Minnesota 2024 Legislative Session Update: Significant Changes to Earned Sick and Safe Time, Paid Family and Medical Leave, Worker Misclassification, and More

By Ken M.T. McGurran and David E. Goldman - Peters & Kappenman, P.A.

May 28, 2024

On May 19, the Minnesota Legislature ended its work for the 2024 session, which featured one of the most chaotic conclusions in recent memory. On May 24, Governor Walz signed H.F. No. 5247 into law, and while denominated a tax omnibus bill, H.F. No. 5247 also contains numerous statutory revisions and additions that all employers should be aware of. Below is a brief overview of some of the most relevant new employment-related laws included in H.F. No 5247 or passed previously during the 2024 legislative session.
 
Earned Sick and Safe Time Modifications

The Legislature modified its recently passed Earned Sick and Safe Time (“ESST”) law in numerous significant respects:

•    Base Rate: The Legislature clarified the ESST law by providing that an employee earns ESST at the same “base rate” as they earn in their employment. This “base rate” is still simply the hourly rate for hourly employees, but for employees with multiple hourly rates, it is defined as “the rate the employee would have been paid for the period of time in which the leave was taken.” Further, for salaried employees, the base rate is “the same rate guaranteed to the employee as if they had not taken the leave,” and for employees paid solely on commissions or other bases, “a rate no less than the applicable local, state, or federal minimum wage, whichever is greater.”

•    New Standard for Increments: Previously, employees could use ESST in the “smallest increment of time tracked by the employer’s payroll system,” which presented complications for employers using particularly small timekeeping increments. Now, employees can use ESST in the “same increment of time for which employees are paid”, and employers are “not required to provide leave in less than 15-minute increments.” However, employers cannot “require use of earned sick and safe time in more than four-hour increments.”

•    Providing Records to Employees: At the end of each pay period, employers are required to provide employees information stating each employee’s total available ESST hours and the total number of such hours used during that pay period. However, employers are not required to provide this information in pay stubs and can elect to use a “reasonable system for providing this information,” which includes providing access to “an electronic system where employees can access this information.” Further, such records must kept by employers for three years, and must be readily available for inspection by the commissioner on demand (requiring compliance within 72 hours).

•    Remedies for Noncompliance: Employers who do not provide ESST as required, or who do not allow the use of such ESST, can be held liable to employees denied those hours or their use for an amount equal to all ESST “that should have been provided or could have been used, plus an additional equal amount as liquidated damages.” An employer’s failure to maintain adequate ESST records will not help limit liability; the statute now provides that if the employer lacks records sufficient to determine the ESST an employee should have been provided, the employer can be held liable to that employee for an amount equal to 48 hours of ESST for each year it was not provided, “plus an additional equal amount as liquidated damages.”

Paid Leave Law Modifications

As with its ESST law, Minnesota materially amended and changed its Paid Leave Law (also sometimes referred to as the Paid Family and Medical Leave Law), which becomes effective on January 1, 2026:

•    First Week of Leave Paid: In contrast with typical disability benefits programs, the amended Paid Leave Law provides an “initial paid week”, defined as “the first seven days of a leave, which must be paid and is a payable period for leave types including family care, medical care related to pregnancy, serious health condition, qualifying exigency, or safety leave.” This initial week must be paid retroactively after applicants meet the required seven-day qualifying event period, and must be included in the first benefit payment to the applicant.

•    New Definition of Typical Workweek: A “typical workweek” under the amended Paid Leave Law is no longer different for hourly and salaried employees. Instead, it is now simply defined as “the average number of hours worked per week by an employee within the last two quarters prior to the effective of application.”

•    Expanded Definition of Family Members: With respect to children as family members, the amended Paid Leave Law now includes the children of domestic partners, as well as children to whom the applicants is a “de facto custodian” instead of “de facto parent.”

•    Guidance on Use of Intermittent Leave: Intermittent leave must be taken in increments consistent with employers’ policies accounting for other forms of leave, “so long as such employer’s policy permits a minimum increment of at most one calendar day of intermittent leave.” Further, applicants are not permitted to apply for benefits associated with intermittent leave until accumulating eight hours of leave time, “unless more than 30 calendar days have lapsed since the initial taking of the leave.”

Expanded Definitions under the Minnesota Human Rights Act

The Minnesota Human Rights Act (“MHRA”), which generally prohibits discrimination in employment, was recently amended to expand its coverage. A disabled person under the MHRA now expressly includes individuals with “an impairment that is episodic or in remission and would materially limit a major life activity when active.” Additionally, the MHRA’s definition of “familial status” now “also means 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.” The MHRA was also amended to clarify that the “ministerial exception”, which allows religious organizations to exhibit preference for members of the same religion or denomination, does not apply to “secular business activities engaged in by the religious association” which is “unrelated to the religious and educational purposes for which it is organized.”

Requirement to Provide “Good Faith” Salary Ranges in Job Postings

Effective January 1, 2025, Minnesota employers that employee 30 or more employees at one or more sites in Minnesota will be required to “disclose in each posting for each job opening with the employer the starting salary range” along with “a general description of all of the benefits and other compensation, including but not limited to any health or retirement benefits, to be offered to a hired job applicant.” Employers who elect not to offer a salary range must instead “list a fixed pay rate.” A salary range, which cannot be open-ended, is defined as “the minimum and maximum annual salary or hourly range of compensation, based on the employer’s good faith estimate, for a job opportunity of the employer at the time of the posting of an advertisement for such opportunity.” Job postings are defined to include recruitment solicitations done “indirectly through a third party,” and include any electronic or hard copy documents that include qualifications for desired applicants.

Prohibiting and Penalizing Worker Misclassification

Effective July 1, 2024, in what is being touted as an effort to combat misclassification of employees as independent contractors, Minnesota law will expressly prohibit and penalize such misclassification. Specifically, employers will be prohibited from (1) failing to correctly classify employees, (2) failing to report or disclose to any person or government agency who is an employee when required to do so, and (3) requiring or requesting employees to enter into agreements or complete any documents that misrepresents the employee’s status as an independent contractor. While employers can be held liable for this misclassification, the new statute also provides for individual and successor liability, along with penalties including compensatory damages (the value of supplemental pay the misclassified employee should have received) and a penalty of up to $10,000 for each misclassification. At present, the general employee/independent contractor tests remain unchanged (although the Attorney General’s Task Force on Worker Misclassification will be reviewing those tests before the next session). However, there is now a new multi-part employee/independent contractor test for building construction and improvement services with which construction employers will need to become familiar.

Non-Solicitation Clauses Now Void in Service Contracts

Service providers, defined as an entity or group acting as an employer or manager for work contracted or requested by a customer, may not “restrict, restrain, or prohibit in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider.” This means that any provision of an existing service contract that purports to restrict this kind of solicitation is void and unenforceable. Notably, this statute defines employees as including independent contractors who perform services for service contractors. Employers should review their service contracts and amend them as necessary, and if an employer finds a restrictive covenant/non-solicitation clause in a service contract that may be void, they should bear in mind that the statute requires them to provide notice of that void provision to their employees.

Contractor Wage Theft Can Disqualify Developers from Receiving Financial Assistance

A new statute titled “Wage Theft Prevention and Use of Responsible Contractors” conditions a developer’s receipt of financial assistance (from either the Minnesota Housing Finance Agency or with respect to federal low-income housing credits) to develop multiunit residential housing on the developer’s verification that every contractor or subcontractor performing work on the project qualifies as a “responsible contractor.” Qualifying as a responsible contractor requires maintaining certain insurance and registration requirements as well as compliance with statutory wage requirements. Pursuant to the new statute, if any contractor or subcontractor working on a covered project receiving financial assistance is found to have failed to pay the statutorily required wages, the recipient of that financial assistance (i.e., the developer) will be responsible for correcting the violation. Further, in such a case, the developer will need to create a “wage theft prevention plan to be eligible for further financial assistance[,]” which will be reviewed for approval by the Department of Labor and Industry. If such a plan is entered into and a developer’s contractors or subcontractors are again found to have failed to pay the statutorily required wages (with a minimum underpayment of $25,000), the developer will be disqualified from receiving financial assistance from the Minnesota Housing Finance Agency for three years.
 
Given its sheer volume, this blog post cannot cover all the new employment-related law in H.F. No. 5247, but our office will continue to provide updates on the many important changes coming from this bill.
 
If you have questions regarding the above or any other employment-related concerns, please contact Ken McGurran at 952.921.4624 or kmcgurran@pklaborlaw.com, David Goldman at 952.921.4606 or dgoldman@pklaborlaw.com, or any other attorney at Peters & Kappenman, P.A.

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