With its low cost of living, various tax advantages and thriving economy, Minnesota is an excellent place in which to start a new business. However, before setting up shop, burgeoning employers should be aware of certain legal realities specific to the state that affect the ways founders can do business in Minnesota.
Minimum Wage Increases
As of 2017, the minimum wage in Minnesota for companies earning $500,000 in sales annually is $9.50 per hour. That’s one of the highest minimum wage rates in the United States. Things are a little easier for small companies, as the minimum wage for businesses doing less than $500,000 is $7.75 per hour. However, Minnesota has faced pressure to increase its minimum wage to $15 per hour, propelling the Minneapolis City Council to vote in June 2017 to do so. Businesses will have five to seven years to phase in the new pay increase. Burgeoning entrepreneurs should factor higher than average payroll costs into their long term plans before breaking ground in Minnesota.
The Sick and Safe Time Ordinance
Another Minnesota employment cost business owners should be aware of is sick leave. As per the Sick and Safe Time ordinance, all employees working in companies that employ at least six people earn one hour of paid time off for every 30 hours they work. This sick time can be used by employees to deal with injury, sexual or domestic assault, medical treatment or preventative care, doctors appointments, looking after a child if school is unexpectedly canceled or caring for certain family members.
The Mini-Cobra Law
As part of the Consolidated Omnibus Budget Reconciliation Act of 1985, federal law mandates that employers with at least 20 full-time employees must give each of their former workers the option of continuing their group health benefits for up to 18 months. Minnesota employment law goes one step further and extends the CORBA ordinance to companies with two or more employees. Additionally, a former worker who becomes disabled within 60 days of going on a COBRA plan can opt for continued coverage for up to 11 months past the federal cutoff. Also, Minnesota employees who become totally disabled while employed can choose to receive COBRA health coverage indefinitely. As healthcare costs can have a significant impact on a startup’s bottom line, founders should take Minnesota’s COBRA extensions into account when creating their business plans.
No Right-to-Work Law
Although several states have adopted “right-to-work” laws that exempt employees from having to pay union dues to work in certain fields, Minnesota is not one of them. As such, entrepreneurs looking to break into Minnesota’s construction, trucking manufacturing, healthcare or grocery industries should be aware of the fact that they will likely need to negotiate with regional and national labor unions. Consequently, they’ll also have to deal with the generally higher than average employment costs that go along with collective bargaining.
Criminal Record Regulations and Protections
Minnesota is one of 24 states that has a “ban the box” law on the books. That means in addition to following the provisions of Title VII of the Civil Rights Act of 1964 and the Fair Credit Reporting Act, employers operating in Minnesota cannot inquire into their potential hires’ criminal background until they’ve conducted a job interview or a conditional offer of employment. Along with the legal protections extended to employees, Minnesota’s “ban the box” law also affords Minnesota employers a degree of protection. In an instance where an ex-worker sues their employer, and that employer is found to be compliant with Minnesota’s ban the box regulation, the employee’s criminal record will be inadmissible in court.
Lastly, before starting a new business in any state, it’s a good idea for an entrepreneur to consult with an experienced labor attorney. They can provide advice that will be crucial to a business’s long-term viability.
This article was written by Mario McKellop for CBS Small Business Pulse