MN Legislature Passes Statewide Paid Sick Leave, Non-compete Ban, and Much More

Late last night, the Minnesota House and Senate passed SF 3035, which is the 276-page omnibus jobs bill.  SF 3035 includes numerous changes to Minnesota state law, including: mandating statewide paid sick leave beginning on January 1, 2024, a near complete ban on non-compete agreements, amendments to the pregnancy and nursing mothers accommodation statute, creation of a new “Nursing Home Workforce Standards Board,” and much more.

To become law, SF 3035 still needs Governor Walz’s signature.  But, he will undoubtedly sign the bill in the coming days and employers need to begin preparing for the substantial legal changes that are effectuated by the new law.

Statewide Paid Sick Leave (Effective January 1, 2024)

SF 3035 includes a new statewide requirement that employees accrue “earned sick and safe time” beginning on January 1, 2024.  The requirement mirrors the paid sick leave requirements in Minneapolis, St. Paul, and Bloomington, and applies to all employers with 1 or more employees.

Beginning on January 1, 2024, employees must receive at least 1 hour of ESST for every 30 hours worked, up to 48 hours per year.  Employees must be permitted to carryover up to 80 hours of ESST from one year to the next unless the employer “front-loads” 80 hours of ESST or pays out ESST at the end of the year.

Employees must be permitted to use ESST for: (1) the employee’s own illness, injury, health condition, or preventative care; (2) to care for a “family member” for the family member’s illness, injury, health condition, or preventative care; (3) leave related to domestic violence or personal safety issues for employee or “family member,” (4) certain business closures by order of a “public official”; and (5) the employee’s inability to work or telework because of health concerns related to the potential transmission of a communicable illness related to a public emergency.

Existing policies can comply with the new ESST requirement, provided that the policy meets or exceeds the accrual and use mandates set forth in SF 3035.  The bill also makes clear that it does not “preempt, limit, or otherwise affect the applicability of any other law, regulation, requirement, policy, or standard that provides for a greater amount, accrual, or use by employees of paid sick and safe time or that extends other protections to employees.”  Thus, employers in Minneapolis, St. Paul, Duluth, and Bloomington will likely have to comply with SF 3035 and their local ordinances if they provide greater protection to employees.

Near Total Ban on Non-Competes (Effective July 1, 2023)

SF 3035 also includes a near total ban on non-compete agreements in Minnesota.  The provision would be effective on July 1, 2023 and, as we previously reported, it would apply to both employees and independent contractors.  Non-competes are defined as:

[A]n agreement between an employee and employer that restricts the employee, after termination of the employment, from performing: (1) work for another employer for a specified period of time; (2) work in a specified geographical area; or (3) work for another employer in a capacity that is similar to the employee’s work for the employer that is party to the agreement.

The only exemption to this ban is for non-competes entered into in connection with the sale of a business or in anticipation of the dissolution of a business.

Importantly, SF 3035 does not include the following types of agreements in the definition of a “covenant not to compete”: (1) “a non-disclosure agreement, or an agreement designed to protect trade secrets or confidential information,” or (2) “a nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer.”  Therefore, these types of agreements would remain enforceable in Minnesota.

SF 3035 also provides that employees and independent contractors may recover their reasonable attorneys’ fees if required to enforce their rights under the non-compete law, and that employers cannot avoid the impact of this law by inserting a choice of law provision favoring the law of another state.

Finally, SF 3035 makes clear that the prohibition on non-competes “is effective July 1, 2023, and applies to contracts and agreements entered into on or after that date.”  Thus, non-compete agreements that were executed before July 1, 2023 would not be affected by the new law.

Pregnancy and Nursing Mothers Accommodations (Effective July 1, 2023)

SF 3035 also includes several amendments to the pregnancy accommodation and nursing mothers statutes.  For instance, SF 3035 makes the following revisions to Minn. Stat. § 181.939, subdivision 1:

(a) An employer must provide reasonable break times each day to an employee who needs to express breast milk for her infant child during the twelve months following the birth of the child. The break times must, if possible, may run concurrently with any break times already provided to the employee. An employer is not required to provide break times under this section if to do so would unduly disrupt the operations of the employer. An employer shall not reduce an employee’s compensation for time used for the purpose of expressing milk.

This significantly expands the rights for nursing mothers to take breaks to express milk for their babies, including those who are more than 12 months old.  Additionally, in subdivision 2, SF 3035 would add the following examples of pregnancy accommodations: “Reasonable accommodation may include but is not limited to temporary transfer to a less strenuous or hazardous position, temporary leave of absence, modification in work schedule or job assignments, seating, more frequent restroom breaks or longer break periods, and limits to heavy lifting.”

These changes to Minn. Stat. § 181.939 would be effective July 1, 2023.

Creation of a “Nursing Home Workforce Standards Board”

SF 3035 creates a “Nursing Home Workforce Standards Board.”  The board would “adopt rules establishing minimum nursing home employment standards that are reasonably necessary and appropriate to protect the health and welfare of nursing home workers.” This includes establishing initial standards for wages and working hours no later than August 1, 2024.

The board would be comprised of nine members. HHS and MN-DOLI would each designate one member. Employers and employees would be given three seats each to represent their interests as well. The governor would have to make these initial appointments no later than August 1, 2023. A simple majority vote would be needed for the board to take any binding action.

Prior to adopting minimum employment standards, the board would have to investigate industrywide market conditions to ensure standards meet or exceed existing conditions for a majority of workers. These standards would have to be reviewed at least once every two years.

Furthermore, the board would be empowered to certify worker organizations it deems qualified to provide training to nursing home workers and establish requirements for the curriculum used in these trainings. These training sessions would have to cover several topics, including the minimum working standards established by the board; antiretaliation protections granted by the bill; and information on how to report violations of workers’ rights to various regulatory entities. The board would have to review the adequacy of the curriculum at least annually.

Employers would have to ensure their employees attend a one-hour training session and would have to compensate workers for these sessions.

Other Provisions

The 276-page bill also includes numerous other revisions to Minnesota employment law, including:

    • Establishing new worker safety requirements in the warehouse industry and updating the Packinghouse Workers Bill of Rights;
    • Instituting strengthened wage protections for construction workers, including a requirement that a contractor entering into a “construction contract” shall be “liable for any unpaid wages, fringe benefits, penalties, and resulting liquidated damages owed to a claimant or third party acting on the claimant’s behalf by a subcontractor at any tier acting under, by, or for the contractor or its subcontractors for the claimant’s performance of labor”;
    • Changes to prevailing wage and certain construction contracts;
    • A ban on so-called “restrictive franchise agreements”;
    • Substantial modifications to the Public Employment Labor Relations Act, which governs collective bargaining and unionization rights in the public sector; and
    • A new prohibition on employers from compelling employee attendance at meetings that discuss religious matters, political issues, or arguments against unionization, which is likely preempted by the National Labor Relations Act.

Bottom Line

SF 3035 represents a substantial revision to employment laws in Minnesota.  While the law still needs to be signed by Governor Walz, he will undoubtedly sign the bill in the coming days and employers need to begin preparing for the substantial legal changes that are effectuated by the new law.

We will continue to monitor this issue as it develops.