Well, I don’t want to say I called it but…on April 8, 2016, I wrote a post about Minneapolis’ proposed paid sick leave and managing paid sick leave laws in multiple states, suggesting that this issue is only going to spread. Indeed, it has. Minnesota is proposing a paid sick leave fund comparable to the State of California – but even going beyond (one upping CA?! Impressive feat if passed). Though I didn’t know it then, I now know that on March 10, 2016, State Senators Sieben, Pappas, Franzen, Bakk and Hawj introduced SF2558, “a bill for an act relating to paid family medical leave benefits; establishing a family and medical leave benefit insurance program; imposing a wage tax; authorizing rulemaking; creating an account; appropriating money” and amending the state statutes accordingly. The proposed law has been amended and is currently before the Finance committee in its 3rd engrossment. English = it is still pending and here is the latest version. It proposes to be effective January 1, 2020, though the payroll tax will take effect 2018 (the State needs 2 years of taxes to have money to pay employees this proposed benefit).
Bill Proposes New Payroll Tax (Effective August 1, 2016) on Employers and Employees.
If passed as drafted, a new payroll tax will be imposed on employers with 21 or more employees (working in Minnesota during the past year) starting August 1, 2016. Employees of covered employers would also suffer the new payroll tax. The initial tax rates are 0% for 2017, 0.05% for 2018 and 0.1% for 2019. The rates in 2020 have not been introduced yet. The proposed bill seeks an appropriation in 2017 from the general fund to get the program started.
What happens to the money from the tax? It will go into a new state-run trust fund to be used to replace between 55% – 80% of an employees wages for up to 12 weeks a year for leave to care for family member, pregnancy-related condition and/or to bond with a newborn child (whether biological or adoptive). In addition, if the IRS determines that the benefits are subject to federal income tax, that tax would be withheld.
How Would This Work?
The Commissioner of Minnesota’s Department of Employment and Economic Development (“DEED”), currently Katie Clark Sieben, would be tasked with administrating the new benefit insurance program. Accordingly, DEED must create three application forms both for online applications and in paper: (1) family care benefits; (2) bonding benefits; or (3) pregnancy benefits. Once the employee applies, the Commissioner would have 2 weeks to approve or deny the application. If the application is determined “valid” and thus approved, the employee would then be notified of the week when benefits commence, the weekly benefit amount payable, and maximum duration. The employer would also be notified and provided rights to participate in an hearing and appeal process. Denied applications (deemed “invalid”) may be appealed, similar to unemployment, via a hearing before a newly created “benefit judge” (as well as challenges by employers).
What Employees Are Eligible?
An employee would be eligible for leave if the employee performed services for the employer for at least 6 months before the request (note this is less than the 12 months required by FMLA) and for at least 20 hours a week (well, it’s a little more complicated formula, but basically – half-time employees).
What Could Leave Be Taken For?
(1) Bonding – the leave begins when requested by the employee (employer may adopt policies governing timing of requests and reasonable notice) but must be within 12 months of the birth, adoption, or placement of foster child (or after child leaves a hospital).
(2) Family Care – the leave begins when necessary – but if foreseeable, employee must make “reasonable effort” to schedule treatment so as not to unduly disrupt the employer’s operations. Regardless, the employee must give notice to the employer “as soon as practicable”.
(3) Pregnancy Leave – Same as (2) above.
Notably, the length of leave may be reduced by any leave taken under the FMLA.
What Benefits Would Employees Receive?
Currently, as drafted, the bill proposes a weekly benefit amount obtained by applying the following percentage to an applicant’s average weekly wage: (1) 80% of wages that don’t exceed 50% of the state’s average weekly wage; plus (2) 66% of wages that exceed 50% of the state’s average weekly wage but no 100%; plus (3) 55% of wages that exceed 100% of the state’s average weekly wage. Such benefits may not exceed the maximum weekly benefit amount applicable at the time payments commence. Additionally, the employee’s combined weekly employer paid benefits and benefits under the new bill would not exceed the employee’s average weekly wage (in other words, state benefits would be reduced by employer contributions).
The benefit would be paid to the employee weekly in the same method of the payment for unemployment insurance benefits. In the course of 52 weeks, the maximum length of benefits would be 12 weeks. The minimum amount of benefits paid is 7 days and thereafter in increments of 1 day.
What If A Company Already Has A Paid Leave Benefit?
The bill proposes that employers may apply to be excluded from the benefit program if it has a plan that covers all its employees in an amount that the wage benefits would be equal to or greater than that the employee would receive under the State-funded benefit program – and the employee does not need to pay any more (in benefit continuation coverage) than required by the State-funded program.
Certainly, the usual suspects – employers may provide greater benefits to its employees and employers cannot retaliate against employees for using this benefit. Employees taking paid leave under this new bill would be entitled to “be restored by the employer to the position held by the employee when the leave commenced, or to a position with equivalent seniority, status, benefits, pay , and other terms and conditions of employment including fringe benefits and service credits that the employee had been entitled to at the commencement of the leave.” Further, any employee “injured” by a violation of this proposed law would be entitled to bring a civil suit against the employer and receive damages; costs and disbursements (including attorneys’ fees); and injunction and other equitable relief. In other words – the employee may sue the employer directly (the state does not need to sue on the employee’s behalf and the employee is not stuck in an administrative hearing situation). Additionally, employers would be required to maintain group insurance coverage while the employee is on leave (and the employee of course, must continue to pay his or her share).
There are certainly many other provisions and nuances of the proposed bill (for example, small employers may elect to be subject to the proposed benefit program), but I won’t get into too much more detail here as it is still just a bill at this point. However, certainly it is something to keep an eye on and I’m sure we’ll hear much more as it makes its way through the legislative process.