On May 25, 2023, Gov. Tim Walz signed new legislation establishing Minnesota’s state-run family and medical leave program (the “Paid Leave Program”), and guaranteeing almost all Minnesota employees the right to paid family and medical leave when they are unable to work due to serious health or caregiving needs (the “Paid Leave Law”).  The Paid Leave Law is set to take effect on January 1, 2026, at which time eligible employees can begin taking paid leave (“Paid Leave”) and employers must begin making their required contributions to the Paid Leave Program.  As the effective date approaches, and in light of recent amendments passed by the Minnesota legislature, employers should prioritize understanding the Paid Leave Law’s implications and upcoming compliance requirements, which take effect as early as fall 2024.

Minnesota’s Paid Leave Law will provide eligible employees with partial wage replacement for up to 20 weeks of leave during a 52-week period for various family and medical reasons, qualifying exigencies, and safety leave (“Paid Leave Benefits”).  The Paid Leave Program will be administered by a newly created division of the Minnesota Department of Employment and Economic Development (“DEED”) called the Family and Medical Benefits Division.  Like Minnesota’s state unemployment insurance fund, DEED will maintain a benefits account for each covered employer in the state and an employee requiring Paid Leave will apply for said leave through DEED.  DEED will then determine the employee’s leave eligibility and available benefit amount.

Employers will fund their Paid Leave benefit accounts, managed by DEED, through a new payroll tax of .88% (amended from the originally stated .7%).  The Paid Leave Law requires that employers pay at least 50% of their annual Paid Leave premiums, with the option to deduct the remaining 50% from employees’ wages, provided such deductions do not reduce an employee’s pay below minimum wage.

Covered Employers

The Paid Leave Law applies to all Minnesota employers with one or more employees, with exceptions for employees of the federal government and self-employed individuals who opt to provide their own coverage for themselves.  Employers with thirty or fewer employees will be eligible for reduced premiums for the employer portion of the requisite premium payments.

Rather than participating in the state-run Paid Leave Program, employers may also opt to offer paid family and medical leave to employees through a private insurance carrier, or self-insure, so long as these plans confer all of the same rights, protections, and benefits provided to employees under the Paid Leave Program.  To opt out of the state-run plan, employers must apply for an exemption from DEED.

Paid Leave Program vs. Private Plan

Employers should carefully consider the advantages and disadvantages of the state-run Paid Leave Program and a private plan before choosing coverage.

The Paid Leave Program, administered by the state, requires an initial employer premium rate of .88%, half of which may be deducted from employees’ wages.  However, there is a possibility that the premium rate may rise based on the Minnesota legislature’s estimated costs of the Paid Leave Program.  Additionally, employees are responsible for filing their own Paid Leave claims with DEED, which could lead to longer processing times and potential difficulties in contacting claims processors.  Employers may also have limited visibility into the leave process and the status of their employees’ claims and/or benefits.  On the upside, the state-run plans like the Paid Leave Program typically offer more stable premium rates from year to year.

Private plans, on the other hand, are administered by private insurers, and generally offer faster claims processing times than state-run plans like the Paid Leave Program.  Although insurers may increase rates beyond the state-run Paid Leave Program’s premiums, private plans offer flexibility to tailor coverage to meet specific employer and employee needs.  Moreover, private plans tend to be more user-friendly and transparent, with easier access to information compared to state-managed plans.

Eligibility

Beginning on January 1, 2026, employees will be able to receive up to 12 weeks of paid leave for either (i) their own serious health condition; or (ii) bonding, safety leave, family care, or a qualifying exigency.  However, the total combined maximum for these categories cannot exceed 20 weeks.  Employees qualify for Paid Leave Benefits in any week of their benefit year during which they are unable to work due to a serious health condition, qualifying exigency, safety leave, family care, bonding, or pregnancy-related medical care for a qualifying 7-day event.  Bonding leave eligibility extends for 12 months after childbirth or placement of a child, without the 7-day event requirement.

The period for which employees seek Paid Leave Benefits must stem from a single event lasting at least 7 consecutive calendar days related to medical care, family care, a qualifying exigency, safety leave, or their own serious health condition, unless the leave is intermittent.  Employees must provide adequate certification from a health care provider or authorized professional regarding the circumstances of their Paid Leave request and information regarding the amount of time off work that is requested.  Under the Paid Leave Law, there is no waiting period to start receiving benefits.

Intermittent leave for a serious health condition of either the employee or an employee’s family member may be taken if reasonable and appropriate.  Other types of leave, including bonding leave, can be taken intermittently.  Employees requesting intermittent leave must provide their employer with a schedule of required workdays off as soon as possible and make reasonable efforts to schedule the leave to minimize disruption to the employer’s operations.  If this cannot be done to the satisfaction of both the employer and employee, the employer cannot require the employee to change their leave schedule in order to accommodate the employer.

Employers are not required to provide, but may elect to provide, more than 480 hours of intermittent leave in any 12-month period.

Employees can use accrued vacation pay, sick pay, or other paid time off in lieu of Paid Leave, provided they meet the eligibility criteria set out by their employer’s policies.  Disability insurance benefits received by the employee may be reduced by the amount of Paid Leave Benefits paid, according to the terms of the disability insurance policy.

Employers have the flexibility to offer supplemental benefit payments to employees on Paid Leave, in addition to any Paid Leave Benefits; however, the total amount of benefits received by the employee, including both Paid Leave Benefits and supplemental benefits from the employer, cannot exceed the employee’s regular salary.  Additionally, employees are ineligible to receive Paid Leave Benefits for any week in which they receive or will receive separation pay, severance pay, bonus pay, or any employer payments related to the separation of employment.

Self-Employment, Independent Contractors, and other Individuals Not Covered by the Paid Leave Law

The Paid Leave Law does not cover self-employed individuals or independent contractors, but such individuals can opt in to the state-run Paid Leave Program and must be approved for coverage if they choose to participate.  The Paid Leave Law also contains limited exceptions for seasonal hospitality employees, as more fully set forth within the law.

Continuation of Benefits

Employers are required to maintain an employee’s coverage under any group insurance policy, group subscriber contract, or health care plan for the employee and any dependents as if the employee was not on Paid Leave.  However, the employee must continue to pay their share of the costs for these benefits.

Similar to the federal Family and Medical Leave Act (“FMLA”) and the Minnesota Parental Leave Act, Paid Leave is job-protected leave for employees beginning 90 calendar days after an employee’s date of hire.  This means that upon their return from leave, employees are entitled to be reinstated to the same position they held when their leave started, or to an equivalent position with equivalent benefits, pay, and other terms and conditions of employment.  Employees are entitled to reinstatement even if the employee has been replaced or the employee’s position has been restructured to accommodate the employee’s absence.  However, employees are not entitled to greater reinstatement rights than if they had continued to be employed, and employers may deny reinstatement if they can show that the employee would not otherwise have been employed at the time reinstatement is requested.

Interaction with Other Leave Laws

Leave under the Paid Leave Law may also qualify for leave under other applicable laws, such as the federal FMLA, Minnesota Parental Leave Act, or local sick and safe time laws, and run concurrently with these laws.  Employers should properly designate leave under these laws, as applicable.  Failure to designate leave concurrently under other applicable laws, like the FMLA, could result in employees combining leave benefits from both laws, potentially extending their entitlement to job-protected leave.

Employee Notice Requirements

If the need for leave is foreseeable, an employee must provide their employer with at least 30 days’ advance notice of his or her need for Paid Leave.  If 30 days’ notice is not practicable because of a lack of knowledge of approximately when the leave is required to begin, a change in circumstances, or a medical emergency, notice must be given as soon as practicable.

Employer Notice Requirements

Employers are required to prominently display a notice detailing the benefits available under the new Paid Leave Law.  DEED will provide a standard employee notice form for employers to use, ensuring compliance with this requirement. Additionally, within 30 days of an employee’s start date or 30 days before premium deductions begin (whichever is later), employers must provide written information in the primary language of the employee, as provided by DEED.  This information includes:

• An explanation of the availability of family and medical leave benefits provided under the Paid Leave Law, including rights to reinstatement and continuation of health insurance;
• The amount of premium deductions made by the employer under the Paid Leave Law;
• The employer’s premium amount and obligations under the Paid Leave Law;
• The name and mailing address of the employer;
• The ID number assigned to the employer by the department;
• Instructions on how to file a claim for family and medical leave benefits;
• The mailing address, e-mail address, and telephone number of the department; and
• Any other information required by the department.

Failure to comply with these notice requirements may result in penalties, starting at $50 per employee for initial violations and increasing to $300 per employee for subsequent violations.

Furthermore, beginning January 1, 2026, employers must include on employees’ earnings statements the amount deducted for the portion of the premium passed on to employees (up to 50% of an employer’s annual premiums) and the amount paid by the employer based on the employee’s wages.

No Retaliation

Employers are prohibited from retaliating against employees for requesting or obtaining Paid Leave Benefits and/or Paid Leave, or for exercising any rights under the Paid Leave Law. This includes actions such as discharge, discipline, penalties, threats, coercion, or any form of discrimination or retaliation.  In addition to other remedies available under the law, the DEED commissioner may impose penalties on the employer ranging from $1,000 to $10,000 per violation.

The Paid Leave Law introduces a new rescission period of employee waivers of claims under the Paid Leave Law.  Employees may waive or release their rights under the Paid Leave Law (likely in a separation agreement or private settlement agreement); however, this waiver or release can be rescinded within 15 days of its execution, except for waivers or releases made in settlement of claims filed with DEED or another administrative or judicial body, which are final upon execution.  Employees waiving or releasing their rights under the Paid Leave Law must be notified in writing of their right to rescind the waiver or release.

Employee Remedies for Violation of the Paid Leave Law

In addition to other specific remedies outlined for retaliatory actions and equitable relief, an employer found to have violated the Paid Leave Law is liable to affected employees for damages, interest on those damages, additional liquidated damages equal to the sum of the damages and interest (unless the employer demonstrates in good faith that the act or omission leading to the violation was not intentional and had reasonable grounds to believe it did not violate the Paid Leave Law, in which case, the court may exercise discretion to waive the liquidated damages penalty), injunctive relief or other equitable remedies including reinstatement and promotion.

Further Rulemaking

The DEED commissioner has the authority to utilize rulemaking to further clarify the Paid Leave Law.  This includes specifying which serious health conditions and other events are presumed to qualify as seven-day qualifying events under the law.  These rules will likely offer additional clarity and guidance on how the Paid Leave Law applies to both employers and employees.

Next Steps to Prepare for the Paid Leave Law

Employers should take proactive steps to prepare for the implementation of the Paid Leave Law, including:

• Deciding on the type of coverage to obtain, whether through a private insurance provider or the state-run Paid Leave Program.
• Contacting their payroll provider to ensure they are prepared to begin making payroll deductions under the new Paid Leave Law.
• Understanding that employer wage detail reporting begins in 2024, with the first report due on October 31, 2024.  Employers with existing Unemployment Insurance accounts can submit a single report covering both programs, while those without UI coverage will need to set up a separate account for Paid Leave reporting.
• Reviewing existing leave policies to ensure compliance with the Paid Leave Law, assessing their relevance, and planning for how benefits under current policies will align with the Paid Leave Law.
• Preparing for the notice and posting requirements of the Paid Leave Law, including understanding the format of employer notices and meeting written notification obligations to employees by late 2025.
• Proactively discussing upcoming changes to benefits and leave policies with employees, outlining the impact of the new Paid Leave Law and clarifying employee entitlements under the legislation.

Although the Paid Leave Law takes effect on January 1, 2026, employers should begin planning and adjusting their employment policies and practices well in advance to ensure compliance and smooth implementation.