Minnesota 2024 Employment Law Legislative Updates Cover Broad Range of Topics

Once again, Minnesota’s legislature and Gov. Tim Walz have been busy enacting several pieces of legislation that will impact the state’s employers. The 2024 Omnibus Labor and Industry Bill and the 2024 Transportation, Housing, and Labor Omnibus Budget Bill impact state laws, including those covering minimum wage, pregnancy accommodation, drug testing, job postings, the state’s Earned Sick and Safe Time leave, the state’s Paid Leave for family and medical, as well changes to the Minnesota Human Rights Act.

Minimum Wage

Effective August 1, 2024, the annual minimum wage increase will be calculated by taking the lesser of 5% or the percentage calculated by the Department of Labor and Industry, increasing the amount the minimum wage can increase each year due to inflation.

Effective January 1, 2025, the carve-out allowing a lower minimum wage to be paid by smaller employers, employers of foreign workers on J visas in the hospitality industry, and individuals under 18 years of age will be eliminated.

Employee Misclassification

Effective July 1, 2024, Minnesota utilizes a complex methodology to determine the status of an independent contractor, combining the definitions included under the Department of Labor and Industry (DOLI) and the state unemployment and workers' compensation codes. The Minnesota Attorney General’s website defines an independent contractor as follows:

• The worker determines when, where, and how to perform the work.
• The worker’s work is not essential to the employer’s business model.
• The worker hires his or her own employees and assistants to complete the work and has continuing and recurring obligations related to the type of work he or she performs.
• The worker cannot have his or her contract terminated so long as the worker completes the proposed end result of the contract.
• The worker has an office, business license, and a place to perform his or her work that is independent of the employer.
• The worker is compensated for doing a particular job, such as preparing someone’s taxes.
• The worker is solely responsible for his negligence, behavior, and the manner in which he or she performs the work.
• The worker has invested in tools, software, office space, and other materials that are not tied to a job with a particular employer.
• The worker cannot quit a job or terminate a contract with an employer without incurring a penalty.

In addition, the state considers a number of factors, falling into three broad categories from the Minnesota Department of Revenue:

• Behavioral Control: Do you (the business) have a right to direct or control how the work is being done? This control may happen through instruction, training, or other means.
• Financial Control: Do you have a right to direct or control the financial and business aspects of the worker’s job?
• Relationship of the Parties: How do you and the worker perceive your relationship?

You must weigh all relevant factors when determining if someone is an employee or independent contractor. Some factors may indicate a worker is an employee, while others indicate they are an independent contractor.

The state’s unemployment and workers’ compensation rules consist of 34 factors—see MN Rules 5224.

The updated legislation impacts all industries except construction, which is impacted by other legislation (see next section), and subjects employers to liability for:

• Failing to classify, represent, or treat an individual who is an employee as an employee under local, state, or federal law;
• Failing to report or identify a person as an employee when required by applicable law;
• Requiring an employee to misrepresent or misclassify themselves as a nonemployee.

The update imposes significantly higher penalties, up to $10,000 for each individual violation.

Employee Misclassification—Construction Industry

Effective March 1, 2025, the independent contractor status of a person performing construction work will be based on a new 14-factor test, which is not yet published on the state’s website, that will focus on the time when the services were rendered. Additionally, among other requirements, the new test requires that any written document—including proposals, contracts, and change orders—provide that the business entity controls the provisions and performance of the contract. The contract must be signed and dated by authorized representatives of all parties to the contract. The new law also provides for significantly higher penalties for violators.

Drug Testing

Effective August 1, 2024, the update to Minnesota’s drug testing law, Drug and Alcohol Testing in the Workplace Act (DATWA), allows employers to test employees and applicants for cannabis, drugs, and alcohol using an oral swab. Employers must inform the employee or candidate of the results at the time of testing. If the test result indicates a positive result, is inconclusive, or invalid, the employee or candidate has 48 hours to request a laboratory test at no expense to the employee or applicant. Confirmatory tests of positive test results following the laboratory test may be conducted at the request and expense of the applicant or employee.

Human Rights Act

Effective August 1, 2024, several changes were made to the Minnesota Human Rights Act, including a revised definition of the term “discriminate,” which was broadened from sex harassment to include harassment in general. The definition of a disability has been expanded to include “an impairment that is episodic or in remission and would materially limit a major life activity when active.”

Included in the changes is a clarified definition of “familial status,” which now reads “… the condition of one or more minors having legal status or custody with (1) the minor’s parents or the minor’s legal guardians or (2) the designee of the parent or parents or guardian or guardians with the written permission of the part of the parent or parents or guardian or guardians.” The definition has also been expanded 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.”

Earned Sick and Safe Time (ESST)

Most of the amendments to the ESST provided updates and clarification to existing provisions of the law. The following updates and clarifications were effective on May 25, 2024.

• Employers are no longer required to provide ESST information on paycheck stubs and may now provide the information each pay period using a “reasonable system” to provide the information, including electronic systems, provided that an employer-owned computer with a printer be available to employees.
• The amendment changes the definition of “rate of pay” as it relates to payment of ESST, by changing the term “regular rate” to “base rate.” The term “base rate” indicates the employee’s base hourly rate or the rate in effect that the time ESST was used if the employee is paid multiple rates. It also clarifies that commissions, bonuses, piecework, etc. are not included in the base rate.
• The 80-hour threshold for coverage has been changed to include any person who is “anticipated” to perform 80 hours of work in the state in a year.
• An employer may now require documentation substantiating an employee’s absence if the employee uses ESST for more than three scheduled workdays.
• Time for an employee to make arrangements for or to attend a funeral service or memorial or address financial or legal matters following the death of a family member has been added as covered leave under ESST.
• The amendments clarify that employers need not allow ESST to be taken in increments of less than 15 minutes but that they cannot require the use of ESST in increments of more than 4 hours.

Effective January 1, 2025, employer-provided personal illness and injury paid leave will be converted into ESST time even if the paid leave extends beyond the 48 or 80 hours required under the law. Here is the text of the amendment:

“… All paid time off and other paid leave made available to an employee by an employer in excess of the minimum amount required in section 181.9446 for absences from work due to personal illness or injury, but not including short-term or long-term disability or other salary continuation benefits, must meet or exceed the minimum standards and requirements provided in sections 181.9445 to 181.9448, except for section 181.9446. For paid leave accrued prior to January 1, 2024, for absences from work due to personal illness or injury, an employer may require an employee who uses such leave to follow the written notice and documentation requirements in the employer’s applicable policy or applicable collective bargaining agreement as of December 31, 2023, in lieu of the requirements of section 181.9447, subdivisions 2 and 3, provided that an employer does not require an employee to use leave accrued on or after January 1, 2024, before using leave accrued prior to that date.”

Parental Leave

Effective August 1, 2024, the Minnesota parental leave law will prohibit employers from reducing the length of the 12 weeks of leave for any period of paid or unpaid leave taken for parental care medical appointments.

Minnesota Paid Leave Law

Beginning January 1, 2026, employers are required to provide eligible employees with paid family and medical leave for up to 12 weeks. The law requires partial wage replacement, funded through a payroll tax split between employers and employees.

The Legislature amended the law by:

• Increasing the payroll tax from its initial 0.7 percent to 0.88 percent.
• Adding or clarifying certain terms.
• Requiring applicants for intermittent paid leave to wait to apply for benefits until they have 8 hours of accumulated leave unless more than 30 calendar days have lapsed since the initial leave was used.
• Requiring employers to allow leave to be used in minimum increments of one calendar day.
• Providing an appeals process.

The effective dates of these changes vary, but the effective date of the program remains January 1, 2026.

Pregnancy Accommodation

The state’s pregnancy accommodation law was updated to provide that employers maintain coverage under any group health insurance plan for the employee and any covered dependents during leave due to pregnancy accommodation. The employee can be required to continue to pay their portion of the coverage costs. This change is effective August 1, 2024.

Job Postings

By January 1, 2025, employers with 40 or more employees in the state must include a salary range, or a good faith estimate of a range, in each job posting as well as a description of all benefits and other compensation. The information must be included in postings made by the employer or third parties acting on their behalf. Employers who do not offer a salary range must list a fixed rate. Open-ended ranges are not allowed.

Restrictive Covenants

Effective July 1, 2024, for any contracts and agreements entered into on or after that date, this law makes restrictive covenants void in service contracts with one exception related to workers who consult for computer software development and related services through a service provider.

New Employer Record-keeping Requirement

Employee earnings statements for each employee for each pay period must be retained by an employer under existing record-keeping requirements.

The definition of employer under the state’s employee access to personnel files law was amended. A covered employer, previously defined as those employing 20 or more employees, has been amended to employment of one or more employees—effective August 1, 2024.

If you have any questions on any of the above information, please contact the HR Hotline.