Minnesota 2024 Legislative Update

The 2024 Minnesota legislative session is in the books.  As we have previously reported, last year’s 2023 legislative session was historical in the number of employment-related laws that were passed.  2024 did not have as much action as last year, but there are certainly a number of new laws and changes to existing ones that should be on every employer’s radar.  Many will require changes to handbooks and policies to remain compliant, so please consult with Felhaber’s experienced team of labor and employment attorneys to discuss your specific situation.

The below information is a high-level summary of the legislative changes.  We are hosting a Webinar on Friday, June 14 from 8:30 – 11:00 a.m. to discuss the Minnesota legislative changes in more detail, and we will be discussing several other recent changes at the federal level. This includes the new FLSA rule on exempt employees and salary thresholds and the FTC’s non-compete ban.  The Webinar is free, you can earn 2.25 hours of continuing education credits, and it will be well worth your time to attend.  More information can be found here. We look forward to seeing everyone there.

Earned Sick and Safe Time Changes

The 2024 Minnesota legislature passed a number of changes to the ESST law.  These changes merit close review and given the number of changes, we have separately reported on them here.

Salary Ranges Required in All Job Postings

Starting January 1, 2025, Minnesota law requires employers to disclose salary ranges in all job postings.  The law requires an employer to disclose in every job posting the “starting salary range” and “a general description of all of the benefits and other compensation (i.e., health, retirement benefits) to be offered to a hired applicant.”  Salary range means “the minimum and maximum annual salary or hourly range of compensation, based on the employer’s good faith estimate” for the position.  The salary range cannot be open-ended (i.e., “$75,000 +”) and, if the employer does not want to post a range, then they must list a fixed pay rate.  The law does not compel employers to have a written job posting whenever it needs to hire someone.  Instead, it just requires a salary range if the employer decides to have a job posting.  Importantly, the term “employer” only includes companies who employ more than 30 employees in Minnesota, so small employers under that threshold are exempted from this law.

Restrictive Covenants in Service Contracts

Following on the heels of MN’s non-compete ban enacted last year, the Minnesota legislature passed a law that bans restrictive covenants in service contracts.  The law prohibits an agreement between a customer and a “service provider” that restricts or prohibits the customer from soliciting or hiring any employees of the service provider. The law becomes effective July 1, 2024, and only applies to agreements entered into after that date.

Examples of these types of service contracts include a daycare provider that requires all of their families to enter into an agreement that prohibits families from directly hiring their employees as nannies.  Or accounting firms, IT providers, consulting companies, or other service providers that require their customers to agree to not hire their employees to work directly for the customer in an in-house position. All of these types of restrictions are now prohibited in Minnesota except for pre-existing agreements which are grandfathered in.

Definition of “Disability,” “Discriminate,” and “Familial Status” Expanded Under Minnesota Human Rights Act (MHRA)

The definition of “disability” under the MHRA has historically been defined as “any person who (1) has a physical, sensory, or mental impairment which materially limits one or more major life activities; (2) has a record of such an impairment; or (3) is regarded as having such an impairment.”  The Minnesota legislature added a fourth category: a person who “has an impairment that is episodic or in remission and would materially limit a major life activity when active.”

The term “discriminate” has been defined as to “segregate or separate and, for purposes of discrimination based on sex, it includes sexual harassment.”  Under the new law, harassment is no longer limited to “sexual harassment,” which expands the scope of “discriminate” to include any harassment made due to any other protected class (race, religion, age, disability, etc.).

The definition of “familial status” has been limited to situations where “one or more minors” are domiciled with the minor’s parents or guardians.  The definition has been expanded to include certain categories of adults – “[F]amilial status also means 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.”

Each of these changes is effective August 1, 2024.

Additional Penalties and Remedies Under the MHRA

Employers have long been subject to compensatory damages (lost wages, emotional distress damages, etc.) and attorneys’ fees if found to have violated the MHRA. The amended statute states that a “court shall order” a party who violates the MHRA “to pay a civil penalty to the state” in addition to other damages available to the aggrieved party. In addition, if a party has engaged in an “unfair discriminatory practice,” the court “shall” award to the aggrieved party “compensatory damages, including mental anguish and suffering, in an amount up to three times the actual damages sustained.”  The statute also recognizes the availability of punitive damages and no longer caps them at $25,000.  In addition to monetary remedies, a court may also order equitable relief, including “the hiring, reinstatement, or upgrading of an aggrieved party who has suffered discrimination, with or without back pay.”

These changes are also effective August 1, 2024.

Religious Organizations Exempted From Certain Aspects of the MHRA

The MHRA has a provision that provides religious organizations certain exemptions under the MHRA, including being able to “give preference to persons of the same religion or denomination” in hiring.  The Minnesota legislature has expanded the scope of this exemption to be consistent with the First Amendment and the ministerial exception recognized by the U.S. Supreme Court in the Hosanna Tabor and Our Lady of Guadalupe decisions.  The amended version of the statute continues to allow religious organizations to give religious preference when hiring.  But it also states that religious organizations are not prohibited from “taking any action with respect to education, employment, housing and real property, or use of facilities” when such action is made consistent with the organization’s religious beliefs.  These new provisions only apply to non-profit religious organizations, including religious schools, and does not apply to “secular business activities engaged in” by the religious organization that is “unrelated to [its] religious and educational purpose.”

Additional Penalties and Liability for Misclassifying Employees

Minnesota has had an employee misclassification statute on the books for years which generally prohibits employers from misclassifying employees as independent contractors.  However, the law has been significantly amended with an eye towards enforcement and penalties.

First, if an “owner, partner, principal, member, officer, or agent” of a company “knowingly or repeatedly engaged” in misclassification of employees, then that person may be held personally liable.

Second, the new statute allows for compensatory damages to the individual who has been misclassified, which may include supplemental pay, overtime, shift differentials, vacation pay, sick pay, health insurance, life or disability insurance, retirement plans, Social Security and Medicare, and any other costs and expenses incurred by the individual resulting from the failure to have been classified correctly.

Third, the new statute allows for a penalty of up to $10,000 for each individual the company failed to classify as an employee, a $10,000 penalty for each statutory violation, and a $1,000 per-day penalty for any person who “delays, obstructs, or otherwise fails to cooperate with the commissioner’s investigation.”

Changes to Minnesota’s Cannabis and Drug and Alcohol Testing Laws

There were a number of relatively minor changes to DATWA.  They include allowing employers to use “oral fluid tests” (i.e. saliva tests) for cannabis, drug, and alcohol screens when otherwise allowed under the statute. The oral fluid tests can be administered at the employer’s place of business, which prevents employees having to go off-site to a testing facility.

DATWA originally allowed reasonable suspicion testing if an employer had a reasonable suspicion that an employee “is under the influence of drugs or alcohol.”  When recreational marijuana was legalized during the 2023 legislative session, there were a number of changes to DATWA to reflect that. However, the legislature did not amend the reasonable suspicion language to include cannabis.  That has now been corrected and an employer may require testing if it has a reasonable suspicion that the employee “is under the influence of drugs, cannabis, or alcohol.”

Minnesota Paid FMLA

Minnesota’s Paid FMLA statute is set to go into effect on January 1, 2026.  The legislature passed a number of changes to the statute, many of which address procedural issues with how the State will operate the system.

There are a few noteworthy changes for employers.

First, DEED is required to notify all employers within five business days if an employee has submitted a claim for benefits.

Second, intermittent use of paid FMLA “must be taken in increments consistent with the established policy of the employer” provided that the policy permits minimum increments of at most one calendar day.

Third, if an employer provides an employee with “wage replacement during an absence,” and if those supplemental benefits and paid FMLA leave benefits exceed the employee’s usual salary, then the employee will be required to return the excess to the employer.

Fourth, for employees who are eligible for both disability benefits and paid FMLA, the disability insurance benefits “may be offset by family and medical leave benefits paid to the employee” by the State. However, such offset must be “pursuant to the terms” of the disability policy. Therefore, employers should review their disability policies and make sure there is language allowing offset to prevent the employee from receiving more in disability and paid FMLA benefits than their normal compensation.

Fifth, the original version of the statute states that an applicant is not eligible to receive paid FMLA benefits if they are receiving severance pay. That provision has been deleted from the statute.

Benefit Continuation During Pregnancy-Related Leave and Parenting Leave

If an employee is provided a leave of absence as a form of pregnancy accommodation under Minn. Stat. 181.939, Subd. 2, or is provided pregnancy and parenting leave under Minn. Stat. 181.941, the employer must now maintain health insurance coverage during the leave period. However, the employee “must continue to pay any employee share of the cost of the benefits.”  This change is effective August 1, 2024.

Prenatal Appointments Cannot Be Counted Against 12-Week Pregnancy and Parenting Leave

If an employee needs to attend prenatal care medical appointments, that time away from work cannot be counted against the twelve weeks of “pregnancy and parenting leave” that employers are required to provide to all employees.

Service Animals in Public Places

Minnesota law previously prohibited hotels, restaurants, or other public places from preventing “a blind or deaf person or a person with a physical or sensory disability from taking a service animal into the public place.”  This terminology has been simplified and expanded so that it applies to any “person with a disability” who uses a service animal.  This arguably expands who can use a service animal at public places by including those who did not fit the original definition but still have a disability.

Right to Review Personnel Record

Employers are likely familiar with the Minnesota statute that provides current and former employees the right to review their personnel record upon request. The statute had defined “employer” as those companies that have 20 or more employees.  That definition has changed to “one or more employees,” so all employers in Minnesota are now under the purview of the personnel record statute.