The Minnesota Department of Employment and Economic Development (DEED) came to town on September 29 to share details about Minnesota's new state-sponsored Paid Family and Medical Leave  program which begins January 1, 2026. The St. Cloud City Council chambers were packed for the Employer Engagement Session, primarily with human resources staff from dozens of area businesses.

Under the program, eligible employees could be on leave for up to 20 weeks in a single benefit year.  An eligible employee can take up to 12 weeks for their own serious health condition, and up to 12 weeks for bonding with a new child.  And eligible employees do not have to take PFML days sequentially.  They can take one or multiple days throughout the benefit year up to the maximums.  That is concerning to one HR professional who said, "This is going to be a real challenge to track and comply while maintaining our workforce."

When an eligible employee returns from PFML, the employer must restore the employee to their original position or an equivalent position.  There is no prohibition against an employer bringing-in temporary help to cover the position while the employee is on PFML.

There was also concern about the PFML program costs to both employers and employees. The program is funded through a new payroll tax on employee wages, split between the employer and employee: For 2026, that tax is 0.88% of wages up to the Social Security wage cap.  Employers can split up to one half of that cost with employees (up to 0.44% of wages).

Some employers at the DEED session indicated they are hiring a third party to provide an Equivalent Plan Substitution -- their own paid leave program that is compliant and approved by the state. Employers that have such a program in-place do not have to pay the state tax or participate in the state-run PFML program. Employers are encouraged to submit their Equivalent Plan Substitution for state review by November 10.

All employers are included in the new PFML requirements, except federal government entities, tribal nations, self-employed individuals, and independent contractors.  The program also applies to for-profit businesses and non-profit organizations, including state and local units of government.  There is no small employer exemption, although there is a premium reduction for small businesses with 30 or fewer employees, and they may be eligible for small business assistance grants.  Independent contractors do not have to participate in the PFML program, but can voluntarily opt-in.

Some are concerned small employers and others will be forced to move away from a W-2 employee model, and move into a legally compliant 1099 independent contractor model. Independent contractors must meet Minnesota's strict new worker misclassification rules.

For employers to comply with the new PFML program, they need to start by creating an account with DEED,  setting-up an employer portal, and designating a Paid Leave Administrator.  If an employer plans to offer an Equivalent Plan through private insurance or self-funding, it is recommended to submit the plan to DEED for review and approval by no later than this November 10, 2025.  Employers must also notify employees and post break room information about the PFML program by this December 1, 2025.

For more details about Minnesota's new Paid Family Medical Leave (PFML) program and how employers can comply, CLICK HERE to visit the DEED web site.  Employers are also encouraged to engage their human resources professionals or HR consultants as needed.

CMBA Government Affairs will also feature a presentation on the PFML program from ProResources, Tuesday, November 18, 8:00-9:00 a.m. For more information, contact CMBA Government Affairs consultant, Steve Gottwalt, steve@cmbaonline.org, 952-923-5265.

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