Minnesota small businesses race to meet paid family and medical leave deadlines

A major new benefit for Minnesota workers is proving a big headache for many employers as mandatory paid leave for health and family emergencies goes into effect in just 15 weeks.

Small businesses may be particularly exposed to strain, as many don’t have HR departments to help with the tracking, compliance and reporting required.

These business owners are now flocking to consultants and a state helpline to navigate the law, which requires all employers to provide up to 12 weeks of paid medical or family leave (or 20 weeks combined) to workers needing to care for themselves or a close relative in crisis.

“I think a lot of companies thought maybe this law would not pass, or would just go away. But now they’re realizing that’s not the case,” said Kelly Weight, CEO of the accounting and human-resources consulting firm Brillect in Minneapolis. “The number of calls to our office is definitely increasing rapidly.”

Two years after the law passed alongside a suite of other progressive legislation when Democrats fully controlled state government, employers interviewed by the Minnesota Star Tribune expressed a desire to comply with the law and its impending deadlines. But they first have to understand the program, get insurance quotes and overcome concerns about cost, administrative hurdles and possible fraud.

Milissa Silva, co-owner of El Burrito Mercado in St. Paul, said she supports the intent of the law because it’s good for her employees. But the mandate comes at a hard time, she said, since it includes a new payroll tax of 0.88% (or 0.66% for firms with fewer than 30 workers).

Expenses have skyrocketed as sales have dragged — enough that she had to lay off some of her 90 workers at the 46-year-old market and cafe.

The business is also grappling with inflation, she said, and “cash flow is getting harder.”

Christine Lantinen, CEO of candy maker Maud Borup, said the new law hadn’t been on her radar until last week when she sat down with her HR manager to flesh out details.

Now she’s waiting for a quote from an insurance plan to manage the mandatory leave program and still has many questions about how the new law will affect her 400-employee company.

On Friday, as workers twirled and bagged mountains of wispy cotton candy in Plymouth for a large retail client, Lantinen said she is most concerned with how to plan for the unknown.

“Could I have 50 employees that come to me and say, ‘I’m taking 20 weeks off?’ Then I’m holding those jobs for five months?” she said. “That’s the fear.”

“Am I being held responsible to give them a job back? I think those are the unknowns,” she said.

Anna Tsantir, owner of Two Bettys Green Cleaning, lobbied hard for the new benefit at the Legislature in 2023.

Tsantir, who employs 70 workers, said this will help her recruit and retain hourly cleaners who have never had access to paid leave.

She believes the law “levels the playing field for small employers” competing with big corporations who can more easily afford their own paid leave programs.

“To me, this paid leave law is a huge equity issue,” Tsantir said. “This is going to make laborers and people that don’t normally get this kind of benefit get this kind of benefit. And guess who usually leaves their jobs to take care of everyone at home? When this kind of stuff comes up, it’s women.”

The state is appropriating $5 million a year for grants to help small employers weather an employee’s leave, but that may not meet the need.

“For a lot of small companies, this ... will be a financial hardship,” said Weight, the HR consultant.

Some neighborhood and business associations have complained the state has been slow to roll out some program requirements and that more education efforts are needed.

By Nov. 10, employers must inform the Minnesota Department of Employment and Economic Development if their company will join the state program or enroll in a private equivalent insurance plan to comply with the law. If employers fail to pick a private player, they will automatically be placed in the state plan.

But DEED did not publish its list of 19 approved private alternatives until July, so “employers are feeling a little bit behind,” said Sarah Coli with New York-based ShelterPoint Life Insurance.

State officials insisted their hands were tied when it came to listing alternatives to enrolling in the state plan. The law did not allow DEED to accept ”equivalent plan" substitution requests before July 1, DEED officials said in a statement.

By Dec. 1, all employers must inform their employees about the new paid leave benefit and its shared costs. The law requires employers to cover at least 50% of the new paid leave payroll tax. Employees cover the rest.

DEED will hold 13 more educational sessions in the next three months.

The agency beefed up its website, hired 40 counselors to answer questions, emailed 21,000 business owners and held 250 workshops across the state designed to guide small businesses wrestling with the nuances of the law.

“Part of the way that we’re developing our tools and our guidance is around trying to support the folks that need it most,” said Greg Norfleet, Minnesota’s paid leave director, who also helped launch Massachusetts’ paid leave program in 2021. “And that most often is small employers.”