The 2023 Minnesota legislative session, which ended May 22, was chock-full of critical employment law developments that will have immediate and ongoing impacts for employers in Minnesota on a variety of fronts, including paid leave, accommodations, noncompetition agreements, drug testing and other worker safety requirements, to name a few. Below is a summary of the most critical developments that apply to most Minnesota employers and what they mean for employer practices and operations.
Noncompete Ban
A bill banning noncompete provisions in employment agreements passed in the Minnesota Legislature and Gov. Walz is expected to sign the bill into law. The bill prospectively prohibits all noncompete agreements with employees or independent contractors regardless of their position or level of compensation. It does not, however, prohibit noncompetition agreements that are agreed to: (1) during the sale of a business where the agreement prohibits the seller from carrying on a similar business within a reasonable geographic area for a reasonable period of time; or (2) in anticipation of the dissolution of a business in which the dissolving partnership or entity agrees that the partners, members or shareholders will not carry on a similar business in a reasonable geographical area for a reasonable period of time. Nonsolicitation and confidentiality agreements with employees and independent contractors would still be permissible.
The new law would take effect July 1, 2023, and is not retroactive, meaning that it would only apply to agreements entered on or after July 1. The bill also provides that on or after July 1, if a noncompete agreement is used in an agreement with an employee or independent contractor, only the impermissible covenant will be rendered void, not the entire contract in which the noncompete provision is contained. Notably though, in addition to other available remedies and injunctive relief, a court may award an employee who is enforcing their rights under this law their reasonable attorneys’ fees. Accordingly, Minnesota employers need to remove impermissible noncompete provisions from contracts starting July 1 in order to avoid exposure under this new law, including a potential attorneys’ fee award.
Another notable impact of this new law is that, irrespective of whether the agreement has a noncompete provision, the law prohibits employers from requiring employees who reside and work in Minnesota from: (1) requiring the employee to adjudicate outside of Minnesota a claim arising in Minnesota; or (2) depriving the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota.
While there is almost certainly going to be questions and litigation surrounding the scope of this new proposed law going forward, companies operating in Minnesota should immediately start reevaluating their agreements and the other measures they are using to protect critical relationships, confidential and proprietary information and against unfair competition.
Statewide Paid Sick and Safe Leave
The Minnesota Legislature passed a bill, which will go into effect starting January 1, 2024, creating a statewide paid sick and safe leave entitlement for employees applying to all employers with one or more employees in the state. Gov. Walz is expected to sign the bill into law. Under the new law, eligible employees will be entitled to accrue a minimum of one hour of earned sick and safe time for every 30 hours worked. An employee’s sick and safe time will begin to accrue on the day they start working and will continue to accrue until the maximum of 48 hours per year is reached. The amount of time accrued may not exceed 48 hours unless the employer agrees to a higher amount. The new law also requires unused sick and safe time to carry over into the following year, as long as the total amount of accrued sick and safe time does not exceed 80 hours.
Earned sick and safe time may be used for a variety of reasons, including mental or physical illness, care of a family member (for reasons listed under the new law), domestic abuse, and closure of the employee’s place of business due to weather or public emergency, to name a few. This new law will have no effect on policies already put in place by employers that exceed the requirements of the law. An employee who seeks to use their earned sick and safe time for more than three consecutive days may be required by the employer to submit reasonable documentation to the employer in support of the absences, which could include documentation from a health care professional for sick time or from the court, a police officer, or an attorney for purposes of the use of safe time. However, a written statement from the employee is usually sufficient if medical services were not sought. Employers should also be aware that the law includes certain record-keeping and notice requirements, as well as provisions prohibiting retaliation against employees for exercising their rights under the law.
Nursing Mothers, Lactating Employees and Pregnancy Accommodations
The Minnesota legislature has passed amendments to Minnesota’s nursing mothers and pregnancy accommodations statute, effective July 1, 2023, to broaden protections for employees. Specifically, the amendments remove language that previously allowed for limitations for reasonable paid breaks to express milk for the first year following childbirth and removed language that allowed employers to decline to provide the breaks if doing so “would unduly disrupt the operations of the employer.” With respect to pregnancy accommodations, the amendments allow for an employee to take “longer” restroom, food and water breaks as an accommodation without being required to provide supporting documentation, and added “temporary leave of absence, modification in work schedule or job assignments,” and “more frequent or longer break periods” to the list of potential reasonable accommodations. Employers should take note the amendments also broaden discrimination and retaliation protections for employees exercising their rights under the law and add a notice requirement to employees regarding such rights.
Recreational Marijuana and Employment Law Implications
Minnesotans will soon be allowed to possess and use marijuana recreationally as a result of a new bill passed by the Minnesota Legislature this session, which Gov. Walz is expected to sign into law. Minnesota law currently prohibits employers from refusing to hire a job applicant, or disciplining or discharging an employee, for using a “lawful consumable product” away from the employer’s premises during nonworking hours. This new law clarifies that various forms of cannabis (as defined by the new law) will be considered a “lawful consumable product” for which employees cannot be discriminated against for using off duty in a lawful manner.
The bill also amended the Drug and Alcohol Testing in the Workplace Act (DATWA) to place limitations on cannabis testing for applicants and employees. Minnesota employers now can no longer test applicants for cannabis unless testing is required by state or federal law or unless the position falls within specific classes of jobs. For example, employers may still conduct pre-employment testing for “safety-sensitive positions,” which are defined as jobs “in which an impairment caused by drug, alcohol, or cannabis usage would threaten the health or safety of any person,” in accordance with certain testing requirements addressed in DATWA. Likewise, employers may also conduct pre-employment testing for peace officers, firefighters, jobs requiring a commercial driver’s license, positions funded by a federal grant, and positions interacting with children, vulnerable adults, or those needing healthcare services, in accordance with DATWA.
These changes do not render employers without recourse if an employee is impaired while on the job. Employers are still allowed to require current employees to undergo cannabis testing in certain circumstances under DATWA, including if an employer has reasonable suspicion that an employee has used cannabis while on the job or on the employer’s premises or is otherwise under the influence of cannabis while working. Further, employers are not required to permit or accommodate cannabis use, possession, impairment, sale, or transfer while an employee is working or while an employee is on the employer’s premises.
Employers currently engaged in cannabis testing, or that have drug-free workplace policies, are encouraged to review those policies for compliance with this new law.
Crown Act
Earlier this year, the Minnesota Legislature passed, and Gov. Walz signed, the CROWN Act, which amends the Minnesota Human Rights Act’s definition of race to include “traits associated with race, including but not limited to hair texture and hair styles such as braids, locs and twists.” As a result, the law confirms protection for employees against discrimination based on race-based natural hair texture and styles under the Minnesota Human Rights Act. Employers in Minnesota should ensure that their policies, practices, and training cover and address this form of discrimination.
Paid Family and Medical Leave
The Minnesota Legislature passed a bill that would establish a state administered paid family and medical leave program to provide eligible employees with paid leave for certain family and medical leave reasons. Gov. Walz is expected to sign the bill into law. The program would operate like the state’s unemployment insurance fund and will cover nearly all employees in Minnesota regardless of employer size. The program will be funded through payroll taxes contributed by both employees and employers. The contributions will begin January 1, 2026, and eligible employees will be able to receive benefits beginning on that date as well.
Eligible employees would be able to take up to 12 weeks of job-protected paid leave for their own serious health condition or pregnancy leave. Employees can also take up to 12 weeks of job-protected paid leave for parental leave, safety leave, caregiving leave, and deployment-related leave. Employees will be capped at a total of 20 weeks for all types of leave in any given year. Workers will receive paid leave based on a formula depending on their wages. The law also includes anti-discrimination and retaliation provisions, meaning employers cannot interfere with an employee’s rights under the law or retaliate against an employee for exercising any rights under the law.
While the program start is not until 2026, employers should begin planning to modify their leave policies and programs accordingly.
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