Minnesota: Legislative Updates Changing the Landscape for Employers

By Peters, Revnew, Kappenman & Anderson, P.A.

May 24, 2023

As the 2023 legislative session came to a close on May 22, 2023, Minnesota Democrats, who control both the Minnesota House and Minnesota Senate, were busy sending numerous bills to the desk of Democratic Governor Tim Waltz that will change the landscape for employers. This article addresses the following legislation: Earned Sick and Safe Time (going into effect January 1, 2024), Paid Family Medical Leave (going into effect January 1, 2026), the total ban on non-compete clauses (going into effect July 1, 2023), and legalized recreational marijuana (going into effect August 1, 2023). Those bills will be signed into law and are discussed below.

Earned Sick and Safe Time Legislation

Effective January 1, 2024, all employers with one or more employees in the State of Minnesota are subject to the state-wide earned sick and safe time legislation. The new legislation requires employers to provide up to 48 hours per year of paid sick and safe time to employees in Minnesota.
 
Reasons for Paid Leave
Earned sick and safe time means leave, including paid time off and other paid leave systems, that is accrued as noted below and paid at the same hourly rate as an employee earns from employment. This paid leave may be used for:

1.    An employee’s own:
   i.    mental or physical illness, injury, or other health condition;
   ii.    need for medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition; or
   iii.    need for preventive medical or health care;

2.    Care of a “family member” (defined below):
   i.    with a mental or physical illness, injury, or other health condition;
   ii.    who needs medical diagnosis, care, or treatment of a mental or physical illness, injury, or other health condition; or
   iii.    who needs preventive medical or health care;

3.    Absence due to domestic abuse, sexual assault, or stalking of the employee or employee's family member, provided the absence is to:
   i.    seek medical attention related to physical or psychological injury or disability caused by domestic abuse, sexual assault, or stalking;
   ii.    obtain services from a victim services organization;
   iii.    obtain psychological or other counseling;
   iv.    seek relocation or take steps to secure an existing home due to domestic abuse, sexual assault, or stalking; or
   v.    seek legal advice or take legal action, including preparing for or participating in any civil or criminal legal proceeding related to or resulting from domestic abuse, sexual assault, or stalking;

4.    Closure of the employee's place of business due to weather or other public emergency or an employee's need to care for a family member whose school or place of care has been closed due to weather or other public emergency;

5.    The employee's inability to work or telework because the employee is:
   i.    prohibited from working by the employer due to health concerns related to the potential transmission of a communicable illness related to a public emergency; or
   ii.    seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, a communicable disease related to a public emergency and such employee has been exposed to a communicable disease or the employee's employer has requested a test or diagnosis; and

6.    When it has been determined by the health authorities having jurisdiction or by a health care professional that the presence of the employee or family member of the employee in the community would jeopardize the health of others because of the exposure of the employee or family member of the employee to a communicable disease, whether or not the employee or family member has actually contracted the communicable disease.

Covered Family Members
A “family member” under this legislation means:

1.    An employee’s:
   i.    child, foster child, adult child, legal ward, child for whom the employee is legal guardian, or child to whom the employee stands or stood in loco parentis;
   ii.    spouse or registered domestic partner; or health condition;
   iii.    sibling, stepsibling, or foster sibling;
   iv.    biological, adoptive, or foster parent, stepparent, or a person who stood in loco parentis when the employee was a minor child;
   v.    grandchild, foster grandchild, or stepgrandchild;
   vi.    grandparent or stepgrandparent;
   vii.    a child of a sibling of the employee;
   viii.    a sibling of the parents of the employee; or
   ix.    a child-in-law or sibling-in-law;

2.    any of the family members listed in clause (1) of a spouse or registered domestic partner of the employee;

3.    any other individual related by blood or whose close association with the employee is the equivalent of a family relationship; and

4.    up to one individual annually designated by the employee.

Accrual of Paid Leave
Full and part-time employees who work at least 80 hours in a year are eligible for paid sick and safe leave benefits, but accruals for sick time commence upon employment. Employees will earn a minimum one hour of sick and safe time for every 30 hours worked and can earn up to 48 hours in a year, unless the employer agrees to a higher amount. Employees are allowed to carry over up to 80 hours into the following year. This legislation does not affect city ordinances that provide more generous protections and benefits for employees.

Required Employee Notice
If the leave is foreseeable, employers may require employees to provide seven days of advanced notice of the intention to use sick leave. If the leave is not foreseeable, employers may require an employee to give leave notice as soon as practical.  A written policy must be developed if an employer requires advance notice of the need to use paid sick leave and the procedure for providing such notice.  If such a policy has not been provided to the employee, the employer cannot deny the use of sick and safe leave. Further, when an employee uses earned sick and save time for more than three consecutive days, the employer may require reasonable documentation that the earned safe and sick time has been used properly.
 
Employers must be sure to provide notice to all Minnesota employees that they are entitled to earned sick and safe time. Employers also must notify employees of amount of leave earned, the accrual year for the employee, the terms of the use of sick and safe time, that retaliation against employees who use safe and sick time is prohibited, and that the employee may file a complaint or civil action if the use of sick and safe time is denied or the employee is retaliated against. This notice must be in English as well as the employee’s primary language. Minnesota employers must also give employees a statement of their earned sick time and amount used.

Documentation
The use of earned sick and safe time must be kept confidential by the employer and documentation must be maintained separate from the employee’s personnel file. Further, employers are not required to pay out earned sick time upon termination. However, if the employee is rehired within 180 days, the employer must reinstate earned sick time.

Practical Considerations
For those employers who have not yet moved to a system of Paid Time Off rather than separate vacation and sick time balances, they should make that change.  Employers should also make sure their policies are updated to make sure that PTO can be used for nearly anything, in particular it should be broad enough to cover all absences required by the Sick and Safe Time requirements.

Paid Family Medical Leave Legislation

Starting January 1, 2026, employees who work predominantly in Minnesota are eligible to receive up to 12 weeks of paid leave for serious health conditions or pregnancy, and 12 weeks of paid leave for bonding, safety leave, and family leave. However, the leave is capped at 20 weeks in a single benefit year. For example, an employee who used 12 weeks of paid leave for pregnancy may only use 8 weeks of paid family leave.
 
Serious Health Conditions
Serious health condition means a physical or mental illness, injury, impairment, condition, or substance use disorder that involves:

1.    inpatient care in a hospital, hospice, or residential medical care facility, including any period of incapacity; or

2.    continuing treatment or supervision by a health care provider which includes any one or more of the following:
   i.    a period of incapacity of seven or more days, and any subsequent treatment or period of incapacity relating to the same condition, that also involves:
      1.    treatment two or more times, within 30 days of the first day of incapacity, unless extenuating circumstances beyond the individual's control prevent a follow-up visit from occurring as planned, by a health care provider or by a provider of health care services under orders of, or on referral by, a health care provider; or
      2.    treatment by a health care provider on at least one occasion that results in a regimen of continuing treatment under the supervision of the health care provider;ii.    a period of incapacity due to medical care related to pregnancy;

   iii.    a period of incapacity or treatment for a chronic health condition that:
      1.    requires periodic visits, defined as at least twice a year, for treatment by a health care provider or under orders of, or on referral by, a health care provider;
      2.    continues over an extended period of time, including recurring episodes of a single underlying condition; and
      3.    may cause episodic rather than continuing periods of incapacity;

iv.    a period of incapacity which is permanent or long term due to a condition for which treatment may not be effective. The applicant or family member must be under the continuing supervision of, but need not be receiving active treatment by, a health care provider; or

v.    a period of absence to receive multiple treatments, including any period of recovery from the treatments, by a health care provider or by a provider of health care services under orders of, or on referral by, a health care provider, for:

vi.    a period of incapacity of seven or more days, and any subsequent treatment or period of incapacity relating to the same condition, that also involves:
      1.    restorative surgery after an accident or other injury; or
      2.    a condition that would likely result in a period of incapacity of more than seven full calendar days in the absence of medical intervention or treatment.

Bonding
Bonding means time spent by an applicant who is a biological, adoptive, or foster parent with a biological, adopted, or foster child in conjunction with the child's birth, adoption, or placement.

Safety Leave
Safety Leave means leave from work because of domestic abuse, sexual assault, or stalking of the applicant or applicant's family member, provided the leave is to:

   1.    seek medical attention related to the physical or psychological injury or disability caused by domestic abuse, sexual assault, or stalking;
   2.    obtain services from a victim services organization;
   3.    obtain psychological or other counseling;
   4.    seek relocation due to the domestic abuse, sexual assault, or stalking; or
   5.    seek legal advice or take legal action, including preparing for or participating in any civil or criminal legal proceeding related to, or resulting from, the domestic abuse, sexual assault, or stalking.

Covered Family Members
For purposes of this legislation, family member means:

   1.    a spouse or domestic partner;
   2.    a child, including a biological, adopted, or foster child, a stepchild, or a child to whom the applicant stands in loco parentis, is a legal guardian, or is a de facto parent;
   3.    a parent or legal guardian of the applicant;
   4.    a sibling;
   5.    a grandchild;
   6.    a grandparent or spouse's grandparent;
   7.    a son-in-law or daughter-in-law; and
   8.    an individual who has a relationship with the applicant that creates an expectation and reliance that the applicant care for the individual, whether or not the applicant and the individual reside together.

Covered Employees and Employers
All employers with employees in Minnesota, regardless of the number of employees, are mandated to participate in this program. After 90 days of employment, employees who predominately work in Minnesota are eligible to participate in this program. Claims must be based on a single qualifying event of at least 7 calendar days.
 
The amount of benefits available is based upon a progression scale with lower income workers receiving a higher percentage of their wages while on leave and higher income workers receiving less of their wages. Additionally, after completing their leave, employees are entitled to reinstatement to their prior jobs, or equivalent, as long as they had been in their position for 90 days. Employers fund at least half of the program through a payroll tax.

Practical Considerations
This legislation would not go into effect until January 1, 2026, so employers have some time to prepare.  It is wise for employers to begin planning for this new system and analyze their employee benefit packages to contemplate how this new government benefit fits into those benefit packages.

Total Ban on Non-Compete Clauses

Minnesota joins California, Oklahoma, and North Dakota as the fourth state to enact a prohibition on agreements that contain a covenant not to compete.

Ban on Covenants not to Compete
These are defined as “an agreement between an employee and employer that restricts the employee, after termination of the employment, from performing: (1) work for another employer for a specified period of time; (2) work in a specified geographical area; or (3) work for another employer in a capacity that is similar to the employee's work for the employer that is party to the agreement.” In this legislation, employee is defined to include independent contractors.

Exceptions Included in the Legislation
The list of banned non-compete clauses does not include “nondisclosure agreements, or agreements designed to protect trade secrets or confidential information.” It also does not include a “nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer.”
 
There are only two limited exceptions to wholesale the ban on non-compete agreements. First, the bill does not ban non-compete agreements that are agreed to during the sale of a business where the seller and buyer agree that the seller of the business is prohibited from carrying on a similar business within a reasonable geographic area for a reasonable length in time. Second, the bill does not ban non-compete agreements that are agreed to in anticipation of the dissolution of a business where the members or partners of the business agree that all or any number of the parties will not carry on a similar business within a reasonable geographic area where the business has been transacted. Unlike some other states, the Minnesota law does not have an exception related to a person’s income.

Timing
This legislation will apply to all contracts and agreements entered into after July 1, 2023. Any contracts or agreements with non-compete provisions entered into before July 1, 2023, will remain enforceable.

Practical Considerations
Previously, Minnesota law limited, but did not prohibit, non-compete agreements. Covenants not to compete have been found to be enforceable previously if their duration, geographic scope, and substantive scope were reasonable. This legislation then may result in longer-term employees with covenants not to compete entered into before July 1, 2023 being bound by non-competes when newer hires are not. Courts have previously held that where there is no distinction made between similarly situated employees who signed a covenant not to compete and those who did not, the covenants not to compete were unenforceable. Freeman v. Duluth Clinic, Ltd., 334 N.W.2d 626, 630 (Minn. 1983).  It is possible that judges may also consider this new legislation in their decisions relating to pre-July 1, 2023 covenants not to compete in the assessment of the reasonableness of the agreement. For those reasons, employers may wish to refocus, to include, or strengthen (with consideration) non-solicitation provisions with employees that protect any goodwill developed by employees with customers of the employer. 

Legalized Recreational Marijuana

Minnesota also has become the 23rd state to legalize the recreational use and possession of marijuana. Starting August 1, 2023, Minnesotans over 21 years old can purchase and possess in public up to 2 ounces of cannabis flower, 8 grams of concentrate, and 800 milligrams of edible products at a time. Further, individuals with misdemeanor convictions for marijuana will automatically have their records expunged for those convictions, though the process will take up to a year. A committee also will be established to consider expunging felony level convictions.
 
Employers may no longer refuse to hire a job applicant or discipline or discharge an employee because the applicant or employee engages in or has engaged in the use or enjoyment of lawful consumable products if the use occurs off the premises of the employer during non-work hours. Lawful consumable products now include cannabis flower, cannabis products, lower-potency hemp edibles, and hemp-derived consumer products.

Cannabis Testing
Also important to employers, effective August 1, 2023, this bill amends Minnesota’s Drug and Alcohol Testing in the Workplace Act (DATWA). First, the bill amends DATWA’s definition of drugs. The new definition of drugs “does not include marijuana” and other cannabis related products. Further, the definition of “Drug and Alcohol Testing” in DATWA no longer includes cannabis testing, unless stated otherwise.

However, not all employees are immune from cannabis testing altogether. Employers can still require employees to submit to random cannabis testing if they are employed in safety-sensitive positions or employed as professional athletes if the professional athlete is subject to a collective bargaining agreement permitting random testing. Employers can still require reasonable suspicion cannabis testing if the employer has a reasonable suspicion that the employee is under the influence of cannabis; has violated the employers’ written work rules which prohibit the use, possession, sale or transfer of cannabis while working; has sustained a personal injury or caused another to sustain a personal injury; or has caused a work-related accident or was operating or helping to operate machinery, equipment, or vehicles involved in a work-related accident.

In addition, cannabis and its metabolites are considered a drug and subject to DATWA testing for several industry positions. Those positions include Safety Sensitive Persons; Peace Officers and Firefighters; positions requiring face-to-face care, training, education, supervision, counseling, consultation or medical assistance to i) children, ii) vulnerable adults, and iii) patients who receive health care services; positions requiring CDLs or requiring an employee to operate a motor vehicle for which state or federal law requires drug or alcohol testing; a position of employment funded by a federal grant; or any other position for which state or federal law requires testing.

With respect to the drug testing of job applicants, employers may no longer require a job applicant to undergo cannabis testing for the sole purpose of determining the presence or absence of cannabis as a condition of employment, unless required by state or federal law. In addition, unless required by state or federal law, an employer may not refuse to hire an applicant solely because the applicant “fails” a cannabis test.

Limiting Cannabis Use
However, employers do have some options to limit cannabis use among employees. Unless otherwise provided by state or federal law, an employer does not have to permit and may enact and enforce written rules prohibiting cannabis use, possession, impairment, sale, or transfer while an employee is working, on company properties, or using an employer’s vehicle, machinery, or equipment.

Exceptions Included in the Legislation
The amendments to Minnesota Statutes § 181.950-181.957 do not apply to employees and job applicants where the specific work performed requires those employees or job applicants to be tested for cannabis pursuant to federal regulations that specifically preempt state regulation of cannabis testing with respect to those employees and job applicants; federal regulations or requirements necessary to operate fully regulated facilities; federal contracts where cannabis testing is conducted for security, safety, or protection of sensitive proprietary data; or state agency rules that adopt federal regulations applicable to the interstate component of a federally regulated industry, and the adoption of those rules is for the purpose of conforming the nonfederally regulated intrastate component of the industry to identical regulation.

Collective Bargaining Agreements
With respect to labor law, the amendments to Minnesota Statutes § 181.950-181.954 should not be construed to limit the parties of a collective bargaining agreement from bargaining and agreeing to a cannabis testing policy that provides greater employee protection, and does not otherwise conflict with, the minimum standards and requirements provided under Minnesota Statutes § 181.950-181.954. The amendments to Minnesota Statutes § 181.950-181 also should not be construed to interfere or diminish current collective bargaining agreements that already provide for cannabis testing that afford employee protections that meet or exceed the minimum standards and requirements provided by Minnesota Statutes § 181.950-181.

Practical Considerations
Employers should revisit their drug testing policies and what their employment policies say about which drugs will be screened for and if and when they decide to test for cannabis use and implement any procedures for responding to cannabis use in the workplace.  Employers should also review and revise their policies to treat marijuana much the way alcohol has been typically treated and banned from possession or use on the worksite.

If you have questions regarding the above or any other employment-related concerns, please contact Martin Kappenman at 952.921.4603 or mkappenman@prkalaw.com, David Goldman at 952.921.4606 or dgoldman@prkalaw.com, or any other attorney at Peters, Revnew, Kappenman & Anderson, P.A.

www.prkalaw.com