Minnesota: Legislative Update
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Discussion
During Minnesota’s most recent legislative session, the state passed several new and amended laws as part of an omnibus bill that will impact Minnesota employers. Key aspects of the bill are summarized below.
New Pay Transparency Requirements. Effective January 1, 2025, employers with 30 or more total employees in Minnesota will be subject to the state’s new pay transparency requirements. Covered employers will be required to include in all job postings a starting salary range, or if no range, a fixed pay rate. The range must include a minimum and a maximum amount based on the employer’s good-faith estimate of the opportunity for each position, and cannot be open-ended. Additionally, any posting must include a “description of all the benefits and other compensation, including but not limited to any health or retirement benefits” associated with the position.
The term “job posting” is defined broadly in the new law to include “any solicitation intended to recruit job applicants for a specific available position, including recruitment done directly by an employer or indirectly through a third party, and includes any postings made electronically or via printed hard copy, that includes [sic] qualifications for desired applicants.”
New Requirements for Independent Contractors. Effective July 1, 2024, significant changes go into effect to Minnesota’s independent contractor laws. All employers, as well as owners, will be subject to increased monetary penalties for the misclassification of employees as independent contractors. Specifically, employers may face up to $10,000 per individual violation for the improper classification of employees. Additional penalties may be imposed if employers fail to report workers as employees to a state agency. Under the new law, individual owners and officers may be held personally responsible for intentional or continued violations.
In addition, and effective March 1, 2025, the Minnesota legislature has updated the factor test for determining employee or independent contractor status for the construction industry. While all industries except construction will continue to use the five-factor test to determine classification, a new 14-factor test has replaced the preexisting 9-factor test in the construction industry. The new test focuses on the time at which the services were provided for purposes of determining appropriate classification. All of the factors must be met in order to confirm independent contractor classification.
Under the new test an individual is an independent contractor only if they:
- Were established and maintained separately from the person to whom they are providing services;
- Own, rent, or lease equipment, tools, vehicles, materials, supplies, etc. that are used in performing their service;
- Provides or performs services to multiple persons or to the general public;
- Is in compliance with specific business registration requirements;
- Is in good standing;
- Has a state unemployment insurance account;
- Has workers’ compensation insurance;
- Holds a current business license;
- Is operating under a contract, subject to specific compliance requirements;
- Submits invoices and receives payments;
- Maintains control over the means of providing or performing the specific services;
- Incurs and maintains expenses and costs;
- Is responsible for the completion of specific services as stated in the applicable contract; and
- May realize additional profit or suffer loss.
Pregnancy and Parental Leave Enhancements. Effective August 1, 2024, the Minnesota legislature has revised the Pregnancy and Parental Leave law to require the 12 weeks of parental leave guaranteed by state law “not be reduced by any period of paid or unpaid leave taken for prenatal care medical appointments.” This means an individual may use more than 12 weeks of protected leave in connection with pregnancy-related medical appointments prior to birth and for care of a child following birth.
Additionally, Minnesota will now require employers to continue providing insurance benefits for employees on leave, and their dependents, as if the employees were not on leave.
New Non-Compete Restrictions. Effective July 1, 2024, a new law prohibits service providers from entering into a contract prohibiting their customers from soliciting or hiring the service provider’s employees, independent contractors, or any other person who performs work for the service provider. Subject to very limited exceptions, “service providers” is defined broadly to include any businesses or groups of persons that are contracted to provide services to a customer. The new law applies to any contractual provision that restricts, restrains, or in any way prohibits the customers from directly or indirectly soliciting or hiring those individuals. Such provisions are deemed void and unenforceable and service providers are required to notify employees of any provision that violates this ban.
Elimination of Alternative Minimum Wage. Effective January 1, 2025, a lower minimum wage may be paid only to those under 20, and only for the first 90 days of their employment.
Payment of Electronic Tips. Effective August 1, 2024, the full amount of all tips received through an electronic payment, such as the use of a credit card or app, must be credited to the employee in the pay period in which it was received and paid to the employee no later than the next scheduled pay period.
Amendments to Minnesota Human Rights Act. Several amendments to the Minnesota Human Rights Act (MHRA) were passed that impact employee rights and potential damages.
- Expanded Definitions – Similar to the ADA, the definition of “disability” in the MHRA is 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 to include caretakers. Under this new definition, it is unlawful to discriminate 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.”
- Increased Potential Damages – A new section has been added to the MHRA concerning civil penalties and amending the damages available for successful claims. Compensatory damages now explicitly 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 amendments also remove the cap on punitive damages and require that in cases decided by a jury, the jury will determine the amount of alldamages to be awarded, including compensatory, treble, and punitive damages.
- Extended Time to File Claims – Previously, individuals alleging a claim under the MHRA had 45 days to commence litigation following receipt of notice of dismissal from the Minnesota Department of Human Rights (MDHR). Under the amended law, individuals will now have 90 days.
- MDHR Determination Timeline – Under the amended law, the MDHR must make a determination on a charge of discrimination within one year of filing.
Amendments to Drug and Alcohol Testing in the Workplace Act. Minnesota will now allow the use of “oral fluid testing” for drug, alcohol and cannabis testing. This change does not expand the list of substances that an employer is permitted to test for, instead, it expands an employer’s options for how to test. Anyone who receives a positive, inconclusive, or invalid result from an oral fluid test must be provided a laboratory test at the employer’s expense, if requested by the applicant or employee within 48 hours. If the applicant or employee fails the laboratory test, they are entitled to request a second retest at their own expense.
Action Items
- Review and update job postings and descriptions for compliance with pay transparency requirements.
- Review employee and independent contractor classifications.
- Review any restrictive covenants with legal counsel to determine compliance.
- Review wage rates for minor employees and other employees earning minimum wage.
- Review and update leave policies, as applicable.
- Review and update drug testing policies and procedures to account for new oral fluid testing allowance.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2024 ManagEase