Rochester chamber calls for delay in state paid leave law; says effects will be 'crippling' for businesses
Feb. 22—ROCHESTER — Two years ago, the DFL-led Legislature passed landmark legislation establishing an insurance program that would provide Minnesota workers up to 20 weeks of paid leave each year for family and medical purposes.
Now, the Rochester Area Chamber of Commerce is adding its voice to calls for a delay in implementation of the Paid Family Leave and Medical Act.
The law, set to take effect in January 2026, provides partial wage replacement for employees for 12 weeks to 20 weeks for medical leave, caring for a family member or safety leave. The chamber says small businesses will suffer disproportionately under its mandates.
"For many businesses, especially small businesses, which make up 80% of our over 1,200 members, the effects of Paid Family Medical Leave mandate in its current form will be crippling," said the recent edition of "The Advocate," the chamber's monthly newsletter. "It is imperative that PFML's implementation be paused by one year due to significant concerns from the business community."
Business leaders say that small outfits are already struggling to fill job openings. The law will add to the strain and challenge of filling temporary positions. Many businesses lack the capacity to absorb prolonged employee absences, they say.
The Rochester chamber is calling for a one-year delay under legislation supported by GOP House legislators, including Rep. Pam Altendorf of Red Wing. The Minnesota Chamber of Commerce and other city chapters are also calling for a delay.
The law, which passed largely on party-line votes in 2023, provides Minnesota workers with paid time off to deal with family and medical issues. To fund the program, it imposes a tax on employers and employees starting Jan. 1, 2026. The premium rate would be 0.7% of the employee's wages, at least half of which would be paid by the employer.
Ryan Parsons, president of the Rochester Area Chamber of Commerce, said it was "very likely" that small outfits would go out of business as a result of its mandates. Employers are already scrambling to meet workforce needs, and the law would exacerbate the problem.
He added that a business that loses an employee to paid leave will still need the work to be performed and will need to hire a replacement. But once the employee on paid leave returns to work, "you may have also brought on some great new talent. How does that work within the budget," Parsons said.
Parsons predicted that the child care and education sectors in particular would be "hard hit" by the law's provisions. He also said the 0.7% levy will not cover the program's costs, and taxes will need to be raised to cover the shortfall.
"it is going to need more," Parsons said.
At the time of its passage, the law signed by DFL Gov. Tim Walz was hailed as a humane measure for employees.
Employers can opt out of the state-run program provided they offer private plan benefits that are at least equal to benefits under the state plan. Grants to offset the program's costs are eligible to employers with 30 or fewer employees and less than $3 million in gross revenues.
The law's authors argued that providing broader protections for state employees would improve maternal and child health incomes, as well as financial security. And it could encourage workers to stay in their jobs longer.
"This program is going to even the playing field," said DFL Sen. Alice Mann of Edina. "It will keep people out of poverty and, most importantly, the program is built on a foundation that we are all worthy, that all of our experiences and life trajectories are equally important."
At the time of its passage, Minnesota became the first state in the Midwest to enact a paid leave law. It joined 11 other states and Washington, D.C., with paid leave laws on the books.
A change to the law would be challenging given the current political makeup in St.Paul. The House and Senate are nearly evenly divided between Republicans and Democrats, with the DFL having a one-seat edge in the Senate and the GOP a similar margin in the House. Walz, who signed the legislation, would also have to be on board.
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