United States - Employee Rights/ Labour Relations (2024)

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Under Minnesota's Paid Leave Law (PLL) that goes into effectin January 2026, employers must provide covered employees up to 20weeks of leave to care for themselves and their family members withpaid leave benefits available through the MinnesotaPaid Leave Program.

Although the PLL was passed on May 25, 2023, employees will notbe able to access paid leave benefits until January 1, 2026. In theinterim, legislators and agency personnel are working to answerquestions and fill information gaps.

Three important recent developments concerning the PLL include:(1) new guidance from Minnesota's Department of Employment andEconomic Development (MN DEED) for employees and employers, (2)amendments to the PLL signed into law by Governor Tim Walz on May24, 2024, which allow for increases to payroll taxes to implementthe PLL and (3) amendments which provide a comprehensive scheme forappeals and calculating benefit amounts, among other changes.

New Guidance

On May 15, 2024, MN DEED published Frequently Asked QuestionsGuides interpreting the PLL for employees and their families (Employee Guide)and employers (Employer Guide). Both Guides providecrucial insight into the MN DEED's interpretation and intendedimplementation of the PLL. For example, the Employee Guide explainsthat after January 1, 2026, employees will have access to two typesof state-funded leave — family leave and medical leave— for up to 12 weeks per benefit year for each type with amaximum of 20 weeks of paid leave per benefit year. The EmployeeGuide also explains that while leave benefits are availablestarting January 1, 2026, in the event an employee welcomes a childthrough birth, adoption, or foster care in 2025, the employee willstill be eligible for paid family leave starting January 1, 2026,provided the leave is used within the first 12 months of welcomingthe new child.

The Employer Guide provides much-needed guidance for employers.It directs that covered employers who do not already have an onlineaccount with MN DEED's Unemployment Insurance Division mustregister for an online account by October 31, 2024, the first wagereport submission date. Importantly, employers who are exempt fromparticipating in Minnesota's Unemployment Insurance Program(such as non-profit and religious organizations) are notautomatically exempt from the PLL and may need to establish a"Paid Leave Only" employer account by the first wagereport submission date. Starting October 31, 2024, employers mustbegin submitting "wage detail reports" (statements ofemployees' wages) for the preceding fiscal quarter to MN DEEDonline. Employers already filing wage reports for unemploymentinsurance purposes need not submit a second wage detail report forPLL purposes; the wage detail report required for MinnesotaUnemployment Insurance will satisfy both the employer'sunemployment insurance and PLL obligations. Finally, startingNovember 1, 2025, employers must post notice of employees'rights under the PLL in the workplace. MN DEED has yet to publishan exemplar notice.

Like other state-run paid family leave programs, Minnesota PaidLeave is designed to be funded by both employees and employers viaincreased payroll taxes and employer premium payments. However,employers with 30 or fewer employees will be eligible for reducedpayments (discussed below), and employers who offer paid familyleave through a private carrier will be able to apply for exemptionfrom PLL premium payment requirements as long as the private planprovides the same or more generous benefits. We anticipate moreinformation on private plan exemptions will become available priorto the April 30, 2026, initial premium payment deadline. Employerswho do not have a qualifying private plan can expect to make theirfirst paid leave premium payment on or before April 30, 2026.

Legislation Allows for Increased Premium Rates

Like Minnesota's unemployment insurance program, the PLLpermits MN DEED to collect premiums in the form of a percentage ofan employee's taxable wages. The PLL initially provided for a0.7% payroll tax on employers, half of which may be passed on tothe employee. On May 13, 2024, actuarial and consulting firmMilliman presented to the Minnesota House of Representatives areport which showed a greater contribution rate was necessary toensure the MN DEED has sufficient revenue to administer the paidleave program. Milliman predicts taxing wages at 0.88% wouldsufficiently fund the paid leave program. Based on Milliman'sreport, the legislature adopted amendments to the PLL, effective asof May 24, 2024, that authorize the commissioner to adjust annualpremium rates.

Small employers may be eligible for reduced contributions. Theamendments added that employers who have up to 30 employees and payan average wage to employees that is equal to or less than 150% ofMinnesota's average wage will be eligible for a reduced"small employer premium rate." Small employers may alsoapply for assistance grants from MN DEED in a process that has yetto be determined by MN DEED.

Given this new information, employers should expect an increasedpayroll tax provision in the PLL, and employees can expect tocontribute up to 0.44% of their wages toward the paid leaveprogram.

New Appeals Framework; Other Changes

The most comprehensive addition to the PLL concerns the abilityof benefit applicants and employers to appeal benefitdeterminations. The recently adopted amendments provide thatemployers and employees typically have 30 calendar days from thedate a decision is made by MN DEED or a private plan administratorto request administrative review of a decision regarding an awardof benefits under the PLL. Then, MN DEED will issue a hearingnotice to the parties. Next, the hearing officer will hold aprivate and recorded hearing and issue a written decision providingtheir reason for the decision and findings of fact. Any evidence ortestimony used at the hearing cannot be considered in any civiladministrative, or contractual proceeding, though it can be used ina criminal proceeding. The parties can then file a request forreconsideration, which will typically be considered by the samehearing officer. No party can recover attorneys' fees or costsagainst MN DEED based on the initial hearing or reconsideration.After a decision is made on reconsideration, an employer (afterpaying the filing fee) or covered individual (without paying thefiling fee) can appeal the decision to the Minnesota Court ofAppeals.

Definitions. The amendments also include changes to thedefinitions section of the PLL. First, an employer using a privateplan to administer paid leave can choose its own definition of a"benefit year" under the statute. Second, independentcontractors and self-employed individuals can opt into coverage forpaid leave benefits. Third, the definition of a "familymember" is expanded to include the child of a domesticpartner.

Intermittent Leave. The amendments also provide neededdetail regarding a covered individual's ability to apply forbenefits for intermittent leave. A covered individual's initialpaid week occurs when the employee takes a combination of sevenleave days, whether those days are consecutive or nonconsecutive. Acovered individual also must take intermittent leave in incrementsconsistent with the employer's policy, which must indicate aminimum increment of one calendar day of leave.

Calculation of Benefits. The amendments also change howbenefits are calculated. Previously, the PLL considered whether anindividual received an hourly wage or salary as part of thecalculation for their benefit payment amount. Pursuant to theamendments, regardless of the structure of a coveredindividual's income, benefit payments will be calculated basedon the average hours the covered employee worked during the lasttwo quarters before filing an application for benefits. Then, thebenefit amount is calculated based on a percentage of the benefitapplicant's average weekly wage. The PLL gives employersdiscretion to provide employees supplemental benefits on top of thebenefits received under the law, like paid time off. The amendmentsgive employees the responsibility to return any supplementalpayments received in excess of their usual income to theiremployer.

Retroactive Benefits. The amendments further explainwhen benefits become effective for covered individuals. When abenefit application is filed, the benefits take effect the Sundayof that calendar week. Previously, if an applicant wanted benefitsto begin before they filed an application, the applicant could onlyrequest benefits to start, at most, seven days prior to the Sundayof that calendar week. Now, a new safe harbor provision allows anapplicant who is incapacitated or failed to timely apply forbenefits through no fault of their own to request retroactivepayment of benefits for a period of time longer than seven daysprior to the Sunday of the week that they filed. Coveredindividuals, however, cannot receive benefits under the PLL forcertain absences or reasons for delay. The amendments added anexpress prohibition on an individual's ability to apply forbenefits for any time they were unable to work due to incarcerationor during time they received unemployment insurance.

Reinstatement. Under the PLL, an employee generally hasthe right to be put back to the same position they held beforestarting leave upon return from paid leave. The amendments clarifythat employees must be put back in a position with the sameovertime pay rate and overtime hour opportunities that theyreceived before leave, unless overtime opportunities changed forsimilarly classified employees.

Employer Plan Changes. The amendments also walk throughwhat happens when a covered individual's benefit plan changes.First, if an employer switches from the state-administered paidleave program to a private plan (or vice versa), then the planunder which the covered individual was approved for leave controlsand continues to control for the total time the request wasapproved. Any extension or change requests made by the coveredindividual would then be administered by the employer's newplan. If an employee's employment ends, then they must stillreceive coverage for 26 weeks or until they secure another job,whichever occurs first.

Data Privacy. Finally, the amendments added a dataprivacy provision, directing that information collected pursuant tothe PLL must be kept private. With some exceptions, any recordedtestimony or exhibits provided regarding a benefit determinationcannot be disclosed without a court order. The privacy provisionalso contains carveouts permitting information disclosure tocertain state and federal agencies, employers, and healthcareproviders.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circ*mstances.