Effective August 1, 2023, contractors will be liable for their subcontractors’ unpaid wages to employees for all new or amended construction contracts on or after that date. Yes, you heard that right. Contractors are now on the hook for the proper payment of wages to their subcontractor’s employees. The amendment can be found here. Contractors cannot require indemnification, release, or transfer this responsibility (in other words, you can’t contract around this statutory liability). Thus, if an employee sues (or the state conducts its own audit/investigation) for improper wages against their employer, the subcontractor, the general contractor may be held jointly and severally liable (also sued for the same amount).

How can contractors ensure their subcontractors are properly paying their employees or otherwise minimize liability? Contractors have the right – and should exercise that right – to receive payroll records and project-related data from subcontractors within 15 days of a request. So long as you can catch any errors early on, they can be corrected prior to accumulation of liability. Further, if the subcontract agreement provides that subcontractors will properly pay their employees or the contract is breached, and the subcontractor does not cure defects (improper payment) the contractor could (following the terms of the subcontract, of course), terminate the subcontract before accumulation a lot of liability (i.e., after six months or a year, if they were paying wages improperly such as prevailing wages, the potential exposure could be very large).

Note, this does NOT apply to contractors who have signed collective bargaining agreements with unions, as those have their own procedures for recovering unpaid wages.

Effective July 1, 2023, Minnesota’s new law requires employers to provide reasonable break times for lactating employees to express milk, regardless of the child’s age (it was 1 year). Break times must be provided even if doing so would “unduly disrupt the operations of the employer”. In addition, lactation spaces must be “clean, private, and secure”. A bathroom or toilet stall is insufficient.

The new law extends the scope of reasonable accommodations for pregnant employees to include temporary leaves of absences, modifications of work schedules or assignments, and more frequent or longer breaks. Employees returning from pregnancy leave are entitled to their prior position or a comparable role.

Employers must inform employees about lactation and pregnancy rights – the notice can be printed here. This includes notifying employees about these rights at the time of hire, when an employee asks about or requests parental leave, and by including a notice in the employee handbook. The notice must be provided in both English and the employee’s primary language. The Minnesota Department of Labor and Industry has issued a notice that can be used in English and the five most common languages in the state that you can find at the link above.

Okay, another non-wage and hour post, but how could I not! This AI stuff is everywhere and now the Equal Employment Opportunity Commission (EEOC) is chiming in. On May 18, 2023, the EEOC released a technical assistance document outlining considerations for employers using software, algorithms, and artificial intelligence for employment selection procedures such as hiring, performance monitoring, promotion decisions. Examples of such tools include resume scanners, virtual chatbots that interact with candidates, video interviewing software, and employee monitoring software.

Not surprisingly, employers are prohibited from using selection procedures that disproportionately exclude individuals based on race, color, sex, religion, or national origin under Title VII, unless the procedures are job related and consistent with business necessity. Thus, if an AI-driven method leads to a substantially lower selection rate (4/5ths rule) for members of a particular group, the AI feature may violate Title VII, unless the employer can demonstrate that the feature is “job related and consistent with business necessity.”

To determine what constitutes a “substantially” lower rate, the EEOC uses the four-fifths rule which provides that if the selection rate for a specific group is less than 80%, or four-fifths, of the selection rate for the most favored group, it may evidence discrimination. However, relying solely on the four-fifths rule does not guarantee compliance with Title VII (I know, no win).

Even more, employers may be held responsible for Title VII violations even when using a tool developed or administered by a third party. Per the EEOC, relying on assurances from vendors will not absolve employers of liability in this regard. So, if you are one of the tech savvy employer and starting to use AI in your employee selections, be sure the AI tools do not adversely impact one group over another.

Friendly reminder – the minimum wage rates in Minneapolis and St. Paul increase yet again July 1, 2023. The minimum wage rate for employers with 100 employees or less in Minneapolis will increase from $13.50 to $14.50. In St. Paul, the minimum wage increases will impact both small and large employers. For businesses with 100 employees or less, minimum wage will rise from $12 to $13; businesses with 101 or more employees will have minimum wage rates increase from $13.50 to $15.

Effective January 1, 2024, all employers (wherever your office/HQ is located) must provide earned sick and safe time (“ESST“) for all employees (yes, including part-time and temporary) who work 80+ hours in a year in Minnesota. Employers may either provide the ESST via a frontloaded lump sum (48 hours if paid out unused ESST at the end of the year or 80 hours if not paid out at the end of the year) or via accrual method. If accrual, employees must earn 1 hour of ESST for every 30 hours worked, and may accrue up to 48 hours per year. Employees may carry over any unused ESST from year-to-year, but employers may cap it at 80 hours. By now, most employers provide some form of paid time off (PTO) – if you have sick and vacation, consider the one bucket PTO. So long as your PTO policy is compliant (it can be more generous), you don’t need a separate ESST bank. Employers do not need to pay out ESST (unless your handbook says you will), but if an employee is rehired in 180 days, their accrued, unused ESST must be reinstated.

ESST can be used to address personal health needs, caring for a family member, workplace or school closure (think: snow days), domestic abuse, sexual assault, stalking – and all related issues (see the law for the full list or MNDOLI’s guidance here). ESST must be able to be used in the smallest increment of time tracked by the employer’s payroll system (but in no event more than 4 hours). An employee cannot be required to find a replacement worker.

The term family member in this context encompasses a broad range of expected relationships including an individual annually designated by the employee.

Notice: Employees must be provided with a notice about ESST by January 1, 2024, or at the start of employment, whichever is later. It must be in English and the employee’s primary language. MNDOLI will provide a sample notice.

Handbooks: Must contain an ESST notice.

Paystubs: Must include the total number of ESST available for use, as well as the total number of ESST used, at the end of each pay period.

If an employee can anticipate the need to use ESST in advance, employers may require advance notice. Employers may set a maximum notice requirement of 7 days in advance. When the need for ESST is unforeseeable, employers may request notice as soon as realistically possible. However, employers must have a written policy in place to enforce a notice requirement.

Additionally, a newly hired employees may begin using their ESST as soon as it s accrues, which begins upon employment. This is in contrast with paid sick and safe leave mandates in Bloomington, Duluth, Minneapolis, and St. Paul, all of which have a 90-day waiting period for new employees. Finally, the new state law does not trump any more employee-advantageous ordinances for ESST, so if you are working in those cities as well, be sure your policy is compliant for both state and local ordinances (which may have greater accrual or carry-over, for example).

While yet another non-wage and hour topic, certainly it is one that everyone in Minnesota is talking about, so how can I not write about it? In the words of our very own Bob Dylan…the times, they are a-changin’! Effective August 1, 2023, cannabis (marijuana), will be a lawful consumable product for all (not just medical marijuana). You can find the law here. Notably, what many employers do not know, is that Minnesota has a Lawful Consumable Product Act that prohibits employers from disallowing employees to consume lawful products outside of work hours. While it was intended for alcohol and nicotine back in the day, it is now certainly inclusive of cannabis.

Under the new law, employers are prohibited from refusing to hire a job applicant or discharge or discipline an employee who uses cannabis outside of work. Employers can still prohibit the use, impairment, or possession of cannabis during work hours, while on-site, or when operating company vehicles, machinery, or equipment. Employers may establish written work rules regarding cannabis (i.e., add this to your zero-tolerance policy) and may take disciplinary action against employees who violate these policies.

The legalization of cannabis also impacts Minnesota’s Drug and Alcohol Testing in the Workplace Act (DATWA), which is already one of the most employee-friendly in the nation. Cannabis is no longer included in the definition of “drug” under DATWA, and drug and alcohol testing does not include cannabis testing, unless stated otherwise. Thus, if you test, you will need to update your drug and alcohol testing policy. When it comes to pre-employment drug testing, employers are prohibited from making cannabis testing a condition of employment, unless state or federal law mandates it. Additionally, employers cannot reject job applicants solely based on positive cannabis test results, unless such action is required by state or federal law.

However, employers with a state-compliant drug and alcohol testing policy (I say this because I’ve seen plenty in handbooks that are not compliant) can request cannabis testing if they have a reasonable suspicion that the employee is under the influence of drugs and alcohol, has violated the employer’s written work rules around cannabis, has injured themselves or another employee, or has caused a work-related accident or was operating or helping to operate vehicles, machinery, and equipment involved in a work-related accident.

What about random testing? Employers may require employees to undergo random cannabis testing if they are employed in safety-sensitive positions (defined as jobs where “impairment caused by cannabis usage would threaten the health and safety of any individual”).

In certain positions, cannabis and its metabolites are considered a drug and are subject to the drug and alcohol testing provisions in Minn. Stat. § 181.950 – 181.957. These positions include:

  • Safety-sensitive positions;
  • Peace officers;
  • Firefighters;
  • Positions requiring face-to-face care, training, education, supervision, counseling, consultation, or medical assistance to children, vulnerable adults, or patients receiving healthcare services;
  • Positions requiring a commercial driver’s license or operating a motor vehicle for which state or federal law mandates drug or alcohol testing;
  • Employment funded by a federal grant; or
  • Any other position for which state or federal law requires testing of a job applicant or employee for cannabis.

Parties involved in a collective bargaining agreement may agree upon a cannabis testing policy without specific limitations or restrictions, so long as it meets or exceeds the minimum standards and requirements for employee protection outlined in Minn. Stat. § 181.950 – 181.954. Existing collective bargaining agreements that already provide employee protections related to cannabis testing will remain in effect, as long as those protections exceed the minimum standards and requirements outlined in Minn. Stat. § 181.950 – 181.954.

Employee and job applicant protections provided under these new DATWA amendments do not apply to certain employees and job applicants. Exclusions apply when the nature of the work being performed requires those employees and job applicants to undergo cannabis testing due to specific circumstances where:

  • Federal regulations preempt state regulations regarding cannabis testing for those employees and job applicants;
  • Federal regulations or requirements are necessary for operating facilities under federal regulation;
  • Cannabis testing is conducted for security, safety, or protection of sensitive or proprietary data; or
  • State agency rules adopt federal regulations applicable to the interstate component of a federally regulated industry, and the adoption of those rules is for the purpose of conforming the non-federally regulated intrastate component of the industry to identical regulation.

What’s the end result? Employers who do not need to test for cannabis by law, may want to consider whether you wish to continue given the Minnesota Lawful Consumable Products Act, the potential for numerous positive tests for those otherwise not “impaired” based on testing that is not as reliable as say blood alcohol levels, and the fact that it will be hard to prove consumption at work unless actually observed. Recall, you can always discipline or terminate an employee for poor performance, for your reasonably believing they are under the influence, or attendance. None of those need to be supported by a drug test.

Effective January 1, 2026, all employers with employees in Minnesota will be required to participate in the state-run paid family and medical leave program which provides both paid and protected leave. A 0.7% payroll tax will be introduced to fund the program, of which employers may deduct up to half (.35%) from employees’ wages. Employees are eligible after 90 days of employment. Once paid leave is completed, employees are entitled to their prior jobs or an equivalent position.

Employees are entitled to 12 weeks of paid leave for their own serious health condition or pregnancy, and up to 12 weeks for bonding, family care, safety leave, or a qualifying exigency. If both apply, leave is limited to a maximum of 20 weeks (not 24) total in a single benefit year. For instance, if an employee takes 12 weeks for pregnancy leave, they only have 8 weeks of bonding leave to use. Claims for leave must be based on a single event lasting at least 7 consecutive days, except for bonding purposes where the 7 day requirement does not apply.

The definition of serious health condition is a physical or mental illness, injury, impairment, condition, or substance use disorder involving:

  • Inpatient care in a hospital, hospice, or residential medical care facility, including any period of incapacity; or
  • Continuing treatment or supervision by a health care provider, which includes:
    • A period of incapacity lasting seven or more days, along with subsequent treatment or incapacity related to the same condition. This treatment should occur two or more times within 30 days of the first day of incapacity, unless circumstances beyond the individual’s control prevent follow-up visits. It also includes treatment by a health care provider that results in a continuing regimen of treatment under their supervision;
    • A period of incapacity due to medical care related to pregnancy;
    • A period of incapacity or treatment for a chronic health condition that requires periodic visits (at least twice a year) for treatment by a health care provider or under their orders or referral. This condition should continue over an extended period, including recurring episodes of the same underlying condition, with the possibility of episodic periods of incapacity;
    • A permanent or long-term incapacity caused by a condition for which treatment may not be effective. The employee or family member must remain under the continuing supervision of a health care provider, even if active treatment is not required; or
    • A period of absence to receive multiple treatments, including recovery periods, by a health care provider or under their orders or referral. This applies to restorative surgery following an accident or injury, or a condition that would likely result in incapacity for more than seven full calendar days without medical intervention.

Bonding means the time that an employee spends with their biological, adopted, or foster child alongside the child’s birth, adoption, or placement. When it comes to family care, it means that an employee is taking leave to provide care to a family member with a serious health condition or is a military member.

Here’s one very important thing to note – the term family member encompasses a broad range of relationships including individuals who expect and rely on the employee for care, regardless of whether they live together (need not be blood relatives).

Safety leave is a type of leave that will be granted to employees who are experiencing domestic abuse, sexual assault, or stalking. The purpose of safety leave may include seeking medical attention, obtaining counseling services, seeking relocation to a safer environment, or seeking legal advice or taking legal action.

As you can imagine, there is a lot of “how is this going to actually work” questions out there. At this point, I understand the state is looking to hire about 400 people to run this program, and so certainly it is going to take the next few years for this to all get worked out. I will continue to post about this as we get closer to implementation. For those of you thinking about short term disability policies – your question about why you’d have it with this program in place is well founded.

While not really wage and hour related, I figured with all the new laws taking effect in Minnesota, I’d throw in a few others that I have been giving seminars on recently. Effective July 1, 2023, Minnesota law prohibits non-compete agreements for both employees and independent contractors. This new law applies to agreements entered into on or after that date. Thus, it is not retroactive, so existing non-compete agreements should still be considered valid. I say “should” because there is an argument to be made (that will be made) before the courts that two people in the same position can’t be treated differently in this regard. Specifically, if a non-compete must only be only so broad as to protect a business’ legitimate business interests, a plaintiff’s attorney may argue that it is not necessary or legitimate as other people performing the same work are free to compete.

Of further note, the ban on non-compete agreements does not extend to non-solicitation, non-disclosure, or agreements designed to protect intellectual property or confidential information. What about non-solicitation of employees? Again, I think this is going to be litigated to the extent a non-solicitation is linked to prohibiting a former employee from hiring away a current employee to work for a competitor. A plaintiff may argue that is an end-run around the law.

Two specific types of non-compete agreements are exempt from the ban: agreements made during the sale of a business or in anticipation of the dissolution of a business. What about a shareholders’ sale of their shares? The law is silent, but there was a proposed amendment during the writing of the legislation that would have specifically added that it applies to the sale of shares as well and it was not included in the bill. Accordingly, the legislature seems to have indicated that this is intended to be related to the wholesale sale of a business and just individuals’ sale of membership interests/stock.

Effective July 1, 2023, all employers will need to provide earned sick and safe leave (ESSL) to ALL employees (including temporary and part-time) who work 80+ hours in Bloomington (no matter where the employer HQ is) pursuant to the new Bloomington City Ordinance. ESSL may generally be used for health needs, school and workplace closure (snow day), domestic violence, sexual assault or stalking – and all tangentially related issues stemming from them (see the ordinance for the full list). Employers with less than 5 employees must provide ESST, though it need not be paid. Employers with more than 5 employees must provide paid ESST.

This ordinance is similar to those already enacted in Minneapolis, St. Paul and Duluth. It provides for 1 hour of ESSL for every 30 hours worked, up to 48 hours per year. Keep in mind, an employer may always have a more generous policy. Additionally, if you have an existing PTO plan, you may use those hours to fulfill this ordinance requirement, so long as the accrual method is as good as or better than the ordinance, and can be used for the same reasons and in the same manner as in the ordinance. There is a 90 day waiting period before a new hire must be able to use their ESSL (you can allow them to use it sooner). Bloomington’s ordinance also allows an employee to retain ESST for a period of 120 days after their termination of employment (if rehired within 120 days, they get their time back – Minneapolis is 90 days, for example).

Although it has yet to take effect, there is already an amendment proposed that will allow accrual in smaller than 1 hour units (as it is currently drafted) and requires the time available to be on a paystub. The remedies for failure to adhere to the ordinance is also in the amendment – providing for (among other things) – reinstatement and backpay, double damages or $250 (whichever is greater); an administrative fine of up to $1,000, civil fine of $250 – $1,000 for each violation (first time offense), and more.

Employers should download and must post the notice of rights that you can find here in a conspicuous place – wherever you put other employee notices. If more than 5% of employees speak another language, the notice must also be posted in the other language (currently English is only linked, but appears they are working on Spanish, Chinese, Somali, Khmer and Vietnamese).

Finally, it is anticipated that the Minnesota State Legislature will pass a statewide paid Earned Sick and Safe Time Act (HF 19) this session, to take effect in 2024. It proposes the same 1 hour accrual for every 30 worked. Currently, it would not, however, replace any local ordinances (such as Minneapolis, St. Paul, Duluth or Bloomington) that provide for greater worker rights. In short – now is the time to do some Spring cleaning with your handbook, and if you perform work in any of the major cities, consider a PTO policy that is compliant with all of the current ordinances.

In August 2022, President Biden signed into law the Inflation Reduction Act of 2022. Under this law, there are increased tax benefits for certain clean energy projects that begin on or after January 29, 2023 – with a catch. Such projects must use both registered apprentices and prevailing wages (and fringe benefits)must be paid. Employers (construction companies, subcontractors) working on a clean energy project should be sure to verify whether this applies to you. The DOL has provided some general guidance here that such employers may find helpful.