family member.

Qualifying Exigency Leave – time to address certain needs relating to the military deployment of an employee’s family member.

Which employers are covered?
All private businesses, including small businesses, and state and local government employers are covered by the statute. Self-employed individuals and independent contractors may decide on their own to purchase coverage. 

Which employees are eligible?
To be eligible to receive benefits, an employee must earn at least 5.3% of the state average annual wage over the course of their “base period.” The “base period” is the most recently completed four calendar quarters prior to the employee’s benefits application. That amount comes to approximately $3,500. The employee does not need to work for the same employer during the base period to qualify for benefits. 

Employees must apply to the Family and Medical Benefits Insurance Division for benefits.

What benefits and protections does an employee on leave receive?
Employees will not be paid their full wages but instead will be paid according to a formula that is based on the employee’s weekly wage during their highest-paid base period quarter. 

Employees who are on leave are entitled to continued employer-provided health benefits during their leave. When an employee returns from leave, they are entitled to reinstatement to an equivalent position unless the employer is able to demonstrate that the employee would not otherwise have been employed when the employee requests to be reinstated.

Employers may not retaliate against an employee for requesting or taking leave or otherwise interfere with an employee’s leave request.  If an employee believes their rights under the statute have been violated, the employee may sue in state or federal court.

How is the leave funded?
Paid family and medical leave is funded by employers, which will pay quarterly premiums to the state family and medical benefit insurance account on taxable wages paid to all employees. Premiums will be .7% of an employee’s taxable wages. Employers may charge up to half of this premium (.35%) to employees through wage deduction. This information must appear on employee earnings statements.  Employers must begin paying premiums on January 1, 2026.  

Employers may offer private plans provided that those plans provide at least the same benefits provided under the State plan.

Notice Requirements
Employers will be required to post a notice prepared by the State regarding paid FMLA benefits. Individual employees must also be issued written notices that contain certain information designated in the statute. These notices must issue at least 30 days from the beginning of the employee’s employment, or 30 days before premium collection begins, whichever is later.
If you have other questions or need assistance updating your policies and practices to comply with these changes, please reach out to Arthur Chapman’s Employment Law team.