FMJ’s HR & Employment and Litigation Practice Groups are monitoring a number of potential changes in employment laws, rules, and regulations. While all of the items discussed below are still being debated, they could each result in major changes with significant impacts. So, employers should start thinking about these topics now. Please reach out to FMJ if you have questions or if you would like to discuss any of these potential changes.
Paid Family and Medical Leave in Minnesota
The Minnesota Legislature is currently considering a bill that would provide paid family and medical leave benefits to Minnesota employees. See HF2 and SF2. The proposed legislation was introduced in early January 2023. This proposed legislation would essentially establish a state-run insurance program that provides eligible employees with up to 12 weeks of paid family leave and up to an additional 12 weeks of paid medical leave per year for qualifying reasons. The proposed bill would require employees to pay a premium (i.e., tax), and the cost of the paid leave would be shared by the State, the employer, and the employee. If passed in its current state, a number of the compliance, data, and reporting requirements would become effective on July 1, 2023, and the programs and benefits outlined by this legislation would become available starting July 1, 2025.
The FTC Has Proposed a Rule to Ban Non-Compete Clauses
A non-compete clause is a contractual term between an employer and an employee that prevents the employee from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the employment ends. Many employers utilize non-compete clauses in employment agreements as a way to protect business relationships that an employee developed or fostered during the course of employment, as well as confidential information that was available to the employee.
On January 5, 2023, the Federal Trade Commission (FTC) proposed a new rule that would not only prevent employers from entering into non-compete clauses with employees but would also require employers to rescind existing non-compete clauses. Many states have already placed restrictions or other limitations on the use of non-compete clauses, and some have gone as far as widely prohibiting their use in certain employment agreements. Although there are some proposed limited exceptions, if the FTC’s proposed rule is published in its current state, it would largely prohibit the use of non-compete agreements nationwide and supersede any state law that is inconsistent with the proposed rule. While the FTC has hopes of broadly banning non-compete agreements, the proposed rule is controversial and will likely face legal challenges, including whether the FTC has legal authority to issue the rule. Please click here to learn more about the FTC’s reasoning and to see the text of the proposed rule. The proposed rule is still somewhat early in its development, and the public comment period will remain open until April 19, 2023.
Minnesota Has Also Proposed Legislation to Ban Non-Compete Clauses
In 2022, the Minnesota Legislature unsuccessfully attempted to ban non-compete clauses. Minnesota lawmakers are revisiting this topic and considering proposed legislation that would render non-compete clauses “void and unenforceable” under most circumstances. There have been multiple versions of this proposed legislation. See HF295, SF405, and HF1237. This legislation is working its way through committees, and ongoing revisions and discussions are underway.
The U.S. Department of Labor Has Proposed Changes to the Rules for Analyzing Whether Someone is an Employee or an Independent Contractor
There have been some relatively complicated developments with the United States Department of Labor’s (DOL) independent contractor analysis over the last few years. Courts and the DOL have traditionally followed the economic reality test to determine whether, based on the totality of the circumstances, a worker was economically dependent on the employer for work (thus, an Employee) or was in business for themselves (thus, an Independent Contractor).
The DOL shifted the analysis in 2021 with a proposed rule that attempted to streamline the analysis by prioritizing two factors, the nature and degree of control over the work and the worker’s opportunity for profit or loss, as “core factors” (the “2021 IC Rule”). If those core factors pointed toward the same classification, they would constitute a “substantial likelihood” that it is the worker’s accurate classification. Many viewed the 2021 IC Rule as potentially making it easier for employers to classify workers as independent contractors because it gave more weight to those core factors.
The DOL is now proposing a new rule in an attempt to reduce the risk of workers being misclassified as independent contractors. The proposed rule would rescind the “core factor” analysis and restore the DOL’s longstanding approach to the economic reality test, by considering the following factors in light of the totality of the circumstances:
- Opportunity for profit or loss depending on managerial skill;
- Investments by the worker and the employer;
- Degree of permanence of the work relationship;
- Nature and degree of control;
- Extent to which the work performed is an integral part of the employer’s business; and
- Skill and initiative.
The proposed rule also notes that additional factors may be relevant to the analysis if the factor indicates whether a worker is in business for themselves, as opposed to being economically dependent on the employer for work. The comment period has closed for this proposed rule. It was speculated that a final rule would be published within a few months, but delays are not uncommon, and nothing has been finalized yet. Please click here to go to the Federal Register and see a copy of the proposed rule.
Minnesota’s Proposed Legislation for Sick and Safe Time
The Minnesota Legislature is proposing legislation that would require employers to provide earned sick and safe time to any employee in Minnesota who works at least 80 hours per year, whether part-time, full-time, or seasonal. See HF19 and SF34. This legislation would allow employees to earn one hour of sick and safe time for every 30 hours worked, with a maximum of 48 hours of sick and safe time on a yearly basis. It would also allow for a carryover of accrued but unused sick and safe time into the following year, or there is an option to pay out unused hours. The total amount of accrued but unused earned sick and safe time for an employee must not exceed 80 hours at any time, unless an employer agrees to a higher amount.
Some examples of qualifying reasons for which employees will be entitled to use accrued sick and safe time include (see proposed legislation for the complete list):
- The employee’s mental or physical illness, injury, or other health condition, including medical diagnosis and/or treatment of the same or preventative care;
- The employee’s care for a family member with an illness or other health condition;
- Absence due to domestic abuse, sexual assault, or stalking of the employee or employee’s family member;
- Closure of employee’s place of business due to weather or other public emergency or to care for a family member whose school or place of care has been closed due to weather or public emergency; and
- Health authorities and/or health care professionals’ determination that the employee’s presence at the workplace would jeopardize the health of others due to a communicable disease.
Importantly, the proposed legislation prohibits employees from being penalized under attendance policies for protected time off. Additionally, the proposed bill requires written notice to employees and inclusion in any employee handbook.
If this legislation passes, Minnesota will join at least 14 other states that have passed some form of paid sick leave mandate. There are several cities within Minnesota, such as Bloomington, Duluth, St. Paul, and Minneapolis, that already have enacted their own paid sick leave mandates. The proposed legislation will likely still impact employers already subject to these ordinances. This legislation is working its way through committees, and it may face further modifications or challenges.
Obviously, there is still quite a bit of uncertainty surrounding the potential changes discussed above, but it is important for employers to start considering the impact that any and all of these potential changes could have. While none of the items discussed above have passed or become effective yet, employers will need to stay alert and be prepared to address those items that do.
FMJ will continue to monitor all of the proposed legislation and rule changes discussed above, and we hope that you will too. Please reach out to members of our HR & Employment and Litigation Practice Groups, including Shannon McDonough, Natolie Hochhausen, and Jamie Briones. They would be happy to connect with you and discuss these issues further.
If you are interested in more resources or discussions about HR & Employment or Litigation topics, please visit our website at www.fmjlaw.com. For example, you can read an informative article about Pay Transparency, another area that is experiencing a great deal of change.
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