The implementation of Minnesota’s Paid Family and Medical Leave (PFML) program on January 1, 2024, has ignited a debate among business leaders and elected officials. While some advocate for the potential benefits of the program, others express concerns over its financial implications and impact on the workforce.
Minnesota Governor Tim Walz signed the PFML bill, also known as HF 2, into law in 2023. The legislation allows employees to take up to 12 weeks of paid medical leave and 12 weeks of paid family leave each year, amounting to a maximum of 20 weeks of leave with job protection. According to Greg Norfleet, a director at the Minnesota Department of Employment and Economic Development (DEED), the program is designed to support individuals during serious health events rather than minor illnesses.
“Our program covers serious health care conditions and life events that employees will need time off to deal with,” Norfleet explained. “It’s not a question of if this person was going to work through it, it’s if they were going to get paid while they’re away.”
Funding for the PFML program will come from a combination of surplus dollars and payroll taxes shared between employers and employees. For most businesses, the tax rate is set at 0.88%, equally divided between employer and employee contributions. Small businesses, defined as those with fewer than 30 employees earning less than 150% of the statewide average weekly wage, will benefit from a lower tax rate of 0.66%.
Concerns regarding the financial burden of the PFML program are prevalent among some business leaders. Mark Johnson, a Minnesota state senator representing East Grand Forks, described the initiative as potentially cumbersome. “While the program sounds good in concept, the Minnesota government will not be as effective as the existing third-party market that’s already available,” he stated. Johnson worries that the program could deter businesses from operating in Minnesota, particularly in communities near the state border.
On the other hand, Nancy Miller, owner of Vinna Human Resources, which serves over 85 businesses statewide, anticipates higher costs for small firms. She argues that managing employee leave will require additional administrative resources. “I think 20 weeks is excessive. I think 12 weeks would have been fine,” Miller remarked. “Why would somebody be in a hurry to get back to work if they’re making 75%, 80%, 95% of their wage?”
Yet, not all business owners share this perspective. Penny Stai, who owns River Cinema in East Grand Forks, views the program positively. With an annual payroll around $1 million, she estimates that her contribution would amount to approximately $8,800 per year. “It’s not that much money,” Stai said. “As long as it’s a good thing for the staff and for our community, that’s fine with me.”
Despite her support for the program, Stai acknowledged that staffing shortages could pose challenges for small businesses. “The hardest part is just going to be for small-staffed places to be able to fill those positions for a month or three months until they return,” she noted, highlighting the difficulties in hiring and training temporary staff.
Concerns about workforce shortages were echoed by Ryan Wall, vice president of administration for American Crystal Sugar, which operates three locations in eastern Minnesota. He mentioned that the company had already been providing short-term disability benefits at no cost to employees. “We also anticipate the program will lead to increased staff shortages, requiring greater overtime costs and additional staff to ensure operations across all three locations are not at risk,” Wall explained.
To support small businesses facing staffing challenges, the Minnesota government is introducing Small Employer Assistance Grants. These grants will cover up to $3,000 per leave, with a maximum of $6,000 per employee annually.
Norfleet clarified that to qualify for medical leave under PFML, employees must have a qualifying condition lasting at least seven days, certified by a healthcare professional. Family leave is broader and includes time off for welcoming a new child, caring for a family member with a serious health condition, and supporting military members or survivors of domestic violence and sexual assault.
With the United States being one of the few countries without a federal paid family and medical leave program, Minnesota’s initiative is significant. The state will become the 13th in the nation to establish its own PFML program. Norfleet cited positive outcomes from other states with similar programs, including higher retention rates and neutral or positive productivity increases among employers.
Local businesses are divided on the potential impacts of the PFML program. Maggie Brockling, East Grand Forks’ Economic Development Director, noted varying opinions. “Some felt that it was an added benefit to their staff, and that it could be seen as something, as a retention tool or an incentive to come work on this side of the state border,” she said. Others, however, view it as an additional burden.
As Minnesota prepares to roll out the PFML program, the new agency within DEED will prioritize transparency and provide resources for employers. An online portal will be created to help businesses track leave requests and coordinate with state agencies. All businesses in Minnesota, with the exception of self-employed individuals, independent contractors, tribal nations, and federal government positions, will be required to participate.
The introduction of the PFML program highlights a significant shift in employee benefits in Minnesota, reflecting a growing national conversation around paid leave and its implications for both workers and employers.
