At the end of the 2024 legislative session, Minnesota Governor Tim Walz signed several bills into law, which amended several employment-related statutes addressing paid sick and leave time, pregnancy accommodation and leave, restrictive covenants, and employee misclassification.

Amendments to the Minnesota Earned Sick and Safe Time Law

Minnesota’s Earned Sick and Safe Time Law (“ESST”), which was enacted last year and went into effect on January 1, 2024, and has since been amended, requires Minnesota employers to provide paid sick and safe time to eligible employees working in the state.

A covered employee under this law is “any person who is employed by an employer, including temporary and part-time employees, whom the employer anticipates to perform work for at least 80 hours in a year for that employer in Minnesota.” The amendments (HF 5247) clarify how earned sick and safe time will be calculated based upon a “base rate,” which is defined to mean:

1. for employees paid on an hourly basis, the same rate received per hour of work;
2. for employees paid on an hourly basis who receive multiple hourly rates, the rate the employee would have been paid for the period of time in which leave was taken;
3. for employees paid on a salary basis, the same rate guaranteed to the employee as if the employee had not taken the leave; and
4. for employees paid solely on a commission, piecework, or any basis other than hourly or salary, a rate no less than the applicable local, state, or federal minimum wage, whichever is greater.

The amendments also expanded the list of reasons available to employees to use sick and safe time, such as for making funeral arrangements or to address financial or legal matters arising out of the death of a family member. For example, ESST may now be used in the same increment of time employees are paid, but an employer is not required to provide leave in increments of less than 15 minutes or more than four hours. Additionally, the amendments clarify that an employer may only request reasonable documentation to support the use of ESST for more than three consecutive work days if those days are scheduled workdays.

If an employer provides paid time off (PTO) in excess of the minimum required amount of sick and safe time, and the employer permits employees to use that time as paid leave for personal illness or injury, then the employer must treat the entire paid leave balance as ESST. This ESST sick leave law change becomes effective on January 1, 2025.

Also, the amendments change employer statement and recordkeeping requirements. Employers must provide the total number of ESST hours available and used during the pay period in a reasonable system, which may be provided electronically. Records must be kept for three years. The aforementioned changes are effective immediately.

Importantly, there are remedies to employees for noncompliance by employers. Employers may be liable to all employees not provided or not allowed to use ESST 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. Also, an employer that does not possess records sufficient to determine the ESST an employee should have been provided will be liable to the employee for an amount equal to 48 hours of ESST for each year ESST was not provided, plus an additional amount as liquidated damages.

Minnesota employers should review their current sick leave policies to ensure compliance with the ESST amendments and requirements.

Amendments to Minnesota’s Pregnancy Accommodations and Parental Leave

Minnesota’s Pregnancy and Parenting Leave Law (“PPL”) and pregnancy-accommodation law were also amended (MN SF 3852 sections 9 through 11).

Under one amendment that became effective August 1, 2024, employers may no longer deduct time off for prenatal care against an employee’s leave entitlement under the PPL, which guarantees up to 12 weeks of unpaid, protected leave related to the birth or adoption of their child and for prenatal care and health conditions related to pregnancy. This amendment could have the effect of allowing employees to use more than 12 weeks of protected leave for pregnancy-related conditions.

Additionally, under the pregnancy-accommodation law, employers must maintain coverage under any group insurance policy, group subscriber contract, or healthcare plan for the employee and any dependents, but the employee must continue to pay their share of the benefits.

Employee Misclassification

The same amendments that amended the ESST (discussed above) also amended a statute prohibiting the misclassification of employees as independent contractors to impose harsher penalties on employers.

The amendment adds a list of “prohibited activities related to employment status,” and officers and agents who engage in such activities can be deemed personally liable.

Compensatory damages are available to misclassified persons, along with civil penalties of up to $10,000 for each misclassified person and each violation and a penalty of up to $1,000 for each person who fails to cooperate or obstructs an investigation into the violations. The amendment also imposes classification requirements for the construction industry.

These amendments went into effect on July 1, 2024.

Minnesota Minimum Wage Modification

MN SF 3852 (discussed above) also standardized the minimum wage in Minnesota, removing the lower minimum wage tier for smaller employers and establishing a single minimum wage at the large employer rate. The bill further eliminated the carve out for small employers, employees of foreign workers on J non-immigrant visas in the hospitality industry, and employers of individuals under 18 years of age. This minimum wage law becomes effective on January 1, 2025.

Effective August 1, 2024, the annual minimum wage increase is now calculated by taking the lesser of 5% (increased from 2.5%) or the percentage calculated by the commissioner (rounded to the nearest cent), increasing how much the minimum wage can rise each year because of inflation.

Drug Testing

MN SF 3852 (discussed above), under Article 7, Sections 4-8, was amended to permit Minnesota employers to use “oral fluid testing” to screen employees or applicants for drugs or alcohol, including cannabis. Laboratory testing is not required.

In the event the oral fluid test is positive, inconclusive, or invalid, an employee or job applicant may request, within 48 hours, further testing by a laboratory and may not be required to pay the costs of using such services. If the laboratory test is positive, employees and applicants may retest at their own expense. 

This drug testing law became effective on August 1, 2024.

Restrictive Covenants Void in Service Contracts

Within MN SF 3852, Minnesota also enacted a new law that bans certain non-solicitation agreements between “service providers” and their customers, stating “[n]o service provider may restrict, restrain, or prohibit in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider.” However, this new law does not apply to workers providing professional business consulting for computer software development and related services who seek employment through a service provider with the knowledge and intention of being considered for a permanent employment position with the customer as their employer at a later date. 

This section is not retroactive and only applies to agreements entered into on or after the effective date of July 1, 2024.

Minnesota Human Rights Act (MHRA)

Minnesota enacted several amendments to the Minnesota Human Rights Act Chapter 363A (“MHRA”) that expand various protected categories, including:

• the definition of “disability” to include persons with an impairment that is episodic or in remission and would materially limit a major life activity when active;

• the definition of “discriminate” to include harassment on the basis of any protected class, as opposed to limiting the term to sexual harassment;

• the definition of “familial status” to include “the condition of one or more minors having legal status or custody with (1) the minor’s parents or the minor’s legal guardian or guardians or (2) the designee of the parent or parents or guardian or guardians with the written permission of the parent or parents or guardian or guardians.” The “familial status” definition also now includes “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.”

Under the amendments, the deadline for a claimant to bring a civil action against an employer after administrative remedies have been exhausted was extended from 45 to 90 days.

Employers are also subject to enhanced penalties and punitive damages under the statute amendments. The amendments now require courts to award treble compensatory including mental anguish or suffering, and may also award punitive damages—the previous $25,000 damages cap was removed. In jury trials, the jury will determine the amount of all damage awards. These damages are in addition to the mandated civil penalties that employers must pay to the state if they are found to violate the MHRA.

These amendments went into effect on August 1, 2024.

To learn more about any of the legal topics above and how they impact your business or any other general questions, please contact the authors of this article or your Dykema relationship attorney.