After a slew of new employment laws were passed last year, in the final days of this year’s legislative session, Governor Walz signed additional legislation that will impact employers large and small. 

The new laws, some of which went into effect immediately and others of which go into effect over the next few weeks, cover a variety of issues including earned sick and safe leave, employee misclassification, restrictive covenants in service contracts, pregnancy and parenting leave, drug testing, minimum wage, anti-discrimination laws, minimum wage, and a requirement to post salary ranges in job postings.

Updates to Minnesota’s Earned Sick and Safe Leave (“ESST”) Law

There were several updates to Minnesota’s ESST law, most of which are effective immediately. These updates include:

• ESST may be used in 15-minute increments, eliminating the prior requirement that employers allow employees to use ESST in the smallest increment of time tracked by the employer’s payroll system.
• Employers can provide employees with details regarding employee’s available ESST and amount of ESST used during a pay period electronically (or on the employee’s paystub, as was previously the case).
• Added to the approved list of leave covered by ESST now includes funerals, the arrangement of funerals, or time away to address financial or legal matters that arise after the death of a family member.
• Clarification on calculating the correct hourly rate when an employee takes ESST:
  • Employees paid on an hourly basis who receive multiple hourly rates must receive ESST at the rate the employee would have been paid for the period of time in which leave was taken;
  • Employees paid on a salary basis must receive ESST at the same rate guaranteed to the employee as if the employee had not taken leave; and
  • Employees paid solely on a commission, piecework, or any other way other than hourly or salary must receive ESST at a rate no less than the applicable local, state, or federal minimum wage. Of those applicable minimum wage laws, they must receive whichever is greater.
• As of January 1, 2025, all PTO policies must comply with the requirements of the ESST statute.  For example, if an employer were to grant 70 hours of PTO to their employees, all 70 hours used for personal illness or injury is required to comply with the documentation, base rate, notice, and penalization requirements under the ESST statutes.

Effective July 1, 2024: Additional Employee Misclassification Rules

As regulators and plaintiff’s attorneys continue to crack down on employers that misclassify employees, this new law provides for harsher penalties for employees who misclassify employees, and also implements a new independent contractor test for those working in the construction industry.

The new law prohibits employers from;

• Failing to classify, represent, or treat an individual who is an employee as an employee under the applicable law;
• Failing to report an individual as an employee when required by applicable law; and
• Requiring an employee to misrepresent or misclassify themselves as a non-employee, including as an independent contractor.

The employer, officers and agents of the employer, can be deemed personally liable for violating the law. Penalties for violations include fines of up to $10,000 for each misclassified person and each violation, and fines of up to $1,000 for each person who fails to cooperate with an investigation into violations of this law.

The misclassified person may also be entitled to recover compensatory damages, such as back wages.

Effective July 1, 2024: Ban on Non-Solicitation Covenants in New Service Contracts

In a law that could have a major impact on staffing companies, effective July 1, 2024, service providers (businesses or people who perform work for a customer) are prohibited from entering into a contract containing non-solicit provisions or other language preventing their customers from soliciting or hiring their employees, independent contractors, or others who perform work for the service provider.

This applies to any provision that restricts, restrains, or in any way prohibits the customer from directly or indirectly soliciting or hiring those individuals. The statute does not state that conversion fees (i.e., fees that a staffing company charges to a client if the client hires one of its employees) are prohibited.

Provisions that violate this restriction are void and unenforceable, and service providers are required to notify their employees of any covenants that violate this restriction.

There is an exception. The ban does not apply to workers who perform professional business consulting for computer software development and related services who seek employment through a service provider with the intent of being hired by the customer at a later date.

Effective August 1, 2024:  Pregnancy and Parenting Leave

The legislature made several key changes to the pregnancy and parenting leave laws effective immediately. During pregnancy or parenting leave employers must do the following:

• Maintain health and other benefit plans for employees “as if the employee was not on leave.” This includes the employer paying their portion of the benefits cost.
• The 12-week entitlement to pregnancy and parenting leave may not be reduced by any paid or unpaid leave the employee takes for prenatal care appointments.

Effective August 1, 2024: Drug Testing—Saliva Testing Now Permitted

Beginning August 1, 2024, employers may utilize oral fluid (saliva) testing as a form of drug testing so long as it complies with the statutory requirements including:

• Conducting testing pursuant to a written policy;
• Notifying employees of test results at the time of the test; and
• Allowing employees the opportunity for a retest if the test is positive, inconclusive or invalid.

Effective August 1, 2024: Amendments to the Minnesota Human Rights Act (“MHRA”)

The MHRA was amended to include additional substantive rights and penalties:

• The amount of potential damages has increased significantly. Compensatory damages now include mental anguish and suffering, and along with back pay and front pay, are subject to a multiplier up to three times “the actual damages sustained.” The prior cap of $25,000 on punitive damages has been eliminated.
• The time period for filing a suit has been extended to 90 days (from 45 days) following the dismissal of a charge of discrimination filed with the Minnesota Department of Human Rights.
• The definition of “disability” has been expanded to include any person who has an impairment that is episodic or in remission and would materially limit a major life activity when active.
• The definition of “familial status” is also broadened and includes caretakers. Discrimination against persons “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” is now unlawful.

Effective January 1, 2025: Elimination of Reduced Minimum Wage for Small Employers

The minimum wage law was revised and eliminated the two-tier system for minimum wage rates. Previously small employers (defined as having annual gross revenue of less than $500,000) paid a reduced minimum wage. As of January 1, 2025, all employers must pay employees the same minimum wage. There is a slight carveout allowing employers to pay workers under the age of 20 a reduced minimum wage for the first 90 days of their employment.

The Minnesota Department of Labor and Industry will review and publish the hourly minimum wage on an annual basis.

Effective January 1, 2025: Salary Information Required in Job Postings

Employers with 30 or more employees at one or more sites in Minnesota will soon be required to include salary ranges in job postings. This requirement extends to recruiters.

Under the new law, all job postings will be required to contain: (1) a minimum and maximum salary range, or hourly range of compensation, and (2) a general description of all benefits and other compensation, including health care and retirement benefits.

The law clarifies that:

• If there is not a compensation range, then the employer must list the fixed salary or hourly rate.
• The compensation range cannot be open ended (in other words, minimum and maximum must be listed).
• The employer must make a “good faith estimate” of the actual salary range, reflecting a realistic expectation of what the employer is willing to offer for the position.

To prepare for this change, covered employers should be prepared to:

• Given the newfound transparency of compensation ranges for job postings, review all compensation packages for fairness and consistency;
• Review policies and procedures for setting compensation levels and benefit offerings; and
• Train affected employees, including but not limited to those responsible for drafting and publishing job postings, setting compensation, and interviewing candidates.

Conclusion

Employers should review their policies and handbooks to ensure compliance with these new laws.

Please contact any member of Best & Flanagan’s Employment and Labor team for additional support.