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Navigating the Minnesota Legislation Landscape: What Employers Need to Know
Navigating the Minnesota Legislation Landscape: What Employers Need to Know
During Minnesota’s most recent legislative session, the state passed several new and amended laws that will impact Minnesota employers.
OneDigital’s Compliance team has provided summarization of key aspects of the new legislation to help employers navigate the latest changes to employer legislation.
New Pay Transparency Requirements
Effective January 1, 2025, employers with 30 or more total employees in Minnesota will be subject to the state’s new pay transparency requirements. Covered employers will be required to include in all job postings a starting salary range, or if no range, a fixed pay rate. The range must include a minimum and a maximum amount based on the employer’s good-faith estimate of the opportunity for each position, and cannot be open-ended. Additionally, any posting must include a “description of all the benefits and other compensation, including but not limited to any health or retirement benefits” associated with the position.
The term “job posting” is defined broadly in the new law to include “any solicitation intended to recruit job applicants for a specific available position, including recruitment done directly by an employer or indirectly through a third party, and includes any postings made electronically or via printed hard copy, that includes qualifications for desired applicants.”
New Requirements for Independent Contractors
Effective July 1, 2024, significant changes go into effect to Minnesota’s independent contractor laws. All employers, as well as owners, will be subject to increased monetary penalties for the misclassification of employees as independent contractors. Specifically, employers may face up to $10,000 per individual violation for the improper classification of employees. Additional penalties may be imposed if employers fail to report workers as employees to a state agency. Under the new law, individual owners and officers may be held personally responsible for intentional or continued violations.
In addition, and effective March 1, 2025, the Minnesota legislature has updated the factor test for determining employee or independent contractor status for the construction industry. While all industries except construction will continue to use the five-factor test to determine classification, a new 14-factor test has replaced the preexisting 9-factor test in the construction industry. The new test focuses on the time at which the services were provided for purposes of determining appropriate classification. All of the factors must be met in order to confirm independent contractor classification.
Under the new test an individual is an independent contractor only if they:
- Were established and maintained separately from the person to whom they are providing services;
- Own, rent, or lease equipment, tools, vehicles, materials, supplies, etc. that are used in performing their service;
- Provides or performs services to multiple persons or to the general public;
- Is in compliance with specific business registration requirements;
- Is in good standing;
- Has a state unemployment insurance account;
- Has workers’ compensation insurance;
- Holds a current business license;
- Is operating under a contract, subject to specific compliance requirements;
- Submits invoices and receives payments;
- Maintains control over the means of providing or performing the specific services;
- Incurs and maintains expenses and costs;
- Is responsible for the completion of specific services as stated in the applicable contract; and
- May realize additional profit or suffer loss.
Pregnancy and Parental Leave Enhancements
Effective August 1, 2024, the Minnesota legislature has revised the Pregnancy and Parental Leave law to require the 12 weeks of parental leave guaranteed by state law “not be reduced by any period of paid or unpaid leave taken for prenatal care medical appointments.” This means an individual may use more than 12 weeks of protected leave in connection with pregnancy-related medical appointments prior to birth and for care of a child following birth.
Additionally, Minnesota will now require employers to continue providing insurance benefits for employees on leave, and their dependents, as if the employees were not on leave.
New Non-compete Restrictions
Effective July 1, 2024, a new law prohibits service providers from entering into a contract prohibiting their customers from soliciting or hiring the service provider’s employees, independent contractors, or any other person who performs work for the service provider. Subject to very limited exceptions, “service providers” is defined broadly to include any businesses or groups of persons that are contracted to provide services to a customer. The new law applies to any contractual provision that restricts, restrains, or in any way prohibits the customers from directly or indirectly soliciting or hiring those individuals. Such provisions are deemed void and unenforceable and service providers are required to notify employees of any provision that violates this ban.
Elimination of Alternative Minimum Wage
Effective January 1, 2025, a lower minimum wage may be paid only to those under 20, and only for the first 90 days of their employment.
Payment of Electronic Tips
Effective August 1, 2024, the full amount of all tips received through an electronic payment, such as the use of a credit card or app, must be credited to the employee in the pay period in which it was received and paid to the employee no later than the next scheduled pay period.
Amendments to Minnesota Human Rights Act
Several amendments to the Minnesota Human Rights Act (MHRA) were passed that impact employee rights and potential damages.
- Expanded Definitions. Similar to the ADA, the definition of “disability” in the MHRA is expanded to include any person who has an impairment that is episodic or in remission and would materially limit a major life activity when active. The definition of “familial status” is also broadened to include caretakers. Under this new definition, it is unlawful to discriminate against persons “residing with and caring for one or more individuals who lack the ability to meet essential requirements for physical health, safety, or self-care because the individual or individuals are unable to receive and evaluate information or make or communicate decisions.”
- Increased Potential Damages. A new section has been added to the MHRA concerning civil penalties and amending the damages available for successful claims. Compensatory damages now explicitly include mental anguish and suffering, and (along with back pay and front pay) are subject to a multiplier up to three times “the actual damages sustained.” The amendments also remove the cap on punitive damages and require that in cases decided by a jury, the jury will determine the amount of all damages to be awarded, including compensatory, treble, and punitive damages.
- Extended Time to File Claims. Previously, individuals alleging a claim under the MHRA had 45 days to commence litigation following receipt of notice of dismissal from the Minnesota Department of Human Rights (MDHR). Under the amended law, individuals will now have 90 days.
- MDHR Determination Timeline. Under the amended law, the MDHR must make a determination on a charge of discrimination within one year of filing.
Amendments to Drug and Alcohol Testing in the Workplace Act
Minnesota will now allow the use of “oral fluid testing” for drug, alcohol and cannabis testing. This change does not expand the list of substances that an employer is permitted to test for, instead, it expands an employer’s options for how to test. Anyone who receives a positive, inconclusive, or invalid result from an oral fluid test must be provided a laboratory test at the employer’s expense, if requested by the applicant or employee within 48 hours. If the applicant or employee fails the laboratory test, they are entitled to request a second retest at their own expense.
Paid Sick Leave
Paid Sick Leave went into effect January 1, 2024. The following recent amendments are effective as of May 25, 2024 unless otherwise stated.
Penalties. If an employer does not provide or allow employees to use their paid sick leave, the employer will be liable for that amount of time plus liquidated damages. Additionally, if the employer does not maintain records to identify the amount of paid sick leave an employee should have been provided, the employer is liable for 48 hours of paid sick leave for each year it was not provided, plus liquidated damages.
Payment of Sick Leave. Employees must be paid for sick leave at their “base” rate of pay, rather than their “hourly” rate of pay.
Employee Definition. "Employee" means any person who is employed by an employer, including temporary and part-time employees, who is anticipated by the employer to perform work for at least 80 hours in a year for that employer in Minnesota.
Reasons for Leave. Paid sick leave can also be used to make arrangements for or attend funeral services or a memorial, or address financial or legal matters that arise after the death of a family member.
Documentation. Employers may require documentation to show that the paid sick leave is being used for a covered reason if the person is absent for more than three consecutive scheduled workdays. However, if documentation cannot be obtained in a reasonable time or without added expense, then reasonable documentation may include a written statement from the employee indicating that the paid sick leave is being used for a qualifying purpose.
Usage. Paid sick leave may be used in the same increment of time for which employees are paid, at a minimum of 15-minute increments, but no more than four-hour increments.
Notice. At the end of each pay period, employers must provide employees with written or electronic notice of the number of paid sick leave hours used in the pay period and the number of paid sick leave hours available.
Records. As of July 1, 2024, employers must keep paid sick leave records for three years.
Extended Benefits. As of January 1, 2025, all paid time off provided in excess of the minimum requirement for personal illness or injury must meet or exceed the minimum statutory requirements for paid sick leave. It is unclear if this means that the full protections of paid sick leave will apply to other paid time off benefits.
Paid Family Leave
Paid Family Leave goes into effect January 1, 2026. The following recent amendments are effective as of May 25, 2024 unless otherwise stated.
Definitions. A number of key terms were clarified, such as “benefit year,” “covered employment,” “covered individual,” and “effective date of leave.” Notably, “family member” now includes the child of a domestic partner and a de facto custodian.
Initial Paid Week. Many state programs have an unpaid first week before benefits are paid. Minnesota has a retroactively paid first week of benefits. Specifically, the seven days of benefits is paid after those first seven days have occurred and payment is included in the first benefit payment.
Usage. Leave must be taken in a minimum increment no greater than one calendar day. Intermittent leave may be taken any time after the first 30 days of leave, or sooner if at least 8 hours of leave have accrued.
Eligibility. As of November 1, 2025, employees are not eligible for leave benefits while they are incarcerated or receiving unemployment benefits.
Wage Replacement. As of November 1, 2025, employers may supplement paid family leave benefits up to 100% of the employee’s usual salary.
Disability Insurance. As of November 1, 2025, an employee may receive disability insurance payments in addition to family and medical leave benefits provided the employee is concurrently eligible for both benefits. Disability insurance benefits may be offset by family and medical leave benefits paid to the employee pursuant to the terms of a disability insurance policy.
Appeals. As of November 1, 2025, a detailed appeals process will be in effect.
Private Plans. As of July 1, 2025, benefits coverage of former employees applies until the individual is hired by a new employer or 26 weeks pass, whichever occurs first; and if an application for leave is filed by a former employee to a private plan, the plan pays benefits for the totality of the leave. Private plans may not cut off eligibility for a former employee during the course of an approved leave.
Small Employer Premium Rate. As of July 1, 2024, small employers are eligible for premium rates if the employer: (1) has 30 or fewer employees; and (2) the average wage for that employer is less than or equal to 150% of the state's average wage in covered employment for the basis period. The premium rate for eligible small employers is 75% of the annual premium rate. Employers must pay a minimum of 25% of the rate and cannot deduct from any employees' pay to fund the employer portion of the premium. Employees must pay the remaining portion due through wage deductions if it is not paid by the employer.
The Paid Family Leave FAQ was also recently updated with information about wage detail reports. Notably, the first wage detail reports will be due on October 31, 2024, and will be based on wages paid between July 1, 2024, and September 30, 2024. Every quarter, employers are required to submit a report to the state that details wages paid to their employees. Paid Leave needs this information to support administration of the program.
Stay informed about the latest compliance regulations and legislative changes impacting Minnesota employers. Watch the latest Minnesota Coffee Chat hosted by OneDigital's compliance experts. Not sure where to start? Contact your local Minnesota office.