At a time of labor shortages that are predicted to persist for years, continued battles with inflation, a potential recession, and a projected three percent decline in the number of working age individuals over the next decade, the Minnesota Legislature passed multiple bills that employers are going to have to address during an already challenging year. A number of these new laws are effective in 2023 and early 2024.
Recreational Cannabis and Marijuana
First up is the legalization of recreational marijuana and cannabis, which is effective on July 1, 2023, although several of the critical provisions do not take effect until August 1, including the ban on drug testing for marijuana in the workplace. Employers need to ensure that policies are updated to be very clear about whether marijuana will be allowed in the workplace. Employers have the ability to prohibit use during work hours and on the employer’s premises but only if a written policy is in place. Employers may not, with the exception of several professions and instances, ban the use of marijuana during an employee’s off-hours away from the employer’s premises.
Minnesota joins several other states in banning covenants not to compete. Applying to agreements entered into on or after July 1, 2023, the law applies to employers of any size and to both employees and independent contractors. The prohibition on noncompete clauses does not apply to non-disclosure agreements or agreements to protect trade secrets or confidential information. In addition, the law does not apply to non-solicitation agreements, or agreements restricting the ability to use client or contact lists.
Sexual Harassment Settlement Agreements and Damages
As part of the Omnibus Tax Bill, Minnesota has added specific language to limit how a sexual harassment settlement agreement may be paid and taxed. Minnesota Statutes section 181.141 is amended to read:
“In a sexual harassment or abuse settlement between an employer and an employee, when there is a financial settlement provided, the financial settlement cannot be provided as wages or severance pay to the employee regardless of whether the settlement includes a nondisclosure agreement.”
This language becomes effective the day following final enactment of the law.
In addition, the legislature amended statute section 290.0132 to add a new subdivision addressing damages received by an employee resulting from a sexual harassment or abuse claim:
“The amount of damages received under a sexual harassment or abuse claim that is not excluded from gross income under section 104(a)(2) of the Internal Revenue Code because the damages are not received on account of personal physical injuries or physical sickness is a subtraction.”
The new subdivision is effective for taxable years beginning after December 31, 2022.
Pregnancy and Nursing Mothers Accommodations
The Omnibus Jobs and Economic Development bill included several amendments to the pregnancy accommodation and nursing mothers statutes. The following revisions were made to Minn. Stat. § 181.939, subdivision 1:
- An employer must provide reasonable break times each day to an employee who needs to express breastmilk for her infant child during the twelve months following the birth of the child. The break times must, if possible, may run concurrently with any break times already provided to the employee. An employer is not required to provide break times under this section if to do so would unduly disrupt the operations of the employer. An employer shall not reduce an employee’s compensation for time used for the purpose of expressing milk.
This legislation expands the rights for nursing mothers to take breaks to express milk for their babies, including those who are more than 12 months old.
Additionally, the bill expanded pregnancy accommodations: “Reasonable accommodation may include but is not limited to temporary transfer to a less strenuous or hazardous position, temporary leave of absence, modification in work schedule or job assignments, seating, more frequent restroom breaks or longer break periods, and limits to heavy lifting.”
These changes will be effective July 1, 2023.
Passed earlier in the session and signed by Governor Walz, the CROWN Act amended the Minnesota Human Rights Act to confirm protection against discrimination based on race-based natural hair texture and styles such as braids, locs, and twists. CROWN stands for “Create a Respectful and Open World for Natural Hair”, and Minnesota joined a growing list of states that has passed the Act.
Safe and Sick Leave
Minnesota’s new earned safe and sick time (ESST) law takes effect on January 1, 2024. On that date, at a minimum, all employers must provide one hour of paid leave for every thirty (30) hours of work, up to forty-eight (48) hours per year. In addition, employees must be allowed to accrue and carry over year-to-year eighty (80) hours, unless the employer front-loads eighty (80) hours at the beginning of the year or pays out ESST at the end of the year.
If an employer has an existing policy in place, it may comply, as long as it meets the minimum requirements of the ESST law. Employers should begin to prepare for implementation of this requirement and determine how existing policies will be updated or modified to accommodate for the ESST law. Note that the new law does not supplant local ordinances that provide additional benefits to employees.
The new state paid Family and Medical Leave Act (PFMLA) law guarantees employees the right to take paid family and medical leave when they cannot work due to serious health or caregiving needs. Workers will be able to utilize the benefit and begin taking leave on January 1, 2026, the same date that workers and employers will begin to contribute to the program.
Unlike the federal FMLA, almost every employer in the state will be impacted by the new measures under PFLMA – the law covers employers regardless of size and includes both full and part-time workers. There are limited carve outs for seasonal workers and self-employed individuals. Note that to qualify, employees have to earn at least 5.3% of the state average annual wage in the twelve-month period prior to the leave request. That amounts to approximately $3,500.00 over the prior year and can be met in a number of ways.
The leave applies to:
- Medical Leave – to address a worker’s own serious health condition, including pregnancy
- Parental Leave – to provide workers the time to bond with a new child
- Caregiving Leave – to allow workers to care for a loved one with a serious health condition
- Safety Leave – for certain needs when workers or their loved ones experience sexual or domestic violence
- Deployment-related leave – to deal with the impact of a loved one’s military deployment
Paid leave is broken into two categories – 1) medical leave (including for pregnancy or recovery from childbirth) and 2) all other leave. Workers may take up to 12 weeks per benefit year in each of the two categories, but workers who need leave from both categories will be capped at 20 weeks in a benefit year.
Jobs will be protected if a worker takes leave, as long as the individual was hired at least 90 days prior to the leave. The payment of benefits will be progressive, meaning lower income individuals will receive a higher percentage of their own income.
As with other state paid leave plans, Minnesota’s new law creates an insurance system. Workers will apply to the state, and benefits will be paid out of the insurance fund. Employers are not responsible for paying the employees while on leave.
Passed as part of the judiciary bill, Minnesota becomes the twenty-ninth state to ban questions regarding an employee or prospective employee’s salary history.
An employee may voluntarily provide this information to an employer if intended to be a part of a salary negotiation. However, once volunteered, an employer is limited to acting on that information by increasing a salary or wage offer.
These laws will change the landscape for employers of all sizes in the state, and every employer will need to spend the time to understand the requirements and update handbooks and policies to comply with the new law.
Julie Padilla is an attorney with Fryberger, Buchanan, Smith, and Frederick, P.A. specializing in environment and energy, real estate and land use, business and corporate law, labor and employment, economic development, nonprofit and tax-exempt entities, and governmental relations and legislation.