Employment Laws and Proposed Legislation Minnesota Employers Should Review in 2023

Minnesota’s CROWN Act—Enacted

Minnesota’s Creating a Respectful and Open World for Natural Hair (CROWN) Act amended the definition of “race” under the Minnesota Human Rights Act (MHRA). Race, as a protected class under the MRHA, is now “inclusive of traits associated with race, including but not limited to hair texture and hair styles such as braids, locs and twists.” Minn. Stat § 363A.03, subd. 36a. The Council for Minnesotans of African Heritage highlighted the importance of the CROWN Act in eliminating racial bias and prejudice against natural hair styles and textures—this discrimination frequently occurs against people of African heritage: “Black women are 1.5 times more likely to be sent home from the workplace because of their hair.”1 Now, Minnesota recognizes that discrimination on the basis of an individual’s hair style, hair texture, and any other trait associated with the individual’s race is unlawful race discrimination.

(Proposed) Minnesota Bill to Legalize Recreational Marijuana Use
Minnesota legislators continue to advance HF 100 and SF 73 in their quest to legalize recreational use of cannabis flower and cannabinoid products. Reasonable exceptions to use in the employment context are outlined in the bills. Under the current drafts, employers retain the right to terminate and otherwise discipline employees for using, possessing, selling, transferring, and being under the influence of cannabis flower and cannabinoid products during working hours, on work premises, or while operating an employer’s vehicle, machinery, or equipment. Disciplinary action must be pursuant to a written policy prohibiting the conduct for which the employee is being disciplined. The policy must be provided to consistent with notice requirements set forth in Minn. Stat. § 181.952, subd. 2.

(Proposed) Minnesota Paid Family and Medical Leave

Minnesota house bill HF 2 and companion senate bill SF 2 would provide eligible employees paid family and medical leave. Payments would be administered through the Minnesota Department of Employment and Economic Development in a manner similar to the unemployment system. The bill proposes three categories of leave in a single benefit year:

1. up to 12 weeks for employee’s serious health condition or pregnancy;
2. up to 12 weeks for bonding, safety leave or family care; and
3. up to 12 weeks for qualifying exigencies arising from a military member’s active duty service or notice of impending call or order to service for the U.S. armed forces.

All employers, regardless of size and location, would be required to provide the leave to employees engaged in covered employment. “Covered employment” is currently defined as including all services performed by an employee if:

1. the service is localized in this state; or
2. the service is not localized in any state, but some of the service is performed in this state and:
   i. the base of operations of the employee is in the state, or if there is no base of operations, then the place from which such service is directed or controlled is in this state; or
   ii. the base of operations or place from which such service is directed or controlled is not in any state in which some part of the service is performed, but the individual’s residence is in this state.

HF2 4th Engrossment 9.9 to 9.19; SF2 6th Engrossment 9.11 to 9.21.

(Proposed) Restrictions on Non-compete Agreements

The Federal Trade Commission (FTC) proposed a rule for notice and comment in January 2023. The comment period originally scheduled to end March 20, 2023, was extended to April 19, 2023. The FTC’s rule, as proposed, bans all non-compete and de facto non-compete provisions. Only certain non-competes restricting substantial owner of a business in connection with the sale of the business, ownership interests or operational assets are excepted from the proposed rule.
Contract provisions “prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with employer” are de facto non-competes also banned under the proposed rule.2 FTC offers two examples of de facto non-competes:

i. A non-disclosure agreement between an employer and a worker that is written so broadly that it effectively precludes the worker from working in the same field after the conclusion of the worker’s employment with the employer.
ii. A contractual term between an employer and a worker that requires the worker to pay the employer or a third-party entity for training costs if the worker’s employment terminates within a specified time period, where the required payment is not reasonably related to the costs the employer incurred for training the worker.

Non-Compete Clause Rule, 88 F.R. 3482, 3535 (proposed Jan. 19, 2023). The rule would apply retroactively to agreements predating publication of the final rule. If finalized, employers must rescind all non-compete and de facto non-compete clauses in worker contracts (including independent contractor contracts) within 180 days of the final rule’s publication date. While the proposed rule remains in the comment period, legal challenges are expected if the rule is finalized. Public comments on the proposed rule can be submitted here.

Minnesota’s state legislature has renewed its efforts to restrict non-compete agreements. Versions of HF 295 and SF 405 bills amended in March 2023 differ substantially. The HF295 version referred to the Judiciary Finance and Civil Law committee on March 13, 2023, would ban covenants not to compete restricting the after-termination conduct of employees earning or expected to be paid an amount equal to or less than Minnesota’s median family income for a four-person family for the most recent year published by the U.S. Census Bureau. The SF 405 version referred to the senate’s Finance committee on March 16, 2023, would ban employees and independent contractors’ covenants not to compete, regardless of the worker’s earnings. The senate’s proposal excludes those covenants entered into in connection with a business sale or anticipation of the business’s dissolution. Both versions would only apply to agreements entered on or after the bill becomes law. View all versions and bill status here: HF 295; SF 405.

Bloomington, Minnesota’s Earned Sick and Safe Leave—Ordinance Effective July 1, 2023

Beginning July 1, 2023, all employees working at least 80 hours within the boundaries of Bloomington, Minnesota shall earn sick and safety time (SST). Employees have the right to use Bloomington SST for the following reasons:

1. The employee’s mental or physical illness; injury; health condition; need for medical diagnosis; care, including prenatal care; treatment of a mental or physical illness, injury, or health condition; or need for preventive medical or health care.
2. The care of a family member with a mental or physical illness, injury or health condition who needs medical diagnosis, care including prenatal care, treatment of a mental or physical illness, injury or health condition; who needs preventive medical or health care; or the death of a family member.
3. An absence due to domestic abuse, sexual assault or stalking of the employee or employee’s family member, provided the absence is to:
   i. seek medical attention or psychological or other counseling services related to physical or psychological injury or disability caused by domestic abuse, sexual assault or stalking;
   ii. obtain services from a victim services organization;
   iii. seek relocation due to domestic abuse, sexual assault or stalking; or
   iv. seek legal advice or take legal action, including preparing for or participating in any civil or criminal legal proceeding related to or resulting from domestic abuse, sexual assault or stalking.
4. The closure of the employee’s place of business by order of a public official to limit exposure to an infectious agent, biological toxin, hazardous material or other public health emergency.
5. To accommodate the employee’s need to care for a family member whose school or place of care has been closed by order of a public official to limit exposure to an infectious agent, biological toxin, hazardous material or other public health emergency.
6. To accommodate the employee’s need to care for a family member whose school or place of care has been closed due to inclement weather, loss of power, loss of heating, loss of water or other unexpected closure.

(Bloomington, Minnesota Ord. 2022-31, passed June 6, 2022.) Use of SST hours may be limited to the time the employee would be scheduled to work in the City of Bloomington. Employers with five (5) or more employees must provide paid SST, while smaller employers have the option of providing the time as unpaid leave. The count includes all employees regardless of status (full-time, part-time, temporary) and location. Employers can review the ordinance for specific accrual and carryover requirements here.

¹ Council for Minnesotans of African Heritage, Legislative Toolkit: The CROWN Act (2022) at p. 1, available at https://mn.gov/cmah/legislation/crown-act/.
² Non-Compete Clause Rule, 88 F.R. 3482, 3535 (proposed Jan. 19, 2023).