Minnesota Governor Tim Walz has signed into law three bills that create new obligations for Minnesota employers.

First, on May 24, 2023, Governor Walz signed a labor appropriations bill prohibiting the use of covenants not to compete against Minnesota employees and employers, with very limited exceptions involving the sale or dissolution of a business. The law prohibits employers from enforcing any non-compete agreement signed on or after July 1, 2023. The law is not retroactive, which permits Minnesota employers a brief window to update employment agreements to include non-compete clauses. Additional details regarding the Minnesota non-compete ban may be found in Ballard Spahr’s recent blog post.

Second, on May 25, Governor Walz signed a bill creating a Family and Medical Benefit Insurance Program, which will, after January 1, 2026, allow eligible Minnesota employees access to state family and medical leave benefits. Importantly, employers will not be responsible for paying these benefits to employees; eligible employees will be provided benefits through a state-run family and medical insurance fund to be funded by state surplus dollars and employer and employee premiums. Employers will need to pay premiums equal to .7 percent of employees’ taxable wages into the fund on a quarterly basis, but employers may pass on up to half of this premium amount to employees through payroll deductions. Once effective, employees will be required to apply directly to the Minnesota Department of Labor and Industry for family or medical benefits, and the Department will determine the benefit amount and issue the appropriate payments directly to the employee. Employers with more generous private plans may apply to the Minnesota Department of Labor and Industry for exemption from premium payment obligations via a forthcoming application. Employers will want to keep an eye on various Paid Family and Medical Leave deadlines applicable to employers which start as soon as 2024, including wage report deadlines, notice deadlines, and premium payment deadlines. This law does not supersede employer’s obligations to provide leave to eligible employees under the Family and Medical Leave Act, but provides a mechanism for employees to receive compensation during qualifying absences.

Third and finally, on May 30, Governor Walz signed legislation legalizing recreational use of marijuana. As of August 1, 2023, individuals 21 years of age or older may lawfully engage in the following in Minnesota:

  • Use, possess, or transport cannabis paraphernalia;
  • Possess or transport up to two ounces of cannabis in a public place;
  • Possess up to two pounds of cannabis in a private residence;
  • Possess or transport cannabis edibles and cannabis concentrate, with some limitations;
  • Share certain amounts of cannabis products; and
  • Use cannabis in a private residence, on private property, or in a licensed establishment.

The law will also allow, on various effective dates, Minnesotans to grow their own cannabis and expunge low-level cannabis convictions. The law further creates a regulatory and licensing framework for businesses looking to sell cannabis products or host cannabis users, and establish a new departmental office, the Office of Cannabis Management, with the purpose of eliminating the “illicit market for cannabis flower and cannabis products” and to “meet the market demand” for the same. Minnesota is now the 23rd state to legalize recreational use of marijuana.

Employers will want to re-examine their policies and processes regarding the potential impact of this legislation. Ballard attorneys are available to answer your questions on how recreational law impacts your business; and watch for an upcoming blog post on this topic.

Ballard Spahr assists clients in incorporating new laws into existing company and employee policies. Please contact your Ballard Spahr attorney if you are interested in updating your policies to discuss actions required to address these new Minnesota employment laws for your business.