ST. PAUL — Minnesota will soon have a tax-funded, state-administered paid family and medical leave program for workers.
The Minnesota Senate on Thursday, May 18, approved the final version of a bill to create a state program that would offer 12 weeks of family leave and 12 weeks of medical leave with a 20-week annual cap. All businesses would be required to participate or offer equivalent benefits.
Low-wage workers often do not have access to the same benefits as higher-paid members of the workforce. Advocates say one-third of Minnesota workers — about 900,000 people — don’t have any paid time off.
“This program is built on a foundation that all people are worthy — that all of our life experiences and life trajectories are equally important,” said Sen. Erin Maye Quade, DFL-Apple Valley. Quade spoke on behalf of bill sponsor Sen. Alice Mann, DFL-Edina, who had to vote remotely due to a medical issue.
Senators voted 34-33 on party lines to approve the bill, which was a priority this session for Democratic-Farmer-Labor lawmakers. Members of the House approved the bill 68-62 on Wednesday. The final step is a signature from DFL Gov. Tim Walz, who supports the program.
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Workers who use paid leave will qualify for compensation based on their wages. A worker who earns less than 50% of the state’s average weekly wage would get 90% of their normal pay. Workers earning more than 50% of the state’s average wage would get 66%, and those earning double the weekly average would receive 55%.
The costs of this mandate — higher payroll taxes and bigger workforce struggles — will escalate rapidly. Small businesses are still squeezed from inflation, supply challenges, and a chronic workforce shortage that is not going away.
It will take a while for the paid leave program to start up. While the initial bill would have gone into effect in 2025, the final language calls for a start date of Jan. 1, 2026. Minnesota is establishing a new office to administer the program that will be staffed by hundreds of new employees.
The program would be seeded by $668 million from the record $17.5 billion budget surplus. Ongoing funding would come from a new 0.7% payroll tax split between employers and employees. It’s initially expected to create an additional $1.5 billion a year in taxes. Past estimates found workers would pay about $3 extra in taxes each week.
While the state will require employers to allow 12 weeks of medical and 12 weeks of family leave, a worker can only take 20 cumulative weeks a year.
Republicans, the National Federation of Independent Businesses and the Minnesota Chamber of Commerce also say they’re worried about a “one-size-fits-all” approach to paid leave for businesses ranging from mom-and-pops to Fortune 500 companies. GOP lawmakers also expressed doubt that the program would remain at current cost estimates.
“When politicians micromanage small businesses, it means fewer jobs, lower pay, and less opportunity,” NFIB Minnesota director John Reynolds, said in a statement. “The costs of this mandate — higher payroll taxes and bigger workforce struggles — will escalate rapidly. Small businesses are still squeezed from inflation, supply challenges, and a chronic workforce shortage that is not going away.”
Businesses that do not offer paid leave through the Minnesota program can opt out if they offer the same or better benefits. There is also a reduced premium for businesses with 30 or fewer employees.
GOP lawmakers oppose a mandate or program run by the state but acknowledge that many Minnesotans want paid family and medical leave. In response, they’ve floated an alternative proposal that would create a private option for paid leave.
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That proposal would allow insurers to sell leave plans to businesses, which the state doesn’t currently allow. Proponents argue the arrangement would allow businesses to provide paid leave while avoiding higher taxes and administrative costs.
Follow Alex Derosier on Twitter @xanderosier or email aderosier@forumcomm.com .
The Trust Project
