Minnesota HR Compliance Guide for Employers
Minnesota employer compliance guide covering ESST, Paid Leave Act 2026, MHRA, no tip credit, non-compete ban, DATWA drug testing, and wage laws.
Minnesota HR Compliance
No tip credit, non-compete ban, ESST for all employers, Paid Leave Act 2026, and MHRA covering 13 classes at 1 employee
Minnesota has undergone more significant labor law change in the past three years than in the preceding decade combined. The 2023 legislative session alone produced a non-compete ban, a parental leave threshold reduction to one employee, new pregnancy accommodation rights, a cannabis testing restriction, and the framework for a state paid leave insurance program. The Paid Leave Act took effect January 1, 2026.
For HR onboarding, the compliance landscape is genuinely complex. No tip credit. Mandatory paid sick and safe time for every employer including those with a single employee. A state-run paid family and medical leave program with its own premium structure. An anti- discrimination law that kicks in at one employee and covers 13 protected classes. And drug testing rules that are among the strictest in the country.
This guide covers every major employment law requirement for Minnesota employers as of 2026, with particular focus on the rules that apply to businesses with 5 to 50 employees. FirstHR was built for exactly this audience: small businesses that need compliance without a dedicated HR department.
What Makes Minnesota Unique for Employers
Minnesota combines some of the strongest employee protections in the country with a business environment that still supports small businesses through reasonable administration and grant programs for smaller employers. The state does not preempt local employment ordinances, which means employers operating in Minneapolis or St. Paul must track city-level requirements on top of state law.
Five compliance surprises appear most often for employers new to Minnesota or relocating from other states:
First, there is no tip credit under any circumstances. Minnesota is one of seven states that prohibit tip credits entirely. Restaurants, bars, and any employer of tipped workers must pay the full state minimum wage ($11.41 in 2026) in addition to all tips the employee receives. Tipped employees keep 100% of their tips on top of full minimum wage.
Second, the state overtime threshold is 48 hours per week, not 40. This is one of the most frequently misunderstood rules. In practice, it applies mainly to employers with less than $500,000 in annual gross revenue who do not engage in interstate commerce. Most businesses in Minnesota are covered by FLSA, which requires overtime after 40 hours, and that threshold controls because it is more protective.
Third, cannabis pre-employment testing is banned for most positions since August 2023. Only seven exempt categories remain. Employers cannot test job applicants for cannabis before extending a conditional offer, and even then only for qualifying positions.
Fourth, the Minnesota Paid Leave Act is now active as of January 2026. This is a state-run insurance program funded by a 0.88% payroll premium. All employers participate. The first quarterly premium payment was due April 30, 2026. Benefits provide up to 20 weeks of paid leave per benefit year.
Fifth, personnel file access rights are robust and come with real penalties. Current employees may request a review of their personnel file once every six months. Former employees may request access once per year. Copies are free. Violations carry penalties of up to $5,000 per incident plus attorney's fees.
Employment Law Foundations in Minnesota
Minnesota is an at-will employment state, but the exceptions are extensive and statutory, making the at-will doctrine considerably weaker here than in states like Indiana or Tennessee.
At-will employment and its exceptions
Minnesota courts recognize the public policy exception to at-will employment, and the Legislature has added numerous statutory protections. Key anti-retaliation provisions include: the Minnesota Human Rights Act at Minn. Stat. § 363A.15 (retaliation for protected activity), the Whistleblower Protection Act at § 181.932 (two-year statute of limitations), workers' compensation retaliation at § 176.82 (punitive damages available), ESST anti-retaliation, and Paid Leave Act job restoration protections. Employee handbooks can also create implied contract obligations under Minnesota case law, so precise at-will language matters. An employee handbook for Minnesota should include precise at-will language to avoid creating unintended contractual obligations.
Key Minnesota agencies
Four agencies handle most Minnesota employment compliance. The Department of Labor and Industry (DLI) covers wage and hour law, MNOSHA, and workers' compensation. The Department of Employment and Economic Development (DEED) administers unemployment insurance and the Paid Leave Act. The Department of Human Rights (MDHR) enforces the MHRA. The Department of Revenue handles income tax withholding and registration.
Minnesota Labor Relations Act
Minnesota is not a right-to-work state. The Minnesota Labor Relations Act at Minn. Stat. § 179.01 et seq. protects private sector collective bargaining rights. Employers may not interfere with employees' rights to organize or engage in concerted activity. The captive audience meeting ban enacted in 2023 specifically prohibits requiring employees to attend meetings whose primary purpose is communicating the employer's views on religious or political matters, including union organizing.
Hiring and Onboarding Requirements
Minnesota new hire paperwork involves more documents than most states, including a state-specific withholding form, a written employment terms notice, and separate ESST and Paid Leave notices.
Ban-the-box (Minn. Stat. § 364.021)
Minnesota prohibits inquiry about criminal history before a candidate reaches a certain stage of the hiring process. For private employers, the law has been in effect since January 1, 2014. Employers with 10 or fewer employees face a $100 penalty per violation; larger employers face $500 per violation. The MDHR enforces for private sector employers. Employers cannot ask about criminal history before either conducting an interview or extending a conditional offer (if no interview is conducted).
Drug testing: DATWA
The Minnesota Drug and Alcohol Testing in the Workplace Act (DATWA) at Minn. Stat. §§ 181.950–181.957 is one of the strictest drug testing laws in the United States. Pre- employment testing is permitted only after a conditional job offer and only if testing is required of all applicants for the same position. Cannabis pre-employment testing is banned for most positions since August 1, 2023. The seven exempt categories are: safety-sensitive positions, peace officers, firefighters, childcare and healthcare workers with direct face- to-face patient or client contact, CDL and motor vehicle operators, positions funded by federal funds requiring testing, and positions requiring a federal security clearance.
Pay transparency (Minn. Stat. § 181.173)
Employers with 30 or more employees at one or more Minnesota locations must include a starting salary range and a general description of all benefits and other compensation in every job posting, effective January 1, 2025. The salary range must be a good-faith estimate and cannot be open-ended. This applies to electronic and printed postings, including those placed through staffing agencies. Pay history cannot be requested from applicants under a separate ban effective January 1, 2024.
Wage and Hour Rules Employers Often Get Wrong
Minnesota's wage and hour rules include several provisions that differ significantly from federal law and from neighboring states. The tip credit prohibition and the 2026 break requirement updates are the most frequently misunderstood.
Minimum wage
The 2024 legislative session eliminated the large employer and small employer distinction that had existed for years in Minnesota. Since January 1, 2025, a single unified rate applies to all employers. The 2026 rate is $11.41 per hour. A training wage of $9.31 per hour applies to employees under 20 years old during their first 90 consecutive calendar days of employment. The CPI adjustment cap was increased from 2.5% to 5% starting in 2025. Current rates are published at dli.mn.gov/minwage.
| Jurisdiction / Tier | 2025 Rate | 2026 Rate |
|---|---|---|
| Minnesota state (all employers) | $11.13 | $11.41 |
| Training wage (under 20, first 90 days) | $9.08 | $9.31 |
| Minneapolis (all employers) | $15.97 | $16.37 |
| St. Paul Macro/Large (101+ employees) | $15.97 | $16.37 |
| St. Paul Small (6–100 employees) | $15.00 (Jul 2025) | $16.37 (Jul 2026) |
| St. Paul Micro (5 or fewer employees) | $13.25 (Jul 2025) | $14.25 (Jul 2026) |
Overtime
Minnesota state law sets the overtime threshold at 48 hours per week at Minn. Stat. § 177.25. Federal FLSA sets it at 40 hours per week. For any employer with more than $500,000 in annual gross revenue or any employer engaging in interstate commerce, federal FLSA governs because it provides greater protection. In practice, this means the 40-hour threshold applies to the vast majority of Minnesota businesses. The state 48-hour threshold is relevant only for truly local, small employers below the FLSA coverage threshold.
Meal and rest breaks (updated January 1, 2026)
New break standards took effect January 1, 2026. Employers must provide a minimum 15-minute paid rest break for every 4 consecutive hours worked, and a 30-minute meal break for any shift of 6 or more consecutive hours. The previous meal break trigger was 8 consecutive hours; the 2026 update lowered it to 6 hours. A meal break may be unpaid if the employee is fully relieved of duties for at least 20 minutes. If duties are not removed or the break is interrupted, it must be paid. The penalty for a missed break is the missed break pay at the regular rate plus an equal amount as liquidated damages. Collective bargaining agreements may modify these requirements.
Pay frequency, stubs, and equal pay
Minnesota employers must pay wages at least once every 31 days. Commission employees must be paid at least once every three months. Each earnings statement must include the employee's name, total hours worked, rate or rates of pay, gross pay, all deductions itemized, net pay, and the date of payment, plus the employer's legal name, operating name, physical address, and phone number. Starting in 2026, PFML deductions and employer contributions must also be shown on the earnings statement. Electronic delivery is acceptable; employees may request paper within 24 hours.
Minnesota's Equal Pay for Equal Work Law at Minn. Stat. §§ 181.66–181.71 prohibits wage discrimination based on sex for equal work requiring equal skill, effort, and responsibility performed under similar conditions. Remedies include unpaid wages for one year plus exemplary damages up to the same amount plus attorney's fees. A separate Wage Disclosure Protection at § 181.172 prohibits retaliation for discussing wages with coworkers.
Earned Sick and Safe Time: What Every Minnesota Employer Must Know
ESST is mandatory for all Minnesota employers regardless of size. There is no small employer exemption. Any employee anticipated to work 80 or more hours per year in Minnesota must accrue ESST. The law has been in effect since January 1, 2024, with amendments effective July 1, 2025.
| Feature | ESST | Paid Leave Act (PFML) |
|---|---|---|
| Program name | Earned Sick and Safe Time (ESST) | Minnesota Paid Leave Act (PFML) |
| Effective date | January 1, 2024 | January 1, 2026 |
| Coverage | All employers (1+ employee) | All employers (no minimum) |
| Funding | Employer-funded (paid by employer) | State insurance (0.88% payroll premium) |
| Maximum leave | 48 hours/year accrual; 80-hour bank | Up to 20 weeks/benefit year |
| Benefit amount | Full regular wages | Up to $1,423/week (90%/66%/55% tiers) |
| Uses | Illness, family care, domestic violence, bereavement, weather closure, communicable disease | Serious health condition, bonding, military exigency, domestic violence |
| Waiting period | None; accrual begins day 1 | 7-day waiting period (can be covered by ESST) |
| Anti-retaliation | Yes; ESST absences cannot count as attendance occurrences | Yes; job restoration rights |
Accrual and caps
Employees accrue 1 hour of ESST for every 30 hours worked. The annual accrual cap is 48 hours per year. The total ESST bank cap (including carryover from prior years) is 80 hours. There is no waiting period; accrual begins on the first day of employment, and employees may begin using accrued time as it accrues. Employers may choose among three front-loading options in place of accrual: front-load 48 hours at the start of the year with payout of unused time at year-end and no carryover; front-load 80 hours at the start of the year with no payout and no carryover; or the standard accrual and carryover method.
Permitted uses
ESST may be used for: the employee's own illness, injury, or preventive care; care for a family member's illness, injury, or preventive care; absences related to domestic abuse, sexual assault, or stalking (safe time); bereavement leave including attendance at funeral or memorial services, financial and legal matters following a death, and grief counseling; closure of the employee's place of business or a family member's school or childcare due to a public emergency; and absences related to a communicable disease risk.
The family member definition is extremely broad: child, spouse or domestic partner, sibling, parent, grandchild, grandparent, in-laws (parents-in-law, siblings-in-law), and one additional individual designated annually by the employee. An employer cannot require that the employee provide a specific medical diagnosis, details of abuse, or a replacement worker as conditions of using ESST.
Local ESST ordinances
Minneapolis and St. Paul both have existing local sick and safe time ordinances that predate the state ESST law. These local ordinances remain in effect. Employers must comply with whichever provision is most protective for the employee. Duluth's local ESST ordinance was repealed in January 2024 when the state law superseded it. Bloomington's ordinance remains in effect; compliance with state ESST generally satisfies local Bloomington requirements.
Minnesota Paid Leave Act: Effective January 1, 2026
The Minnesota Paid Leave Act is a state-run insurance program that provides partial wage replacement for employees who need leave for qualifying medical or family reasons. It is separate from ESST. All Minnesota employers regardless of size must participate unless they obtain approval for an equivalent private plan.
Coverage and benefits
The Paid Leave Act covers four types of leave: medical leave for the employee's own serious health condition (up to 12 weeks per benefit year); family leave for bonding after birth, adoption, or foster placement, caring for a family member's serious health condition, or military qualifying exigency (up to 12 weeks); and safety leave for domestic violence, sexual assault, or stalking situations. The combined maximum is 20 weeks per benefit year if both medical and family leave are needed in the same year.
The weekly benefit amount is calculated in three tiers: 90% of wages up to 50% of the state average weekly wage; 66% of wages between 50% and 100% of the state average weekly wage; and 55% of wages above 100% of the state average weekly wage. The maximum weekly benefit is $1,423 in 2026. Employees must meet an earnings threshold of approximately $3,900 in the base period to be eligible.
Premium structure and employer obligations
The total premium rate is 0.88% of taxable wages in 2026. This is split into a medical portion (0.61%) and a family portion (0.27%). Employers must pay at least 50% of the total premium. Up to 50% may be deducted from employee paychecks. Small employers with 30 or fewer employees and average wages at or below 150% of the state average weekly wage are eligible for reduced rates (0.66%) and assistance grants of up to $3,000 per temporary worker hire, up to $6,000 per year.
Private plan option
Employers may opt out of the state plan if they obtain approval for an equivalent private plan, either self-insured or through a commercial insurer. The private plan must meet or exceed all state plan benefits. The application fee is $250. Self-insured employers must post a surety bond. Annual reporting to DEED is required by November 1 each year. The deadline to apply for a private plan for the 2026 plan year was November 10, 2025.
Interaction with ESST and FMLA
ESST and the Paid Leave Act are separate programs funded differently and serving different purposes. Employees may use accrued ESST to supplement Paid Leave benefits during the seven- day waiting period or to top off partial wage replacement. Employers with 50 or more employees who are covered by federal FMLA may require concurrent use of Paid Leave and FMLA leave for the same qualifying event. More information is at pl.mn.gov.
Other Leave Requirements Beyond ESST and PFML
Minnesota has one of the most comprehensive leave frameworks frameworks in the country. In addition to ESST and the Paid Leave Act, employers must navigate parental leave, pregnancy accommodations, jury duty, voting leave, and several other requirements.
| Leave Type | Threshold | Duration | Key Notes |
|---|---|---|---|
| ESST (Earned Sick and Safe Time) | 1+ employee | Up to 48 hrs/yr accrual; 80-hr bank | Illness, family care, domestic violence, bereavement, weather, communicable disease |
| Paid Leave Act (PFML) | All employers | Up to 20 weeks/benefit year | Medical leave (12 wks) + family leave (12 wks); state insurance program |
| Federal FMLA | 50+ employees within 75 miles | 12 weeks unpaid | Runs concurrently with PFML and MN Parental Leave |
| MN Parental Leave (WESA) | 1+ employee (since Jul 2023) | 12 weeks unpaid | Birth, adoption; no tenure requirement since Jul 2023 |
| Pregnancy accommodations | 1+ employee | Ongoing | 3 accommodations without doctor's note; employer cannot force leave |
| Bone marrow donation leave | 20+ employees | Up to 40 paid work hours | Physician verification permitted |
| Organ donation leave | No size threshold | Up to 40 paid work hours | Physician verification permitted |
| School conference/activities | All employers | 16 hrs unpaid per year | School conferences, child care activities, pre-K |
| Jury duty | All employers | Duration of service | Unpaid; cannot require use of PTO; violation = criminal contempt |
| Voting leave | All employers | Time to vote (paid) | Primary and general elections; violation = misdemeanor |
| Military leave (public employees) | State/local govt | 15 days paid/year | Minn. Stat. § 192.26 |
| Military family leave | All employers | 10 working days unpaid | Spouse/family of injured or killed military member |
Minnesota Parental Leave (WESA)
The Women's Economic Security Act parental leave provisions at Minn. Stat. §§ 181.940–181.944 were significantly expanded effective July 1, 2023. The employer size threshold was reduced from 21 employees to 1 employee, and the tenure requirement was eliminated. All Minnesota employers must provide up to 12 weeks of unpaid, job-protected leave for birth, adoption, or foster placement. Since August 2024, prenatal care time does not count against the 12-week entitlement.
Pregnancy accommodations
Minnesota provides three specific accommodations without requiring a doctor's note: lifting restrictions for more than 20 pounds, access to seating, and more frequent bathroom, food, or water breaks. Additional reasonable accommodations are available through an interactive process. Employers cannot force an employee onto leave or require an accommodation; the choice belongs to the employee.
The Minnesota Human Rights Act: Broader Than You Think
The Minnesota Human Rights Act at Minn. Stat. Ch. 363A is enforced by the Minnesota Department of Human Rights (MDHR). Its most important characteristic for small businesses is the threshold: coverage begins at one employee, covering virtually every employer in the state. More information is available at mn.gov/mdhr.
| Protected Class | Coverage Threshold | Source |
|---|---|---|
| Race | All employers (1+) | MHRA Ch. 363A |
| Color | All employers (1+) | MHRA Ch. 363A |
| Creed / Religion | All employers (1+) | MHRA Ch. 363A |
| National origin | All employers (1+) | MHRA Ch. 363A |
| Sex (includes pregnancy) | All employers (1+) | MHRA Ch. 363A |
| Gender identity | All employers (1+) | MHRA Ch. 363A (since 1993) |
| Sexual orientation | All employers (1+) | MHRA Ch. 363A (since 1993) |
| Marital status | All employers (1+) | MHRA Ch. 363A |
| Familial status | All employers (1+) | MHRA Ch. 363A (expanded 2024) |
| Disability (incl. episodic/remission) | All employers (1+) | MHRA Ch. 363A (expanded 2024) |
| Public assistance status | All employers (1+) | MHRA Ch. 363A |
| Age (25–70 in employment) | All employers (1+) | Minn. Stat. § 363A.03, subd. 2 |
| Veteran / military status | All employers (1+) | MHRA Ch. 363A |
Key distinctions from federal law
The MHRA covers more protected classes than Title VII at a much lower employer threshold. Minnesota added sexual orientation and gender identity protections in 1993, making it one of the first states in the country to do so. The filing deadline for MHRA complaints is one year from the discriminatory act, compared to 180 or 300 days under federal law.
2024 amendments made the MHRA significantly more powerful. The previously existing $25,000 cap on punitive damages was removed entirely; punitive damages are now uncapped. Treble compensatory damages are possible. Harassment protections were explicitly extended to all 13 protected classes. The disability definition was expanded to include episodic conditions and conditions in remission.
Age discrimination specifics
Minnesota's age discrimination protection in employment covers employees from age 25 to 70 under Minn. Stat. § 363A.03, subd. 2. This is narrower than the federal ADEA (which covers age 40 and older with no upper limit) on the lower end, but applies at one employee vs. the ADEA's 20-employee threshold. A separate provision at § 181.81 prohibits termination solely based on age. For very small employers with fewer than 20 employees, the MHRA provides the only age discrimination protection.
Workplace Safety and Workers' Compensation
Minnesota operates a full state OSHA plan and requires workers' compensation coverage starting at one employee.
Workers' compensation (Minn. Stat. Ch. 176)
All Minnesota employers with one or more employees must carry workers' compensation insurance. Exemptions are narrow: independent contractors, household workers earning less than $1,000 per quarter, and corporate officers who may elect out. Coverage options include commercial insurance, self-insurance for employers meeting net worth thresholds, and group self-insurance. Workers' compensation is a no-fault system and is the exclusive remedy for workplace injuries. Retaliation against an employee for filing a workers' compensation claim carries punitive damages under § 176.82.
MNOSHA: Minnesota's state OSHA plan
Minnesota has operated a state OSHA plan since 1973, with final federal approval in 1985. MNOSHA covers both private and public sector employers. Federal OSHA is limited to federal employees, USPS, certain agricultural operations, aircraft cabin crew, and tribal operations. MNOSHA enforces several standards that go beyond federal OSHA requirements.
Required Workplace Postings
Minnesota employers must display both state and federal required workplace posters. All state posters are available for free at dli.mn.gov/posters. The Paid Leave Act poster became required by December 1, 2025.
| Poster | Who Must Post | Notes |
|---|---|---|
| Minimum Wage Poster (updated annually) | All employers | Free download: dli.mn.gov/posters |
| Earned Sick and Safe Time (ESST) | All employers | Updated Jul 2025 |
| Unemployment Insurance Benefits | All covered employers | DEED / uimn.org |
| Workers' Compensation | All employers (1+) | DLI Workers' Compensation Division |
| Job Safety and Health (MNOSHA) | All employers | MNOSHA; also federal OSHA poster |
| Age Discrimination | All employers | DLI |
| Employer-Sponsored Meetings (captive audience ban) | All employers | Effective Oct 2024 |
| Paid Leave Act poster | All employers | Required by Dec 1, 2025; pl.mn.gov |
| Veterans Benefits and Services | 50+ full-time employees | DLI |
| Minneapolis Labor Standards poster | Employers with employees working in Minneapolis | 10 languages; minneapolismn.gov |
Federal required postings include the FLSA Minimum Wage poster, EEOC Know Your Rights poster, OSHA Job Safety and Health poster, USERRA poster, and FMLA poster for employers with 50 or more employees. Minneapolis employers must also display the Minneapolis Labor Standards poster, available in 10 languages.
Employee Privacy and Data Protection
Minnesota's employee privacy framework includes strong personnel file access rights, detailed drug testing confidentiality rules, and a data breach notification statute.
Personnel file access (Minn. Stat. §§ 181.960–181.966)
Current employees may review their personnel file once every six months upon written request. Former employees may request access once per year for as long as records are maintained. Employers at Minnesota locations must respond within 7 working days; out-of-state employers with Minnesota employees have 14 working days. Copies must be provided free of charge. Since July 1, 2024, employees have the right to submit a written rebuttal of up to 5 pages to any disputed item. Employers with 20 or more employees must inform new hires of their personnel file rights. The penalty for non-compliance is up to $5,000 per violation plus costs and attorney's fees. An employee onboarding checklist should include notifying qualifying new hires of their personnel file rights at hire.
Recording consent (Minn. Stat. § 626A.02)
Minnesota is a one-party consent state. One party to a conversation may record it without notifying the other parties, provided the recording is not for the purpose of committing a crime. Unauthorized interception carries criminal penalties of up to $20,000 and five years' imprisonment, plus civil remedies of $100 per day or $10,000 in statutory damages, whichever is greater, plus treble damages. Employers may prohibit recording in the workplace through a written policy; violation of such a policy may support a termination decision.
Data breach notification (Minn. Stat. § 325E.61)
Minnesota's data breach notification law requires disclosure in the most expedient time possible without unreasonable delay. There is no specific number of days stated in the statute, unlike some other states. If 500 or more Minnesota residents are affected, the employer must also notify consumer reporting agencies within 48 hours. The Attorney General enforces under § 8.31.
Termination and Separation Procedures
Minnesota's termination rules are notably employee-protective, particularly around final paycheck timing, non-compete restrictions, and health insurance continuation.
Final paycheck
When an employee is discharged, wages are due immediately on demand under Minn. Stat. § 181.13. If the employer does not pay within 24 hours of a written demand, the employer is in default and owes penalty pay equal to one day's average earnings for each additional day late, up to a maximum of 15 days. For employees who quit voluntarily, the final paycheck is due on the next regular payday occurring more than 5 days after the last day worked, but no later than 20 days from the last day worked. Commission payments follow a separate schedule at Minn. Stat. § 181.145. If an employee has been entrusted with money or property, the employer has 10 additional calendar days to conduct an audit before paying.
Non-compete ban (Minn. Stat. § 181.988)
Non-compete agreements with employees or independent contractors are void and unenforceable if signed on or after July 1, 2023. Pre-July 2023 agreements remain enforceable if they were reasonable at the time of signing. The ban applies statewide regardless of where the employee works. Franchise no-hire restrictions between franchisors and franchisees were retroactively voided. Non-solicitation agreements, NDAs, confidentiality agreements, and trade secret protections remain fully enforceable. A choice-of-law clause requiring a Minnesota employee to adjudicate outside Minnesota or under another state's law is voidable at the employee's election.
Minnesota mini-WARN (Minn. Stat. § 116L.976)
Minnesota's Business Closing and Layoff law encourages (but does not strictly mandate) early notification for plant closings, substantial layoffs, and relocations affecting 50 or more employees at a single site within a 30-day period. Employers are expected to report to the DEED Commissioner with names, addresses, and occupations of affected employees. Federal WARN applies separately for employers with 100 or more employees, requiring 60 days' advance notice.
Minnesota continuation coverage (Minn. Stat. § 62A.17)
Minnesota's continuation coverage law fills the gap left by federal COBRA for small employers. Federal COBRA covers employers with 20 or more employees. Minnesota continuation applies to employers with 2 or more employees, covering the 2-to-19 employee range that is exempt from COBRA. Coverage extends up to 18 months following termination or layoff, and indefinitely for employees who become totally disabled. The premium may not exceed 102% of the plan cost. The employer must notify affected employees within 14 days of the qualifying event, compared to the 44-day federal COBRA timeline. For employee handbook, understanding this distinction is critical.
Payroll Tax and Compliance Essentials
Minnesota payroll registration requires filing with three separate state agencies: the Department of Revenue for income tax withholding, DEED for unemployment insurance, and DEED for Paid Leave premiums.
State income tax
Minnesota imposes a progressive income tax with four brackets. The top marginal rate of 9.85% is one of the highest in the country. Withholding is calculated using Minnesota Form W-4MN, which every employee must complete. If an employee completes a new federal W-4, a new W-4MN is also required. Employees who claim exempt must file a new W-4MN each calendar year.
| Rate | Single Income Range (2025) | Married Filing Jointly (2025) |
|---|---|---|
| 5.35% | $0 – $32,570 | $0 – $47,620 |
| 6.80% | $32,571 – $106,990 | $47,621 – $189,180 |
| 7.85% | $106,991 – $198,630 | $189,181 – $330,410 |
| 9.85% | Over $198,630 | Over $330,410 |
Unemployment insurance
The Minnesota UI taxable wage base is $43,000 per employee for 2025 and increases to $44,000 for 2026. New employer rates vary by NAICS industry code across 51 separate rate categories, ranging from approximately 1.4% to 9.3%. All employers also pay a base tax rate of 0.40% and a 2025 surcharge of 5.0% on their total UI tax. Quarterly reports are due the last day of the month following the end of each quarter. Employers register with DEED through uimn.org.
Paid Leave premium registration
All employers must register with DEED's Paid Leave system at pl.mn.gov and submit quarterly wage detail reports. Quarterly wage reporting began October 31, 2024. Premium payments begin with the first quarter of 2026, due April 30, 2026. Small employers (30 or fewer employees with average wages at or below 150% of the state average weekly wage) pay a reduced rate of 0.66% and may be eligible for assistance grants.
Minneapolis, St. Paul, and Local Compliance
Minnesota does not preempt local employment ordinances. Cities and counties may adopt requirements that exceed state law, and several have done so. Employers must track compliance by the physical work location of each employee, not by employer headquarters.
Minneapolis
Minneapolis has a minimum wage of $16.37 per hour in 2026 for all employers. This applies to any employee who works 2 or more hours within Minneapolis city limits in a given calendar week. The Minneapolis Sick and Safe Time Ordinance remains in effect alongside state ESST; employers must follow whichever provision is more protective. Minneapolis also has a Wage Theft Prevention Ordinance and requires a separate Minneapolis Labor Standards poster, available in 10 languages.
St. Paul
St. Paul uses a tiered minimum wage structure based on employer size. Macro and large employers (101 or more employees) reach $16.37 per hour in January 2026. Small employers (6 to 100 employees) reach $16.37 in July 2026. Micro employers (5 or fewer employees) reach $14.25 in July 2026. St. Paul's Earned Sick and Safe Time Ordinance (Chapter 233) remains in effect and was updated in November 2025. The city's HREEO Department enforces local labor standards.
Other cities
Bloomington has a local ESST ordinance; compliance with state ESST generally satisfies local requirements. Duluth's local ESST ordinance was repealed in January 2024 when the state law took effect. No other Minnesota city currently has a local minimum wage above the state rate.
Minnesota vs. Federal vs. Wisconsin
The table below compares key parameters across Minnesota, federal law, and Wisconsin, which is a useful reference for employers operating across state lines in the upper Midwest.
| Parameter | Minnesota | Federal | Wisconsin |
|---|---|---|---|
| Minimum wage (2026) | $11.41 (unified) | $7.25 | $7.25 |
| Tip credit | None (full MW + tips to employee) | $5.12/hr | $4.92/hr |
| Overtime threshold | 48 hrs state; 40 hrs FLSA (applies to most) | 40 hrs/week | FLSA only (40 hrs) |
| Mandatory paid sick leave | ESST: 1 hr / 30 hrs, up to 48 hrs/yr | None | None |
| Paid family/medical leave | Up to 20 weeks (state insurance) | None (FMLA unpaid) | None |
| Anti-discrimination threshold | 1 employee; 13 classes | 15 (Title VII) | 1 employee; 14 classes (WFEA) |
| Non-compete agreements | Banned (July 1, 2023) | No federal ban | Enforceable if reasonable |
| Drug testing regulation | DATWA: strict; cannabis restricted | None (non-DOT) | Limited regulation |
| Cannabis pre-employment testing | Banned for most positions | No restriction (non-DOT) | No restriction |
| Recording consent | One-party | One-party | One-party |
| State OSHA plan | Yes (MNOSHA, since 1973) | Federal OSHA | Federal OSHA |
| Final pay (discharge) | Immediately on demand; 24-hr default | No federal rule | Next regular payday |
| Local wage preemption | No preemption; cities may exceed state rates | N/A | State preempts local wages |
| Mini-COBRA coverage | 2+ employees (state continuation) | 20+ employees (federal COBRA) | 2+ employees |
Minnesota is significantly more employee-protective than Wisconsin and federal law across nearly every dimension. Employers operating in both states must track each requirement separately. The non-compete ban, ESST mandate, Paid Leave Act, and tip credit prohibition are Minnesota-specific with no equivalent in Wisconsin.
Legislative Timeline: What Changed and What Is Coming
Minnesota has seen more labor law activity since 2023 than in the prior decade combined. The following timeline covers the major changes with ongoing compliance implications.
Frequently Asked Questions
Does Minnesota allow a tip credit?
No. Minnesota prohibits tip credits entirely under Minn. Stat. § 177.24. Employers must pay every tipped employee the full $11.41 minimum wage in 2026. All tips belong to the employee on top of that wage. This applies to servers, bartenders, delivery workers, and any other tipped position without exception.
Can I include a non-compete clause in my employment agreement?
Not for agreements signed on or after July 1, 2023. All such agreements are void and unenforceable under Minn. Stat. § 181.988. Pre-July 2023 agreements remain enforceable if reasonable. Non-solicitation agreements, NDAs, confidentiality agreements, and trade secret protections are still fully permitted.
When must I start collecting Paid Leave premiums?
Premium withholdings began January 1, 2026. The total rate is 0.88% of taxable wages. Employers pay at least 50% (0.44%); up to 50% may be deducted from employees. The first quarterly payment covering January through March 2026 was due April 30, 2026. Manage registration and payments at pl.mn.gov.
Do Minneapolis minimum wage rates apply if an employee works only a few hours there?
Yes. Minneapolis minimum wage applies to any employee who works at least 2 hours within Minneapolis city limits in a calendar week, regardless of where the employer is headquartered. A suburban employer whose employee makes a single client visit to Minneapolis must pay the Minneapolis rate of $16.37 per hour for those hours.
Can I conduct pre-employment cannabis drug testing?
Only for the seven exempt position categories under DATWA: safety-sensitive, peace officers, firefighters, direct-contact childcare or healthcare workers, CDL and motor vehicle operators, federally-funded positions requiring testing, and security clearance positions. For all other roles, pre-employment cannabis testing is prohibited since August 1, 2023.
What is the deadline for a discharged employee's final paycheck?
Wages are immediately due on demand when an employee is discharged. If the employer does not pay within 24 hours of a written demand, penalty pay begins accruing at one day's average earnings per day, up to a maximum of 15 days. For employees who quit voluntarily, the deadline is the next regular payday occurring more than 5 days after the last day worked, but no later than 20 days from the last day.
Does the ESST law apply to my business with only 3 employees?
Yes. ESST applies to all employers regardless of size under Minn. Stat. § 181.9446. There is no small employer exemption. Any employee anticipated to work 80 or more hours per year in Minnesota must accrue ESST from day one of employment at a rate of 1 hour per 30 hours worked, up to 48 hours per year.