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Thus far, 2023 has proved a banner year for new employment-related legal developments. While state legislatures and courts have varied in their activity levels, Minnesota just may win the high achiever legislative prize. Following the 2023 legislative session Minnesota employers were hit with a tsunami of employment law changes. These legal updates are not only critically important for Minnesota employers, they also may serve as a bellwether for other state legal trends like increased paid leave, employee contract and communication requirements, augmented family-related benefits, and cannabis legalization.[1]

This blog article was developed primarily by Virginia (Ginny) Cronin, who joined Wagenmaker & Oberly in fall 2022. As a Minnesota-based attorney, Ginny focuses on serving Minnesota churches and other nonprofits, as well as W&O clients primarily through the firm’s employment and risk management practice groups.

Legal Compliance and Best Practices Generally

The list of employment-related updates contains different effective dates. Consequently, employers therefore may need to get immediately compliant with some changes, and they may have time to address other changes. Many of these changes may be best addressed through employee handbook modifications and related personnel training. To varying degrees, these legal developments may be appropriate for all employers to consider as part of their updated employee handbooks and related policies, especially (a) employers with workers in multiple states, and (b) in anticipation of possibly similar legislation in other states or otherwise considering best practices.

Do any categorical exceptions or exemptions exist for religious employers or other nonprofits? With respect to the following legal updates, the answer is negative. No explicit exceptions or exemptions exist for churches, houses of worship, or other nonprofit organizations. Further, many of the “minor” changes in existing Minnesota employment laws effectively lower the required number of employees for a current law’s applicability, meaning even very small organizations are, or will soon be, subject to these laws. Regardless of their size or nature, all employers should be aware of these changes and make necessary adjustments to abide by the law and avoid unwanted penalties. In practical terms, nonprofit leaders should review and update existing employee handbooks, workplace policies, and operational practices.

Effective July 1, 2023:

Non-competition Agreements § 181.988. This new law prohibits any post-employment noncompete agreement (e.g., cannot work at a similar organization within 5 miles) with an employee or independent contractor regardless of a person’s income, with only two very limited carveouts that may not apply to most nonprofits, except under very specific circumstances.[2] It does not include restrictions on nondisclosure, confidentiality, trade secret, or non-solicitation agreements (including specifically those restricting the ability to use client or contact lists or restricting the solicitation of customers). The new law does not prohibit severance or separation agreements, but may modify future such agreements offered to departing or terminated employees, by restricting use of traditionally used provisions.

Modification to Wage Disclosure Protection § 181.172. New amendments to Minnesota’s current Wage Disclosure Protections expand the employer prohibition on penalizing or retaliating against employees from discussing their wages. Prohibited retaliatory actions of employers now include the following: “[a]n employer shall not discharge, discipline, penalize, interfere with, threaten, restrain, coerce, or otherwise retaliate or discriminate against an employee for asserting rights or remedies under this section.” Nonprofit employers should provide notice of this law, such as within their employee handbook, as legally required.

Amendments to the Drug and Alcohol Testing in the Workplace Act (DATWA), Minn. Stat. §§ 181.950-.957. Due to the legalization of recreational cannabis, as further addressed below, significant changes were made to Minnesota’s Drug and Alcohol Testing in the Workplace Act (“DATWA”). Definition of “drug” was modified and separate category of “cannabis testing” with more limited permitted testing and discipline scenarios. These changes prohibit employers from testing for cannabis unless explicitly required by law or the job position falls within specific classes of jobs (e.g., safety-sensitive positions). If an organization currently engages in or plans to engage in the drug or alcohol testing of employees, it must comply with the updated DATWA.

Modification to the Nursing Mothers and Pregnant Employees, § 181.939 and Pregnancy Accommodations. These new modifications provide increased protections for pregnant and nursing (lactating) employees under § 181.939. This amendment eliminated restrictions related to expressing breast milk (e.g., breaks and no restriction due to child’s age), and provides expanded protections to employees during pregnancy, including specific pregnancy accommodation provisions, including “longer” restroom, food, and water breaks as an accommodation without being required to provide supporting documentation. Specific language added includes “temporary leave of absence, modification in work schedule or job assignments,” and “more frequent or longer break periods.” This law requires employers to notify employees of these rights at both (1) the time of hire, (2) when they request parental leave, and (3) within the organization’s employee handbook (if one exists). Similar federal law changes took effect June 27, 2023, under the Pregnant Workers Fairness Act (PWFA).[3]

Effective August 1, 2023:

Legalization of Recreational Cannabis Bill. Under the new law, adults (21 and older) may possess or transport up to 2 ounces of cannabis flower, 8 grams of concentrate and 800 milligrams of edible product (including low-potency hemp-derived product). An adult may also possess up to two pounds of cannabis flower in a private residence. Generally, this new law prohibits employers from disciplining or discharging employees, or refuse to hire individuals, due to their consumption of legal cannabis outside of work.

Employers may ban the possession and use of cannabis during work hours and when an employee is on-site or in an organization-owned vehicle. This includes discipline or other corrective action, including termination, or employees who use, possess, sell, transfer, or are otherwise impaired by such lawful products while working, while on work premises, or while operating an employer’s vehicles, machines, or equipment. However, a church or other religious organization may be able to enact prohibitions of cannabis use according to church polity and its sincerely held religious beliefs regarding recreational cannabis and marijuana use. If a church or other religious organization plans to enact such prohibitions, careful consideration with legal counsel is advisable.

Employer-Sponsored Meetings and Communications, § 181.531. This new law prohibits employers from holding mandatory employer-sponsored “captive audience” meetings if those meetings are for the purpose of communicating the employer’s opinion on religious or political matters. Employers are also prohibited from threatening to take or taking adverse action against employees who refuse to attend or participate in an employer-sponsor meeting, or who refuse to receive or listen to an employer communication, if the meeting or communication is to communicate the employer’s opinion about religious or political matters. “Religious matters” are defined as matters “relating to religious belief, affiliation, and practice and the decision to join or support any religious organization or association.”

Notably, under the Internal Revenue Code, Section 501(c)(3) organizations (which include churches and other houses of worship) are strictly prohibited from engage in political campaign activities. Since engaging in such activities could jeopardize tax-exempt status, churches and nonprofits are generally advised to avoid engaging in any political issues or matters all together. On the political aspects of this law, nonprofits are likely in line operationally with this aspect already through their compliance with federal law.

But with respect to the religious aspects of this law, churches and other religious organizations may have legitimate constitutional concerns. It is important to not overlook churches and religious organizations’ rights under the U.S. Constitution. Specifically, churches have very strong legal protections, including the free exercise of religion and church autonomy (i.e., the right of churches to be free from government control with regards to their internal affairs).[4] Given these constitutional protections, it is highly likely that this law will be challenged on constitutional grounds at some future point. Organizations seeking to exercise religious liberty rights in this capacity should consult with legal counsel regarding compliance with this law in relation to existing constitutional protections.

The CROWN Act, Amendment to Minnesota Statutes § 363A.03. The CROWN Act, which stands for “Creating a Respectful and Open World for Natural Hair,” was signed into law on February 1, 2023, effective August 1, 2023. This law amends the Minnesota Human Rights Act and expands the definition of race:

Subd. 36a. Race. "Race" is inclusive of traits associated with race, including but not limited to hair texture and hair styles such as braids, locs, and twists.

Generally, the Minnesota Human Rights Act prohibits discrimination in employment, housing, public accommodations, public services, education, credit, and business based on protected class, such as: race, religion, disability, national origin, sex, marital status, familial status, age, sexual orientation, and gender identity. In light of the CROWN Act amendment, employers should review current dress code and grooming policies (often inclusive of physical appearance, such as hair styles) and train personnel to ensure compliance with the law.

Effective January 1, 2024:

Statewide Earned Sick and Safe Leave, §§ 181.9445-9448 and § 177.50. Under the law, beginning January 1, 2024, eligible employees are entitled to accrue one hour of sick and safe leave for every 30 hours worked, up to a total of 48 hours per year, and employees will be able to carry accrued hours, subject to an 80-hour total cap on accrued hours. Under this accrual method, employers are not required to pay out employees at separation for any accrued but unused sick and safe time, unless they choose to do so.

Alternatively, employers may opt to front-load sick and safe leave at the beginning of each applicable benefit plan year. Some employers may prefer this method of accrual, as it allows for record accrual once a year, thereby reducing the recordkeeping requirements for accrual by pay period. However, if employers decide to not carry over accrued but unused sick and safe time at the end of each year, they may either (1) front-load a minimum of 48 hours of sick and safe time and pay out all unused time at the employee’s hourly rate (at the end of the year), or (2) front-load a minimum of 80 hours of sick and safe time for each employee that is available for immediate use (at the start of each year).

Employers that currently provide earned sick and safe time to employees under a paid time off policy are not required to provide additional earned sick and safe time, as long as the policy meets the same conditions or exceeds the minimum standard of the law.

Keep in mind that this new law does not preempt the current local regulations requiring employers in Minneapolis, St. Paul, Duluth, and Bloomington to provide similar leave. Employers in these cities must comply with both the new state law and the existing city regulations, as applicable.

Under the new law, employees may use their earned sick and safe time for reasons such as:

• the employee’s mental or physical illness, treatment, or preventive care;
• a family member’s mental or physical illness, treatment, or preventive care;
• absence due to domestic abuse, sexual assault or stalking of the employee or a family member;
• closure of the employee’s workplace due to weather or public emergency or closure of a family member’s school or care facility due to weather or public emergency; and
• when determined by a health authority or health care professional that the employee or a family member is at risk of infecting others with a communicable disease.

Under the law, employers are also required to provide specific notice to their employees regarding earned sick and safe leave to employees and include certain information in their employee personnel manual or handbooks if they have one. The Minnesota Department of Labor recently released a sample notice, and it is available on its website.[5] In addition to notice, employers must also inform employees about accrued sick and safe time via earned income statements totaling earned hours accrued for use and used during the pay period.

Pay History Ban. Under this law, employers can no longer ask job applicants about their pay history. Job applicants also include all current employees seeking an internal promotion or transfer, full and part time employees, and contractors. The intent of the law is to require employers to base employee salaries on market conditions and job requirements without being influenced by the job applicant’s current or previous pay.

Effective January 1, 2026:

Paid Family and Medical Leave, §§ 268B.01-.29. Under this law, all Minnesota employers (including churches and other nonprofits), regardless of size, will be required to provide to employees paid family and medical leave for up to 12 weeks with partial wage replacement related to the following (with a total combined cap of 20 weeks per year):

• a serious health condition;
• pregnancy, bonding, safety, or family care;
• a military member's active-duty service or impending call to active duty in the United States armed forces.

This program will be funded by a 0.7% payroll tax paid by employers and employees. However, employers offering private benefits that meet or exceed the law’s requirements can apply for approval with a related registration fee to opt out of the state plan requirement.[6]

Practically speaking, nonprofit employers must be diligent in revising policies, altering operations, and planning financially to comply with these new employment laws. Proactive efforts including board leadership, careful attentiveness through HR resources, and collaboration with legal counsel should likely mitigate risk of legal noncompliance, potential discrimination claims, or other potential employer liability. To what extent is Minnesota a trend-setter for other states? Stay tuned for more employment law updates in 2024!

[1] Chicago has similarly passed a very employee-friendly new paid leave ordinance, which our law firm will address in a separate blog.
[2] Under the new law, a covenant not to compete is valid and enforceable if (1) it is agreed upon during the sale of a business, and (2) it is agreed upon in anticipation of the dissolution of a business.
[3] Learn more about the Pregnant Workers Fairness Act in our law firm’s blog article, Undue Hardship Legal Developments.
[4] For more information about the church autonomy legal doctrine, see our law firm’s blog article explaining its application in a variety of contexts.
[5] See the Minnesota Department of Labor sample notice available online here.
[6] For more information and to review developing details of this program, please see the official State of Minnesota website here.

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