Well, I don’t want to say I called it but…on April 8, 2016, I wrote a post about Minneapolis’ proposed paid sick leave and managing paid sick leave laws in multiple states, suggesting that this issue is only going to spread. Indeed, it has.  Minnesota is proposing a paid sick leave fund comparable to the State of California – but even going beyond (one upping CA?! Impressive feat if passed). Though I didn’t know it then, I now know that on March 10, 2016, State Senators Sieben, Pappas, Franzen, Bakk and Hawj introduced SF2558, “a bill for an act relating to paid family medical leave benefits; establishing a family and medical leave benefit insurance program; imposing a wage tax; authorizing rulemaking; creating an account; appropriating money” and amending the state statutes accordingly.  The proposed law has been amended and is currently before the Finance committee in its 3rd engrossment. English = it is still pending and here is the latest version.  It proposes to be effective January 1, 2020, though the payroll tax will take effect 2018 (the State needs 2 years of taxes to have money to pay employees this proposed benefit).

Bill Proposes New Payroll Tax (Effective August 1, 2016) on Employers and Employees.

If passed as drafted, a new payroll tax will be imposed on employers with 21 or more employees (working in Minnesota during the past year) starting August 1, 2016.  Employees of covered employers would also suffer the new payroll tax.  The initial tax rates are 0% for 2017, 0.05% for 2018 and 0.1% for 2019.  The rates in 2020 have not been introduced yet.  The proposed bill seeks an appropriation in 2017 from the general fund to get the program started.

What happens to the money from the tax?  It will go into a new state-run trust fund to be used to replace between 55% – 80% of an employees wages for up to 12 weeks a year for leave to care for family member, pregnancy-related condition and/or to bond with a newborn child (whether biological or adoptive).  In addition, if the IRS determines that the benefits are subject to federal income tax, that tax would be withheld.

How Would This Work?
The Commissioner of Minnesota’s Department of Employment and Economic Development (“DEED”), currently Katie Clark Sieben, would be tasked with administrating the new benefit insurance program. Accordingly, DEED must create three application forms both for online applications and in paper: (1) family care benefits; (2) bonding benefits; or (3) pregnancy benefits.  Once the employee applies, the Commissioner would have 2 weeks to approve or deny the application.  If the application is determined “valid” and thus approved, the employee would then be notified of the week when benefits commence, the weekly benefit amount payable, and maximum duration.  The employer would also be notified and provided rights to participate in an hearing and appeal process.  Denied applications (deemed “invalid”) may be appealed, similar to unemployment, via a hearing before a newly created “benefit judge” (as well as challenges by employers).

What Employees Are Eligible?

An employee would be eligible for leave if the employee performed services for the employer for at least 6 months before the request (note this is less than the 12 months required by FMLA) and for at least 20 hours a week (well, it’s a little more complicated formula, but basically – half-time employees).

What Could Leave Be Taken For?Continue Reading Minnesota Considering Payroll Tax Starting in 2018 for 2020 Statewide Family and Medical Benefit Insurance Program