WATCH: Small Business Owners Ask Questions, Express Concerns With New PFML Mandate During DEED Webinar

Date: January 23, 2024

Job creators express their criticisms of and concerns with the new mandate.

Despite the advocacy efforts of NFIB MN and the opposition of small business owners across the state, the Minnesota Legislature imposed the largest business mandate and biggest single tax increase with the passage of the Paid Family and Medical Leave (PFML) mandate during the 2023 legislative session.

Though the program doesn’t go into effect until January 1, 2026, Main Street needs clarity now on how it will be administered and how to comply.

On January 18, NFIB Minnesota hosted a webinar with the Minnesota Department of Employment and Economic Development (DEED) and more than 90 NFIB member small business owners to answer questions and get feedback on PFML. CLICK HERE to view DEED’s PowerPoint presentation.

CLICK HERE to view the full webinar. FAQs may be found below.

During the webinar, NFIB State Director John Reynolds shared just a few reasons why job creators overwhelmingly oppose the PFML mandate, including the ongoing worker shortage, cost, and administrative burden.

“NFIB opposed the paid family and medical leave program during the legislative session,” Reynolds said. “We argued a number of different ways about the negative impact it would have on our members. The top reasons being threefold. First, we’re in a chronic worker shortage and this poses a huge problem for our employers. The idea of finding replacement workers for up to 20 weeks per year is a daunting one for small businesses in particular. Second, an expensive new payroll tax comes with the program. And then finally, there are concerns about the administrative burden and the potential for abuse.”

Reynolds continued, noting the importance of conveying these concerns to decision-makers at DEED.

“We thought it was important for two reasons to have this webinar today,” Reynolds said. “One, it’s important for our members to understand the impact or potential impact that this program may have on their businesses. Two, it’s also important for our members to be able to share their perspectives with DEED. DEED is going to have to make a lot of decisions over the next couple of years as they build out and implement PFML. The more that we can share our perspective with them, the more that they can make decisions that ease or reduce some of the burden on our members.”

NFIB MN will continue to serve as the voice of small businesses in St. Paul, advocating against harmful policy proposals and mandates. We will continue expressing small business owners’ concerns with the new program and suggestions to alleviate the program’s burden on our job creators.

About the PFML Mandate:

The program requires nearly all employers to allow nearly all employees with 20 weeks off per year for a wide range of reasons, including the employee’s medical condition, parental leave, or to care for family and anyone for whom the employee has an “expectation” to provide care. Program users will apply to and be paid via a state government agency and the program is funded by a new $1.5 billion per year payroll tax split between employees and employers. The details of the program will be worked out via regulation over the next two years.

You can read more about the PFML law HERE.

CLICK HERE to view the webinar. FAQs may be found below. CLICK HERE to view DEED’s PowerPoint presentation. Don’t forget to download the NFIB Engage App today to stay up to date with legislation that will impact your business at the state or federal level.

If you have any questions, please contact NFIB Minnesota State Director John Reynolds at [email protected].

Questions from the PFML Webinar:

Small business owners are rightly worried about the impact PFML will have on their workforce and business operations. While some details of the program won’t be known until DEED finalizes regulations, below are answers to some of the commonly asked questions during the PFML webinar.

Do I have to pay both the employee on PFML leave and the replacement I hire to continue the work?

  • No, the employee on leave will be paid through the state-run PFML program. Employers are responsible for continuing benefits – including health insurance – while the employee is on PFML. Where applicable, employers can continue to collect premiums for benefits from the employee on leave.

Are there any exemptions for small employers?

There are no exemptions based on the number of employees or amount of revenue at a business.

There is a limited exemption for seasonal employees of certain seasonal hospitality employers. A person who is employed for no more than 150 days during any consecutive 52-week period is not eligible for the program. To qualify as a seasonal hospitality employer, the business must:

  • have average receipts during one six month period of the preceding year that are no more than 33% of its average receipts for the other six month period of that year; and
  • be a business identified in Minnesota Statute 157.15, Subd. 4-9 or 11-14.

If an employee exceeds the 150-day threshold, the employer must notify DEED within five business days.

Is there any help for small businesses?

The PFML program provides limited assistance for very small employers.

Payroll Tax Exclusion. For businesses with 20 or fewer employees, the PFML law excludes the lesser of (i) $12,500 of each employee’s wages or (ii) $120,000 from the payroll tax calculation. For each employee over 20 employees, the exclusion is reduced by $12,000, so that it phases out at 30 employees.

Employers with fewer than 30 employees and less than $3,000,000 in gross annual revenue may receive a grant of up to $3,000 per employee for hiring a temporary worker or increased an existing worker’s wages to compensate for an employee who uses PFML for seven days or more. The total amount of grant assistance an employer can receive in one year is $6,000.

Employers must apply to DEED for the grants, which are approved on a first come, first served basis. The total amount of assistance available per year is $5,000,000.

Is there a waiting period before an employee can use PFML?

No, an employee can use PFML beginning on day one of employment. The only limitations on when an employee can use PFML are whether they meet the qualifying criteria (own illness, family caregiving, parental leave, etc.) and if they have earned enough in wages during the previous 52 weeks to receive payment from the state.

However, an employee is not eligible for job protections until after 90 days of employment. In other words, an employee who uses leave within their first 90 days does not have a right to be reinstated to their previous position with the business.

Can teenagers and high school students take PFML?

Yes, teenagers and high school students can use PFML. The only limitation is whether they’ve earned enough in the previous 52 weeks to receive benefit payments under the state program.

If an employee is laid off and then rehired, does the 90-day limitation on job protections start again?

The PFML law does not directly address this issue. If an employee is separated from employment and then re-hired, NFIB’s view is that there is a new 90-day window where the employee is not entitled to job protections under the law.

Are PFML benefits considered taxable income?

Guidance on this is forthcoming from DEED and the Minnesota Department of Revenue, but likely depends on the type of leave taken. Washington, which also has a state-run PFML program, treats family leave as taxable income and considers medical leave benefits tax exempt.

What if the only employees are owners?

If any employee receives a W2, they are considered an employee for the purposes of PFML. Owner-employees who paid in other manners will not automatically be covered by PFML, but may opt in under certain circumstances.

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