Date: June 17, 2024

What Employers Should Know After the Minnesota Legislature’s Latest Session

by Foley Mansfield
Date: June 17, 2024
by Foley Mansfield

What Employers Should Know After the Minnesota Legislature’s Latest Session

The Minnesota legislature recently wrapped up its latest session with a bevy of revised laws (and some new ones too) impacting employers. This article examines some of the biggest changes that employers should know about.

Amendments to Earned Sick and Safe Time Law (“ESST”)

ESST is paid leave that an employee may use when they or a family member are sick, need to see a doctor or medical professional, need help due to domestic abuse, or various other related reasons. Employers must provide employees with a minimum of one hour of ESST for every thirty hours worked.

As I wrote in an April article, the Minnesota legislature had proposed various amendments to Minnesota’s new ESST law earlier in the session, some of which made the cut and are effective immediately. For instance, employers are liable to employees if they do not comply with ESST accrual or use requirements for the employee’s regular rate of pay plus an additional equal amount as damages. Additionally, employers now have the option to provide an employee’s accrued and used ESST hours in ways other than just an employee’s pay stub, such as in writing or in an electronic system. One significant change is the definition of “employee,” or, who is eligible for ESST. Instead of identifying an employee as someone who works 80 hours a year for an employer, the definition includes someone “anticipated” to work at least 80 hours in a year. Flight deck and cabin crew members employed by air carriers are now eligible for ESST, though volunteer/on-call firefighters and ambulance personnel, elected officials, and farm laborers (working 28 days or less a year) are no longer eligible. Another major change allows ESST to be used to make arrangements for or attend a funeral, memorial, or address financial or legal matters following the death of a family member. Employees may use ESST in the same increments of time in which they are paid, though an employer need not provide leave in less than 15-minute increments and cannot require use in more than 4-hour increment limits.

Lastly, the Minnesota legislature established a more nuanced way to determine an employee’s pay rate while using ESST. Previously, employers were only required to pay ESST at the employee’s normally hourly rate. Now, ESST pay is determined by an employee’s “base rate,” which considers the employee’s classification. For hourly employees, their base rate is just their hourly rate. For hourly employees who have multiple hourly rates, their base rate is the rate they would have been paid for the time period they took the applicable leave. Salaried employees’ base rate is the same rate guaranteed to them as if they had not taken leave. Employees paid solely on commission or anything other than hourly/salary must receive no less than the highest applicable local, state, or federal minimum wage. Additionally, base rate does not include commissions, shift differentials; overtime, holiday, or weekend premiums; scheduled days off; bonuses; or gratuities.

Amendments to Paid Leave Law

Launching in 2026, this program will provide employees with up to 12 weeks of paid time off for family or medical leave reasons, including caring for a family member, bonding with a new baby, or when an employee’s own health condition prevents them from working. Though fundamentally similar to the federal Family and Medical Leave Act (“FMLA”), Minnesota’s Paid Leave program applies to all Minnesota employers regardless of size, unlike FMLA which only applies to employers with 50 or more employees.

Unsurprisingly, the Paid Leave law received a few amendments as well. First, the taxes owed by employers to fund the program increased to 0.88% from 0.7%. Additionally, employers are now required to allow leave in minimum increments of one calendar day. Employees are now restricted from applying for benefit payments for intermittent leave until they have accumulated eight hours of leave, that is unless more than thirty days have passed since their initial leave. The appeal process on determinations of benefit accounts was significantly expanded and builds off the unemployment insurance appeal process. There were also numerous additions and revisions to various definitions.

Another major revision allows employers with 30 or less employees with an average wage rate of less than or equal to 150% of the state’s average wage for the applicable period to apply for assistance grants. These employers will have a premium rate that is 75% of the annual premium rate, they must pay at least 25% of the rate, and they are not allowed to deduct employee pay to fund the employer’s premium. Employees then are required to pay any remaining portion and the employer must deduct pay as necessary to fund the employee portion of the premium.

Amendments to Employee Misclassification

Properly classifying your employees (i.e., employee or independent contractor) is important in Minnesota, as failure to do so requires employers to pay back pay to the employee, gratuities, and compensatory damages, at minimum. Starting next month, Minnesota’s prohibition on non-construction employee misclassification will be greatly expanded. The prohibitions of course stay in place, though are more minutely detailed. Violations are now clearly delineated to include the failure to classify, represent, or treat an individual as an employee; failure to report or disclose employees to any government agency; and the prohibition of requiring or requesting employees to enter a contract that misclassifies, misrepresents, or inaccurately treats them as an independent contractor. Additionally, any owner (or similar person) or successor who knowingly or repeatedly engaged in misclassification (or the improper reporting thereof) may be held individually liable. Arguably the most significant amendment arises out of the increased penalties for misclassification, which now include: 1) compensatory damages the value of supplemental pay (including shift differentials, vacation pay, insurance, or other benefits) and any of the employee’s costs and expenses incurred resulting from the misclassification; 2) a penalty of up to $10,000 for each individual the person misclassified; 3) a penalty of up to $10,000 for each misclassification; and 4) a penalty of $1,000 for each person who delays, obstructs, or fails to cooperate with an investigation and each failure of the same.

The rules regarding the misclassification of construction employees were also greatly expanded. For starters, the previous nine-factor test for independent contractors in the construction industry is now a fourteen-factor test to be considered at the time the services were provided or performed. The construction rules similarly provide substantial detail on misclassification prohibitions, allow individuals to be held liable for violations of the same, and significantly expands penalties. Most of these changes also go into effect next month.

Amendments to Personnel Record Review and Access Rules

Minnesota’s rules on personnel record review and access now apply to all employers where it previously only applied to employers with 20 or more employees. While all Minnesota employers regardless of size have been required to provide their Minnesota employees with their personnel record within 7 working days of the request (14 days for out of state employees) for the past 20 years, this change now requires all employers to provide new hires with a notice of their rights under these rules. Other rules in this section will also now apply, meaning all employees now have the right to dispute information in their record and all employers are now prohibited from retaliating against an employee for asserting rights under these rules.

Amendments to Pregnancy and Parental Leave Laws

Under Minnesota’s Pregnancy and Parental Leave laws, all employers are required to provide 12 weeks of unpaid leave to an employee for the birth or adoption of a child and to any female employee for prenatal care, or incapacity due to pregnancy, childbirth, or related health condition. Beginning in August, employers will be required to maintain insurance coverage for employees on this type of leave (and any of their covered dependents), although the employee must continue to pay any employee share of those benefits. Previously, employers had to make coverage available but could require the employee to cover the entire cost. Additionally, employers may no longer reduce an employee’s leave under these rules by any time taken off for prenatal care medical appointments.

Amendments to the Minnesota Human Rights Act (“MHRA”)

In the employment context, the MHRA prohibits discrimination based on protected class. The legislature made several changes to this law. First, two defined terms were expanded to be more inclusive. “Disability” was expanded so that a “disabled person” now includes a person who has an impairment that is episodic or in remission and would materially limit a major life activity when active. “Familial status” was also revised to include “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.” Previously, this definition only included living with minors.

Once a charge is filed, the Minnesota Department of Human Rights (“MDHR”) now has one year to issue a probable cause determination on any charge, even certified “complex” charges, unless tolled for settlement discussion purposes or the parties agree to participate in an alternative dispute resolution process. Another change allows charging parties more time to file suit (90 days as opposed to 45) after receiving notice that MDHR dismissed their charge or determined there was no probable cause—similar to the time to file for federal claims of this type.

Damages and penalties for private employers violating the MHRA are set to increase and expand in August as well. Employers found by a court to have violated the MHRA will now be required to pay the employee compensatory damages, including mental anguish or suffering, in an amount up to three times the actual damages sustained. Unlimited punitive damages are also now awardable (previously capped at $25,000), with both compensatory and punitive damages to be determined by a jury where applicable. Employers will also be required a civil penalty to the state, determined based on the “seriousness and extent of the violation, the public harm occasioned by the violation, whether the violation was intentional, and the financial resources of the respondent.” The court may also order equitable remedies, including: 1) the hiring or reinstatement of the employee, with or without backpay; 2) admission or restoration in a union, admission or participation in an apprenticeship, on-the-job training, or other retraining; or 3) any other relief the court deems just and equitable.

Requirement of Salary Ranges in Job Posting

One of the new rules from this session requires employers with 30 or more employees to provide salary ranges in their job postings. Effective January 1, 2025, the included salary range (meaning a minimum and maximum annual salary or hourly range of pay) must be listed in good faith and include general descriptions of all benefits and compensation, such as health insurance, dental insurance, and 401k benefits. Alternatively, employers can advertise a fixed pay rate.

Amendments to Gratuities Law

Beginning in August, employees that receive gratuities through a debit, charge, credit card, or electronic payment must be credited with those gratuities for the pay period in which they are received. Likewise, the full gratuity indicated in the payment must be distributed to the employee no later than the next scheduled pay period.

 

Contacts:

Michael S. Kernstock

 

Related Practices:

Employment Law Litigation

Business & Corporate

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