Purpose

• The bill would temporarily exempt small employers from Minnesota’s Paid Leave Law until January 1, 2028. It also updates how key terms like "covered employment," "employee," and "employer" are defined for this law, with special rules for certain small employers and new options for some entities.

What the bill changes (main provisions)

• Exemption for small employers
  • Small employers (defined as those with 20 employees or fewer) would be exempt from the Minnesota Paid Leave Law through January 1, 2028. After that date, the exemption would no longer automatically apply unless the law changes again.
• Covered employment (definition updated)
  • “Covered employment” would be defined to include work in Minnesota or work outside Minnesota under certain conditions, with a focus on where the work is performed during the year and where the employee resides. Specifically, if 50% or more of the year’s work is in Minnesota, or if 50% or more is outside Minnesota but the employee’s residence is in Minnesota for at least 50% of the year, the employment may be considered covered.
  • The definition would exclude certain groups from becoming covered employment, including self-employed individuals, independent contractors, seasonal workers, and employers with 20 or fewer employees (as calculated under the statute). This exclusion for small employers would expire January 1, 2028.
  • Entities that are initially excluded may opt in to coverage through a process determined by the commissioner.
  • The commissioner could adopt rules to better define and apply covered employment, including for cases not clearly covered by the basic criteria.
• Employee definition updated
  • An “employee” is someone who performs services for an employer, but the definition explicitly excludes:
  • The United States government
  • Self-employed individuals
  • Independent contractors
  • Seasonal employees
  • Employees of an employer with 20 or fewer employees (thresholds may apply as calculated under the statute)
  • This exclusion for small-employer groups also expires January 1, 2028.
• Employer definition updated
  • An “employer” includes a broad range of entities (individuals, partnerships, corporations, government entities, charter schools, etc.), plus certain state and local government organizations and other public or quasi-public entities.
  • The definition would expressly include charter schools and the “taxpaying employer” concept.
  • The same small-employer exclusion applies: an employer with 20 employees or fewer would not be considered an employer for purposes of the Paid Leave Law under this bill, with the threshold calculated as specified, and this exclusion would expire January 1, 2028.
  • Exclusions also include the United States government and self-employed individuals who elect and are approved for coverage under a separate provision (for their own coverage and benefits).
• Rulemaking and implementation
  • The bill would allow the state commissioner to adopt rules to further define the application of the subdivision on covered employment and to establish criteria for individuals who do not meet the standard criteria but still perform services as employees for Minnesota employers.

How this affects workers and businesses

• For workers
  • In the near term (through 2027), many employees who work for very small employers (20 or fewer) may fall outside the paid leave requirements if their employer is exempted, unless their employer chooses to opt in.
  • Some workers may be treated as not covered if they are employed by a small employer, depending on how “covered employment” and “employee” are applied in practice.
• For small businesses
  • Most small employers (20 or fewer employees) would not be required to provide paid leave under the Minnesota Paid Leave Law until at least 2028, reducing regulatory obligations and costs in the short term.
  • Small employers would have a potential path to opt in, which would bring their workers under the paid leave requirement if they choose to do so.
• For the state and administration
  • The bill would give the state a mechanism to clarify and adjust definitions and coverage through rules, potentially making it easier to tailor how the Paid Leave Law is applied across different types of employers and employment arrangements.

Timing and expiration

• The key temporary feature is the expiration date of the small-employer exemptions and related exclusions: January 1, 2028. After that date, the current exemptions and definitions would either revert or require further legislative action or regulatory changes to continue or modify.

Significant changes to existing law (at a glance)

• Introduces a temporary exemption from the Minnesota Paid Leave Law for small employers (20 or fewer employees) through January 1, 2028.
• Redefines or clarifies core terms—covered employment, employee, and employer—with explicit exclusions for certain groups (self-employed, independent contractors, seasonal workers) and for small employers (until 2028).
• Allows for an opt-in process for entities that would otherwise be excluded from coverage.
• Gives the commissioner authority to issue rules to define and apply these provisions, including for cases not clearly covered by the basic criteria.

Relevant Terms - Minnesota Paid Leave Law - Covered employment - Employee - Employer - Small employer (20 employees or fewer) - Seasonal employee - Independent contractor - Self-employed - Opt-in - Commissioner - Rules (chapter 14) - Minnesota Statutes 268B.01 - Exemption - January 1, 2028 - Taxpaying employer - Charter schools - United States government - Exclusion criteria - Cross-state employment (where work is performed during the calendar year)