Minnesota's paid family and medical leave program becomes law

For Toni Kay Mangskau, 2017 was a cruel year.

Her mother was receiving cancer treatment when her brother, who is developmentally disabled and for whom she is a guardian, landed in intensive care for weeks. Her children also had health issues that demanded her attention.

"It's just a struggle where you want to be there for your loved ones," said Mangskau, whose only option was unpaid leave. The health care worker lost a third of her income that year.

She was among the advocates who gathered Thursday at the State Capitol to watch as Minnesota became one of a dozen states to approve paid family and medical leave requirements.

Gov. Tim Walz signed off on the creation of a state-run program that will ensure workers can take weeks or months off with partial pay after having a child, or when they or a family member have a serious health condition. They also will be able to take time off following an adoption, related to the military deployment of a family member or in situations of domestic abuse, sexual assault or stalking.

"The vast majority of nations have this because they know it's the right thing to do," Walz said. "They also know it's the right thing to do to build your economy, to make it resilient and strong and healthy."

The change won't take effect until January 2026. Legislators delayed the start of the program by six months, one of several adjustments made amid concerns from business owners and other employers, including school districts.

Lawmakers also scaled back initial plans to allow workers to take up to 12 weeks for their own health issues and 12 weeks to care for another person in the same year. Instead of 24 weeks of total leave, they capped it at 20 weeks with a 12-week limit on each type of leave. Advocates said it's rare someone will take the full time allowed, and people will have to meet certain health condition requirements to qualify.

Despite the adjustments, business leaders said they felt unheard at the Capitol this session.

"This is going to be a significant burden on businesses. It will drive up costs of being in business in Minnesota," said Chamber of Commerce President and CEO Doug Loon. "Unfortunately what we're seeing is legislation without listening to all the perspectives. Some might call it bold, but I would say it's more divisive."

Chamber members already design, implement and administer complicated benefit packages and believe adjustments are needed to make the state program "solvent, workable and fair," Lauryn Schothorst of the Chamber added in a statement Thursday. She said the group is going to advocate to refine the program before it starts in two and a half years.

The state is using $668 million from the projected budget surplus to jumpstart the paid leave program. Once it begins in 2026, it will be funded through a .7% payroll tax on employers, similar to unemployment insurance. Employers will be able to shift half of that cost to employees.

The tax could be increased, and other states with paid leave programs have needed to make such adjustments. But in another late-session change, Minnesota legislators agreed to cap the rate at 1.2%.

The new law requires the state to do an actuarial analysis this year of the program's finances, including whether the .7% payroll tax figure is sufficient. GOP lawmakers stressed during the session that the analysis should have been done prior to passing a bill.

"We may have to exceed a 1.2% cap. And yet here we are implementing a program without any actuarial study, without any qualified analysis other than what the advocates have done," Sen. Eric Pratt, R-Prior Lake, said during the final Senate debate on the bill.

GOP lawmakers have pushed to instead allow employers to use private insurance plans to offer paid leave, and for the state to provide tax credits to companies with the benefit.

Democrats countered that the private market has failed to meet Minnesotans' needs. They said at Thursday's bill signing that after a decade of work, numerous committee hearings and watching 11 other states pass similar programs, their plan is well-vetted.

Starting in 2026, employers will either have to participate in the state plan or opt out if they offer the same or better benefits, said House bill sponsor Ruth Richardson, DFL-Mendota Heights.

"Because it's a statewide pool, it actually creates one of the most affordable options to be able to offer paid family and medical leave," Richardson said of the state program. "So even for some of the bigger companies that are out there that are offering it, they are oftentimes paying much more to offer really similar benefits."

The new law provides payroll tax relief for smaller companies, Richardson noted, as employers with fewer than 30 workers would have reduced costs.

Lawmakers also passed a paid sick and safe time measure this session, which allows workers to earn paid time off for short-term absences, such as a doctor's appointment or caring for a child with the flu. Businesses must cover the cost of that requirement.

Joy McAfee, who runs a small business as a doula, was among those at the Capitol to celebrate paid leave. She said she has assisted many parents who lacked sufficient paid leave to heal and bond with a new baby. When she gave birth to her first child, her husband wasn't able to take any time off and she had to care for their son while experiencing severe postpartum depression.

"I see parents breaking down consistently about 'How are we going to make this work? How are we going to do this?'" McAfee said. "This bill is going to change the way in which families navigate their ability to care for themselves, their ability to attach and attune to their children, their ability to care for their loved ones."

Staff writer Briana Bierschbach contributed to this report.