Small-business carveout for paid leave fails, opponents say it would strip benefits from many

Megan Horsager farms with her father in western Minnesota. Her mother is an employee and could take off any time for any reason. But implementing Minnesota’s new Paid Family and Medical Leave program has been far less flexible.

Serving as the farm’s de facto human resources department, Horsager has spent significant time trying to understand how the law applies to their small operation, particularly because her mother is not a typical W-2 employee.

Despite the efforts, Horsager remains unsure whether they are in compliance.

“It’s been a lot of frustration trying to implement a program we’re never going to use,” she told the House Workforce, Labor, and Economic Development Finance and Policy Committee Wednesday, adding they considered hiring outside help to manage the new requirements.

Horsager was one of several testifiers saying the statewide program, which offers temporary wage replacement for up to 20 weeks a year, disproportionately affects small employers who lack HR departments, redundancy in staffing, or administrative capacity.

Rep. Kristin Robbins (R-Maple Grove) proposes HF2113 as a remedy.

As amended, the bill would exempt businesses with 15 or fewer employees from the paid leave program, though employers could still opt in. Robbins said small employers need flexibility that the universal structure of the law does not provide.

Opponents, however, say the bill could potentially exclude about one in five Minnesota workers, who wouldn’t be guaranteed time to bond with a child or manage a cancer diagnosis because of where they work.

The bill failed to advance out of the committee on a party-line vote.

[MORE: Read letters for and against the bill]

Bill supporters

Small-business concerns, some documented in a Minnesota Chamber of Commerce survey, include:

• Staffing issues: Losing even one trained employee in a five- or six-person operation can halt business or, in the case of a leave by a journeyman electrician supervising apprentices, result in layoffs. Additionally, employers reported difficulty finding permanent staff, let alone temporary who could fill in during leave.
• Administrative load: Many small businesses lack HR departments; 30% said they hired outside help to understand or implement the law, said National Federation of Independent Businesses Director Jonathan Boesche.
• Cost shifting: Small employers noted that roughly two-thirds of paid leave claims have come from firms with 200 or more employees, meaning small businesses may help fund benefits used mostly by larger employers.

Rep. Wayne Johnson (R-Cottage Grove) said the mandate resulted in Minnesota having one of the lowest percentages of business starts in the nation. “People are saying there are too many mandates, too many costs, too many headaches to start.”

Bill opponents

Opponents, however, say carving out small employers would undercut the program’s purpose as a universal minimum labor standard and could exclude more than 450,000 workers statewide.

Others warned that exemptions create incentives for businesses to game the system by splitting into smaller entities or reclassifying workers. Several testifiers said the program is meant to function as social insurance where broad participation keeps costs stable.

They also point to provisions in the law helping businesses with 30 or fewer employees, including lower premium rates and grants to help cover costs such as overtime or employee training.

Rep. Pete Johnson (DFL-Duluth) urged lawmakers to center the conversation on workers navigating new babies, medical crises, or family emergencies. “There were a lot of people who had to make really hard choices, or lost jobs, or weren’t able to spend time with their loved ones or heal properly prior to this law.”