Minnesota: 2025 Legislative Session Update and Minnesota Paid Family Leave Law

By Martin D. Kappenman and Francis P. Rojas - Peters & Kappenman, P.A.

May 23, 2025

2025 Legislative Update

The Minnesota Legislature adjourned at midnight on Monday May 19, 2025, leaving several budget bills unfinished.  The Minnesota Legislature still needs to finish the budget bills for Education, Commerce, Labor and Jobs, Health, Taxes, Environment, Human Services and Health, Capital Investment/Bonding, and Transportation. Prior to their adjournment, the Minnesota Legislature finished its budget bills for Veterans and Military Affairs, Housing, Legacy, State Government and Elections, Judiciary and Public Safety, and Agriculture.
 
Under the Minnesota Constitution, the Legislature must adjourn its regular session by mid-May. Any work that is unfinished must be completed during a special session.  Once a special session is called by the Governor, the Legislature will determine its duration and agenda.
 
The Speaker of the House, Lisa Demuth, stated that the Legislature will have working groups continue to work on the bills. The working groups will need to draft and agree on bills that follow the joint budget target.  Last week, the Minnesota Legislature agreed on joint budget targets for approximately $66.5 billion for fiscal years 2026-2027. This is $5 billion less than the last state budget for fiscal years 2024-2025.  The joint budget targets correspond to a starting point that will then allow the committees to work out the specifics for each budget.
 
Governor Tim Walz indicated that once there is an agreement in place for the major bills, he will call a special session.  If the budget is not finalized by June 1, the State will begin to issue layoff notices.
 
Unfortunately for employers, the Legislature did not significantly alter or delay the implementation of the Minnesota Paid Leave Law.
 
Minnesota Paid Leave Law
 
The Minnesota Paid Leave law (Chapter 59 - MN Laws) will take effect on January 1, 2026.  This law creates a state-administered mandatory paid family and medical insurance program and will be administered by the Minnesota Department of Employment and Economic Development (DEED).  Under this law, employees would be eligible for 12 weeks of paid leave to care for a family member with a serious health condition, to bond with a new baby or child, or when the employee’s own serious health condition prevents them from working.  Additionally, an employee may use the leave to support a family member called to active duty or if the employee or a family member is facing a significant personal safety issue.
 
The Minnesota Paid Leave will run concurrently with the Family Medical Leave Act (FMLA) or other leave taken for the same purpose.  An employer may require an employee to provide a copy of the certification required by DEED to apply for benefits. The certification depends upon the type of leave requested but generally will substantiate the need for the leave and where applicable, the duration and timing of the leave.
 
Not all employees are covered under the Minnesota Paid Leave law.  

•    Self-employed individuals and contractors are not covered by the Minnesota Paid Leave. However, they may opt-in for paid leave benefits.
•    There is a seasonal worker exception for those “who are employed no more than 150 days during any consecutive 52-week period in hospitality by an employer whose average receipts during any six months of the preceding calendar year were not more than 44% of ties average receipts for the other six months of the year.”
•    Applicants are ineligible for Minnesota Paid Leave benefits if they are incarcerated or receiving unemployment benefits for any portion of a typical workweek.
The 2026 contribution rates are as follows:
•    2026 Total premium rate: 0.88%
•    Cap premium rate: 1.1%
•    2026 Maximum employee contribution rate: 0.44%
•    2026 Minimum employer contribution rate: 0.44%
•    2026 Minimum small business employer contribution rate: 0.22%.

Key takeaways about contribution rates:

1.    The premium rate will be 0.88 percent and can be split between employer and employee contributions. Employers will contribute 50% of the total premium, although they may choose to pay up to 100%.
2.    In the 2025 Legislative Session the cap was reduced from 1.2% to 1.1% of the Social Security maximum taxable wage base.
3.    If you are a small business (less than 30 employees) and the average employee wage is less than 150% of the statewide average weekly wage, then you might be able to pay a reduced premium rate. You can access the premium calculator here: Premium rate and contributions / Minnesota Paid Leave.
4.    Please note the premium rate will be set each year, subject to a maximum set in state law (capped at the Old-Age, Survivors, and Disability Insurance (OASDI) limit).

The protections afforded under the Minnesota Paid Leave law mirror those protections under the FMLA.  An employer cannot retaliate against an employee for requesting or obtaining Minnesota Paid Leave. An employer cannot obstruct or interfere with an employee’s application for Minnesota Paid Leave.
 
Additionally, an employee must be returned to the same position they held when the leave started, with equivalent benefits, pay, and other terms and conditions of employment.  If during the leave, the employee experiences a layoff or if the employee’s position is eliminated, the employee is not entitled to reinstatement in the former or comparable position.  In such circumstances, the employee retains all rights under the layoff and recall system, including in a system detailed by a collective bargaining agreement, as if the employee had not taken the leave.

Please take notice of the following key dates:

•    May 30, 2025 – Applications for the Paid Leave Public Outreach Grants are due. For more information about the Public Outreach Grant and the application process, please go to the following link: Public outreach grants / Minnesota Paid Leave.
•    October 31, 2025 – the first quarterly wage detail reports are due.  These reports must detail the wages paid to employees between July 1, 2025 and September 30, 2025. Employers will submit this information using the existing Unemployment Insurance system. The quarterly wage detail reports submitted for Paid Leave are identical to the wage detail reports employers currently submit for unemployment insurance purposes.  For more information, you can find it here: Welcome Employer & Agents / Employers - Unemployment Insurance Minnesota.
•    December 2025 – Deadline for employers to notify employees about Paid Leave Benefits. Please note that you must provide notice to all employees, including seasonal employees. Ensure posters are displayed in areas where employees can easily see them.
•    January 1, 2026 – Employers can begin deducting the employee share and the Minnesota Paid Leave law comes into effect.
•    April 30, 2026 – the first premiums are due on April 30, 2026 based on wages paid between January 1, 2026 and March 31, 2026.
•    July 31, 2026 – premium adjustments will be made starting on July 31, 2026 and every July 31 each year thereafter for the following calendar year.
 
Employer’s Role and Responsibilities

•    Submit quarterly wage detail reports in a timely manner.
•    Inform and educate the employees.  Posters and the FAQ can be found here: Employer resource toolkit / Minnesota Paid Leave
•    Work with us as you encounter issues or have questions in the workplace.
•    Submit paid leave premiums in a timely manner.

www.pklaborlaw.com