Minnesota 2024 Legislative Session Summary, Vol. 2

Mega Omnibus and other bills introduce new rules and regulations for small businesses in Minnesota

Minnesota’s 2024 legislative session ended chaotically at midnight on Sunday, May 19.

In the first recap, we looked at the end of this year’s session and some of the victories for small business owners. You can read it here: Minnesota 2024 Legislative Session Summary, Vol. 1 – NFIB.

In this issue, we take a look at some of the new orders and regulations that impact small businesses in Minnesota.

CHALLENGES for small businesses

Minnesota’s NFIB supported legislation to give small business owners a break from paying taxes and fines, and this year we successfully pushed back against a wide range of harmful proposals.

With the power of your voice, we were able to make a difference in the Minnesota Legislature.

Unfortunately, some of the proposals have entered into force.

Obligation to set prices covering: Lawmakers have imposed new regulations on the use of fees to recover the costs of doing business in addition to the base price of a good or service (see HF 3438). Generally speaking, the new law requires that the advertised price include all mandatory fees or surcharges.

However, there are many important exceptions and caveats that small businesses should understand in this law:

– Refers to mandatory charges that: (1) must be paid in order to purchase a good or service, (2) cannot reasonably be avoided, and (3) a reasonable person would expect to be included in the final price.

– Does not apply to taxes and fees imposed by the government (but applies to fees imposed by an employer that are intended to cover the cost of government mandates)

– Does not apply to reasonable postage or shipping charges actually incurred by the consumer.

– It does not apply to auctions of goods or services for which the total cost is impossible to ascertain if any mandatory fees associated with the transaction are clearly and conspicuously disclosed and an indication is given that the total cost may vary.

– Does not apply to services where the total cost of the service (1) is determined on the basis of the consumer’s choices and preferences or (2) relates to distance or time, provided that the trader clearly and visibly discloses the factors determining the final price, any mandatory charges related to transaction and that the final price may vary.

– It does not apply to a restaurant, including a hotel, which automatically and compulsorily collects a tip if the advertisement includes clear and explicit information about the fee. (Note: It is unclear whether this exclusion applies to a health and wellness fee that covers an employee’s health care or other benefits. We are waiting for explanations from the state before the bill enters into force.)

– Excludes fees related to the purchase or lease of a motor vehicle charged by a motor vehicle dealer and fees, surcharges and other costs related to real estate settlement services (real estate agent’s commissions and fees are covered, subject to other limitations).

The Inclusive Pricing Act enters into force on January 1, 2025.

Regulations and penalties for independent contractors: Some of the most disturbing pieces of legislation that went into effect this year included tough new penalties and rules regarding the classification of workers as independent contractors (See HF 5247, article 10).

For all companies, the bill opens the way to civil lawsuits filed by employees against companies for alleged violations related to employee misclassification. In addition to actual damages in the form of lost wages, companies are subject to potential penalties of up to $10,000 per violation.

Moreover, any business owner who “knowingly or repeatedly” misclassifies employees as independent contractors is subject to personal liability (meaning liability does not end with the company).

For construction contractors, the bill expands the employee classification test from nine to fourteen factors (some of which have multiple elements).

Specifically, a business or individual will need to prove that they “received and retained 1099 forms relating to income from construction or improvement services” and “completed the provided W-9 federal income tax form to the person for whom the services were provided, if required by federal law.”

In addition, the contract between the entrepreneur and the independent contractor must be concluded in the form of a written contract for specific services. Unlike earlier versions of this bill, a written contract is required NO applies to change orders.

The increased penalties in the bill take effect on July 1, 2024. Changes to the independent construction contractor classification test apply to work performed on or after March 1, 2025.

Finally, the bill establishes an interagency partnership between the Minnesota Attorney General, the Department of Revenue, the Department of Labor, the Department of Commerce, and the Department of Employment and Economic Development. The purpose of this partnership is to facilitate more consistent enforcement of worker classification laws.

NFIB will be closely monitoring this group to ensure it does not abuse its power to intimidate innocent small business owners.

Changes to drug testing in the workplace. DFL staff made additional changes to workplace drug testing restrictions introduced in last year’s bill legalizing recreational marijuana.

Among other changes, instead of laboratory testing, employers will be given the option of oral fluid testing to screen employees and job applicants for the presence of drugs, alcohol or cannabis.

If the employer chooses to test oral fluid, the employee must be notified of the result at the time of testing. If the oral fluid test result is positive, inconclusive or invalid, the job applicant or employee may request laboratory testing at the employer’s expense.

Requirements for laboratory tests are specified in Chapter 181,953.

Overall, employee and applicant testing remains highly regulated (see, e.g., cannabis testing limits in § 181.952, subd. 8-9). This includes limitations to cases where it is required by state and federal law and employers requiring a written testing policy for employers and applicants.

You can read more about last year’s changes here: Minnesota Legislative Session Summary, Part IV: Marijuana Legalization – NFIB.

Watch the Minnesota NFIB Drug Testing Webinar: Minnesota Members: Marijuana Legalization and Your Small Business – NFIB.

Salary ranges in job offers: From January 1, 2025, companies employing 30 or more employees are required to provide a good faith salary range in every job advertisement (See HF 3852, art. 7, section 2).

Prohibition on deducting credit card processing fees from employee tips: As of August 1, employers can no longer deduct a portion of the credit card processing fee from an employee’s tip (See HF 3852, art. 7, section 1). Under the old law, employers could deduct a portion of the credit card processing fee from the tip, proportional to the tip portion of the total payment.

Elimination of subminimum wages: Most employers in Minnesota are subject to the statewide “large employer” minimum wage, which is currently $10.85 per hour. A large employer means any company with annual gross revenues of more than $500,000.

At the behest of labor unions and other activists, the Minnesota Legislature eliminated several “sub-minimum wages” this year (See HF 3852, art. 7, section 6). These wage rates apply to: (i) businesses with an annual gross income of less than $500,000, resort and accommodation workers working on a J visa, and youth workers under the age of 18.

Beginning January 1, 2025, minimum hourly wage rates for these groups will increase from $8.85 per hour to the statewide minimum wage.

Legislators kept “training pay” for employers under the age of 20, who can be paid a minimum hourly wage of $8.85 for the first 90 days of employment. This rate will be adjusted for inflation on January 1, 2025, in accordance with applicable law.

Finally, the annual minimum wage inflation adjustment cap was increased from 2.5% to 5% per year.

Ban on customer no-poaching clauses: Companies must not include no-poaching clauses in contracts with customers (See HF 3852, art. 2 seconds. 53). These types of contracts prohibit the client from employing an employee from the company from which the client purchases services. The development follows last year’s statewide ban on non-competition agreements with employees.

No-poach agreements are common in parents’ contracts with child care providers, but no exceptions were included in the final version.

The ban applies to contracts with customers concluded from July 1, 2024.

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This is the second in a series of summaries of the 2024 legislative session in Minnesota. In subsequent editions, we will focus on additional mandates and regulations passed this year.