2024 HR compliance essentials for Minnesota employers

by Leah Davis, CPA

Keeping up with ever-changing employment laws can feel overwhelming, especially when you’re also trying to keep up with essential operations. While it’s tempting to put off compliance-related tasks, it’s critical to become familiar with new requirements as soon as possible to ensure you don’t fall out of line. In addition to penalties and fines, failing to comply with these latest updates could put you at risk for employee complaints and turnover.

This year, we’re keeping a close eye on a few state and federal changes that will affect every employer, regardless of size or industry. To help you understand what’s changing and what actions you should take, we’ve compiled an overview of the most pressing updates.

You can also learn more about these changes by checking out our recent webinar, “Mastering Minnesota’s new employment laws & exempt employee salary threshold,” provided in partnership with the Blethen Berens law firm.

1. Minnesota Earned Sick and Safe Time (ESST) amendments

In May 2024, Minnesota passed new legislation that included several amendments to the state’s new ESST law. Key highlights and changes to ESST regulations include the following:

Effective immediately:

• Increased penalties and damages for employers who do not provide or allow ESST use for eligible employees.
• Employee pay statements are no longer required to have the current ESST balance and hours used as long as employees have access, either in writing or electronically, to their current available and used ESST hour balances each pay period. If employers are providing this information electronically, employees must be allowed access to a company-owned computer during regular working hours so they can review and print their ESST balance and use information.
• Employers must retain ESST accrual and usage records for 3 years and make them available for agency review within 72 hours of request.
• Clarification that ESST hours used by an employee must be paid at the same “base rate” that an employee would otherwise earn. Base rate is further defined to essentially mean the rate of pay that an employee would have received if they had been working as normally assigned but not including commissions, differentials, rate premiums, and/or tips.
• Broader definition of “Employee” for ESST eligibility to include any worker who is “anticipated” by the employer to perform work in Minnesota for at least 80 hours in a year.
• Confirmation that the following workers are NOT considered eligible employees under ESST and are not entitled to ESST leave benefits:
  • Volunteer/paid-on-call firefighters
  • Volunteer/paid-on-call ambulance service workers/attendants
  • Elected officials
  • Farm workers who provide physical labor or farm management if they are only employed for 28 days or less each year
• Broader ESST eligibility for employees who work less than a majority of their hours in Minnesota in a calendar year.
• Added bereavement/funeral leave, including time to make arrangements for or to attend a funeral service or memorial, or address financial or legal matters that arise after the death of a family member, to the list of eligible ESST leave uses.
• Clarification that ESST use does not need to be provided in time increments of less than 15 minutes.
• As long as ESST has been waived under a collective bargaining agreement or the employee is needed to maintain minimum staffing requirements under a written employer policy, ESST use in the event of a qualifying “weather event” is not required to be available for employees who:
  • Would be required to respond to the public emergency or weather event, including public employees who hold a commercial driver’s license (i.e., snow plow drivers, electric utilities workers, etc.)
  • Firefighters, police officers, 911 dispatch operators, or correctional facility guards

Effective January 1, 2025:

Likely the most significant change to ESST is the amendment that, as it is currently drafted, appears to require that ALL employer-provided paid time off that can be used for an employee’s own “personal injury or illness” (i.e., PTO, extended illness, sick, or even vacation time off, if allowed in cases of illness or injury) to be treated like ESST in regard to eligibility for use, employer documentation limitations, and employee retaliation protections.

What this may mean in practice (pending further clarification from the Minnesota Department of Labor and Industry): any employer who has elected to provide other types of paid leave in excess of ESST will no longer be allowed to have different use or documentation requirements for this leave. Moreover,  they will not be allowed to discipline for any “excessive” use of paid time off and ALL types of paid leave will need to be treated like ESST.

Actions to take now:

The majority of these amendments are effective immediately, which means that all employers should carefully review their current ESST policies, practices, and accrual setups to ensure that they are meeting all existing and new requirements.

If your organization offers additional paid leave that exceeds the ESST requirements, you should begin to plan for potential changes but keep a close eye on Minnesota Department of Labor and Industry guidance before making any major changes.

We’re encouraging clients to evaluate more generous sick or PTO plans and policies to assess the impact if the amendment were to be interpreted as written, evaluate what changes could need to be made to your other paid time off policies to limit the impact of the ESST changes, and, most importantly, stay informed as the implementation of new legislation is further clarified by the state.

Overall, we recommend reviewing the totality of the amendments in detail, so you know which actions you need to take now and by January 1.

1. Changes to the federal salary threshold for exempt employees

In April 2024, the Department of Labor issued a final rule that increases the salary thresholds for certain overtime exemptions under the Fair Labor Standards Act (FLSA). While employees must still meet both a duties test and a salary test to be exempt under the FLSA White Collar Exemptions (executive, administrative, and professional, etc.), the increased thresholds will cause some employees to lose their exempt status if their employer doesn’t adjust their salary accordingly.

Effective July 1, 2024, the threshold increases from its current amount of $684/week ($35,568/year) to $844/week ($43,888/year). The threshold will increase again effective January 1, 2025, to $1,128/week ($58,656/year). Highly compensated employee thresholds will also increase on those dates to $132,964/year and $151,164/year, respectively.

Actions to take now:

These changes are already facing multiple legal challenges, so we’re recommending a “prepare and hold” approach to implement these changes. However, it’s still important to review all exempt employees and positions to make sure they meet the duties test for the exemption under which the position is classified.

You will also want to identify any individuals who may be receiving a salary below the $844/week or $1,125/week levels. For these employees, you will need to decide whether to simply increase the salary to the new level or to convert the position to nonexempt. If you choose the latter, you will need to track and pay overtime, per the FLSA regulations, by July 1 and, if necessary, January 1, 2025.

Keep in mind that if you do change an employee’s exempt status and/or salary amount, you must provide written notice to the employee prior to making the change.

If it’s been a while since you’ve evaluated your overall compliance with the Federal Fair Labor Standards Act (FLSA), check out our recent “FLSA Back to the Basics” webinar with attorneys from Blethen Berens to get you up to speed and ready to comply.

3. Updates to Minnesota Paid Family Medical Leave reporting

While there are many pressing and time-sensitive changes facing Minnesota employers right now, it’s critical to not forget about the implications of the looming Minnesota Paid Family Medical Leave Act, which was signed into law in May 2023 and effective beginning January 1, 2026.

Under this new program, employees will be eligible to take up to 12 weeks of partially paid leave per year in the following scenarios: when a serious health condition prevents them from working, when they need time to care for a family member or new child, for certain military-related events, or for certain personal safety issues.

Understandably, this will be a major change for most employers, specifically small employers who have not previously been required to comply with the federal Family and Medical Leave Act (FMLA), so it’s critical to begin planning as soon as possible.

In addition, employers will be required to begin submitting wage detail reports to the state’s Department of Labor and Industry for the quarter ending September 30, 2024, of this year.  Payments into the program, however, will not begin until January 1, 2026.

Actions to take now:

If your organization is already covered by the Minnesota Unemployment Insurance program, it’s likely you will hardly notice the 2024 reporting, as it will be collected with the same wage detail report that you already submit for unemployment tax purposes.

If your organization is  not covered by the UI program, you will need to register for a “Paid Leave Only” account through the UI online system during summer 2024 and begin reporting in October 2024 for the July through September 2024 period.

You should also begin thinking about how extended paid leave could impact your operations, staffing needs, FMLA processes, other extended leave policies or programs, and existing short-term disability insurance policies.

The bottom line: This new program will have broad implications on how you plan for operational continuity and how you structure employee benefits that might overlap with the new Minnesota paid leave options.

Keep your compliance efforts on track

You’re not alone if you feel like staying up to date with and meeting compliance requirements seems like a full-time job. Sometimes it can even be hard to know where to start or what your next action should be.

If you’re unsure of how to navigate these new employment laws or if you’d like to learn more about impacts to your organization, the Abdo team of HR advisors can help.

Our experts can guide you through responding to these requirements, design strategies for compliance that work in the real world, and give you the confidence to move forward with a plan tailored to your needs.

To learn more about how we can help, check out our HR & Payroll services page.