Minnesota PFML, One YearLater: What Employers Have Learned

Minnesota’sPaid Family and Medical Leave (PFML) program has now been live for over a year,and for many employers, it has been a significant learning curve. ChristensenGroup recently hosted a webinar with employment attorneys Brian Bankstein andPenny Phillips of Felhaber Larsen to unpack what’s working, what’s not, andwhat employers should be doing differently heading into 2027.

Good News on Premiums: No RateIncrease for 2027

The MinnesotaDepartment of Employment and Economic Development (DEED) recently announcedthat the PFML premium rate will remain at 0.88% for 2027. This comes as arelief to many employers who expected an increase given how heavily the programwas used in its first several months.

One thing towatch going forward: the initial seed funding the legislature allocated tolaunch the program is set to expire after this year. Starting in 2027, theprogram will be funded entirely through employer and employee premiums. Whetherthe rate holds steady again next year remains to be seen.

The Biggest Complaint: Delays andMissteps

Across both stateand private plans, employers are reporting significant delays andadministrative hiccups. Based on client feedback, the state plan has generatedmore complaints than private plans, particularly around claim processing delaysand lack of communication.

The real-worldconsequence: when an employee is out and an employer has no update on theirclaim status, it becomes difficult to hold that employee accountable from anattendance standpoint. There is a fine line between employees legitimatelynavigating a slow system and employees using the ambiguity to their advantage,and the uncertainty makes it hard for employers to know how to respond.

The Big One: Concurrent Leave and“Stacking”

If there was asingle theme repeated throughout the webinar, it was this: DEED expectsemployers to do more than simply notify employees that other leave will countagainst their Minnesota PFML entitlement. Employers must also be able to provethe employee acknowledged that notice.

Here’s why thismatters. Say an employee takes Minnesota parenting leave but doesn’t apply forMinnesota PFML at the time. If that employee later applies for PFML, theemployer cannot simply tell the state “they already used this time.” DEED willask for proof that the employee was notified their parenting leave would countagainst their PFML bank, and proof that the employee acknowledged that notice.Without that documentation, the employee’s leave time effectively resets,allowing them to “stack” additional paid leave on top of time already taken.This creates an unintended expansion of the benefit that the statute did notnecessarily intend.

The practicalfix: Build acknowledgment language directly into your leave request or PFMLapplication process. For example, a signature block that states something like,“By applying for leave, I acknowledge my understanding that Minnesota PaidLeave, FMLA, and other applicable benefits will run concurrently and this mayreduce or alter the amount of paid leave available to me in the future.” Thisstreamlines compliance without requiring one-on-one follow-up for every leaverequest.

Why You Need a Written PFML Policy

Many employers,especially smaller businesses relying on insured or private plans, assumed theydidn’t need a formal internal policy. That assumption is risky. Minnesota PFMLoverlaps with a long list of other laws and benefits, including:

•            FMLA

•            The ADA

•            The Pregnant Workers Fairness Act

•            Minnesota Pregnancy and Parenting Leave

•            Earned Sick and Safe Time (ESST)

•            Workers’ compensation

•            PTO

•            Short-term and long-term disability

•            Company-paid leave policies

Each of these interactswith PFML differently, and the gaps between them are where employers run intotrouble. A written policy that clearly addresses how these leaves runconcurrently, how offsets work, and what documentation is required helps closethose gaps and gives HR staff a consistent framework to follow, particularlyimportant for smaller employers without a dedicated leave administrator.

Three common missteps to avoid:

1.          Failing to properly designate leave. Ifan employee applies for PFML and is also FMLA-eligible, the leave should bedesignated as FMLA at the same time.

2.          Misunderstanding how leave laws interact.Overlapping requirements are complex, and assuming one law’s rules applyuniversally leads to errors.

3.          Poor documentation and recordkeeping.Without records of notice and acknowledgment, employers have little to fallback on when disputes arise.

Switching Between Private andState Plans

If you’re unhappywith your current plan, Minnesota Statute 268B.10 lays out specificrequirements for switching.

Private planto state plan: - You must have maintained the private plan for at least oneyear. - You must give DEED a minimum 30-day notice of your intent to terminatethe private plan. - Once you switch, you’re locked into the state plan forthree years.

State plan toprivate plan: - There is no waiting period or lock-in requirement to leavethe state plan. - However, you must go through the full private plan approvalprocess with DEED, the same process required for any new private plan,including meeting all statutory requirements.

Is a Self-Insured Plan WorthConsidering?

Both attorneysflagged self-insured plans as an option worth watching, though it’s stillearly. A self-insured plan puts administration and timing decisions in theemployer’s hands rather than a third party, which could mean fewer delays and,for mid-size employers with generous existing benefits and lower PFMLutilization, potential cost savings. That said, both attorneys suggestedwaiting a year or two until there’s more clarity on how the law is beinginterpreted before making that move.

Short-Term and Long-TermDisability: Review Your Plans

One of the mostcommon question themes was how STD and LTD plans coordinate with MinnesotaPFML. The short answer: it depends entirely on what your plan documents say.

If you haven’treviewed the terms and conditions of your STD or LTD plans since PFML tookeffect, that should be a priority. The plans need to “play in the sandbox”correctly with the state program.

One real-worldexample: a client with a union contract that included a self-insured STDbenefit providing 26 weeks of coverage. The employer took the position that thefirst 12 weeks of STD run concurrently with Minnesota paid leave, with theremaining weeks available after that. Without reviewing the plan language, thatkind of coordination would be easy to get wrong.

A key statutoryrule to remember: an employee’s total combined pay from PFML, STD, PTO, and anyother income source cannot exceed their usual salary. If an STD plan isstructured to pay the full benefit amount on top of PFML, you mayunintentionally be making the employee ineligible for PFML entirely, sincethey’re already being made whole through the employer’s plan. If your STDcarrier or broker tells you the plan pays the full amount alongside paid leave,that’s worth a closer look.

Benefits That Affect Eligibility

There are certainbenefits that can make an employee ineligible for Minnesota paid leave:

•            Unemployment insurance: Employees cannotcollect UI and PFML at the same time. If you’re a seasonal business that laysoff employees and one of them applies for PFML while on unemployment, thatshould be reported to the state. DEED reportedly monitors this internally, butemployers should be prepared to flag it as well.

•            Social Security Disability benefits: Generally,employees receiving SSD are not eligible for PFML, though there are some narrowexceptions.

Key Reminders Employers KeepGetting Wrong

The attorneysreiterated several rules that continue to trip up employers:

1.          You cannot force employees to use PTO orother paid benefits before or during PFML. Employees choose whether to usesupplemental benefits. You can offer the option, but you cannot require it.

2.          Employees can choose to use PTO in lieu ofapplying for PFML. If they do, and they later apply for state benefits, youcan report to the state that they already used paid time for the same reason,which reduces their remaining PFML entitlement. But this only works if you havedocumented notice and acknowledgment from the employee at the time.

3.          Total combined pay cannot exceed usualsalary. PFML, STD, PTO, and any other income sources are capped at what theemployee would normally earn.

4.          Employers cannot interfere with, discourage,or retaliate against employees who apply for PFML. The statute includesanti-discrimination and retaliation provisions.

5.          Set clear policies and communicatesupplemental benefit options before leave begins. Ambiguity after the factcreates disputes.

Be Very Careful With Suspected Abuse

A client calledfrustrated because an employee on bonding leave was apparently out playing golfseveral times a week. The instinct was to fire the employee for abusing theprogram. The attorneys’ guidance: be very careful.

The state’s positionis that employers should not be the arbiter of whether there is fraud in thePFML program. That determination belongs to the state. When Penny asked DEEDdirectly about a similar situation on behalf of a client, the response was essentiallythat the employer should not concern itself with what an employee is doingwhile on parenting leave.

This doesn’t mean youhave to ignore genuinely egregious circumstances. If the facts are extreme, getlegal advice before acting. But don’t assume abuse and terminate the employee,because the retaliation provisions in the statute expose employers to legalaction if the determination is wrong.

Insurance Premiums While on Leave

Employees are requiredto continue paying their share of insurance premiums while on PFML. This is asignificant pain point, especially when an employee leaves the company duringor after the leave and the employer is left chasing unpaid premiums.

Options include having awritten agreement to deduct premium payments from the employee’s PTO balance,or paying the full premium and using a repayment agreement when the employeereturns. Under Minnesota law, you must have a proper payroll deduction authorizationto recoup premiums. You cannot simply take the money out of their check withoutone.

Worked-Through Examples: Why aChecklist Matters

The attorneyswalked through several leave scenarios to illustrate how even small changes infacts produce completely different outcomes. The recurring message: employersneed a checklist approach to evaluate every leave request, because theinteraction between FMLA, PFML, Minnesota Pregnancy and Parenting Leave, ESST,STD, and PTO changes depending on the specifics.

Example 1: Six months of service,no FMLA eligibility, gives birth

•            Not eligible for FMLA

•            Eligible for six weeks of paid medical leavethrough PFML plus two weeks of bonding time

•            Minnesota Pregnancy and Parenting Leave coversthe same period with job protection but no pay

•            Eight weeks counted against the 12-weekPregnancy and Parenting Leave entitlement

•            PTO available as a top-off if the employerallows supplemental benefits

Example 2: STD at 60% for sixweeks, ESST and vacation available

•            Six weeks of paid medical leave plus six weeksof bonding time through PFML

•            FMLA exhausted after 12 weeks

•            Eight weeks of PFML remaining (out of the20-week maximum)

•            STD covers only the six-week medical portion,not bonding

•            ESST available only during the medical recoveryperiod, not for bonding

•            PTO can supplement throughout if the employer’spolicy permits top-off

Example 3: The “worst case scenario”

An employee takes leavein three separate stretches across the year for different protected reasons:caring for an in-law, caring for a child, and their own surgery. Because thereasons differ and the entitlements don’t all overlap cleanly, the employee couldend up with 20 weeks of Minnesota paid leave plus 12 weeks of FMLA, all in asingle year. Even with the tightest concurrent leave policies, this kind ofstacking is legally possible and there is little the employer can do to preventit. The takeaway: run leaves concurrently whenever the law permits, holdemployees accountable when you can, and write policies as tightly as possible.

More Q&A Highlights

Do you expect faster response timeson PFML applications? Yes, both attorneys expect improvement as the stateand private plans gain experience. DEED has indicated that the number onereason for approval delays is incomplete or missing medical certifications.Employers can help by coaching employees to submit complete paperwork upfront.

Several employees got approvedalmost immediately. Is that typical? No. Consider it fortunate. It maycome down to the specific agent handling the file or the simplicity of thecertification.

Best practice for top-off to avoidoverpayment situations? The risk arises when an employee demands full PTOpayout while a PFML application is pending, and the employer complies beforeknowing the state’s weekly benefit amount. The safer approach is to pay onlythe estimated difference between the employee’s normal wages and the expectedPFML benefit, rather than disbursing full PTO. There is limited guidance on howto recoup overpayments once they occur.

Can an employer ask an employee tohold off on using PTO until the state issues a determination? You can ask,but if the employee says no, you’re in a difficult spot. The better approach isto calculate the appropriate supplement amount yourself rather than relying onthe employee to wait. With some applications taking five to seven weeks toprocess, asking an employee to wait indefinitely is not always realistic.

How do you handle work restrictionsfrom a medical provider that don’t match the job duties? When an employeeon intermittent or reduced leave has restrictions at work, such as no drivingor lifting limits, you must also consider the ADA. This is coming up morefrequently, both for employees whose restrictions prevent them from doing theirjob while at work, and for employees who have exhausted PFML and FMLA and arenow requesting continued leave as a reasonable accommodation. It’s unlikely tobe fraud, but it may require an interactive ADA process.

Someone on bonding leave says midwaythrough they won’t return. Can we fill the position? Yes, but get it inwriting. The employee’s PFML benefits are not affected by their intent toreturn; if approved, they receive the benefits regardless. On job restoration,the employer can rely on the employee’s representation that they will notreturn, but should get a written acknowledgment or resignation letter beforefilling the position. Without documentation, the employee could later claimthey never said it, which creates a significant legal problem.

Are there changes to how wecommunicate PFML information during onboarding? No new statutoryrequirements. Many employers have built PFML notifications into theironboarding modules for efficiency, but the underlying obligations haven’tchanged.

How do you handle PFML with variedschedules? The state calculates benefits based on the preceding threereporting periods, while private plans may calculate based on current earnings.With fluctuating schedules, this can create apparent overpayment orunderpayment situations. Report any overpayments to the state or your privateplan and work through the recoupment process.

Do private plan employers need toreport anything to the state proactively? Even with a private plan,employers still have reporting obligations to the state, including wage datasubmissions through the normal process. On the recordkeeping side, employersshould maintain their own tidy records of private plan administration in caseof a complaint to the DEED commissioner or private litigation. The private planhandles most of the work, but employer-side records are your complianceevidence if something goes sideways.

Are there policy templatesavailable? DEED indicated it would provide a sample policy, but theattorneys found it lacking. They recommend working with your employmentattorney to draft a policy tailored to your situation, since employers havestrong and differing opinions on how these policies should be structured.

The Bottom Line for Year Two

The webinar reinforced thesame themes across both sessions: document everything, write tight policies,run leaves concurrently whenever the law allows, and don’t assume you canhandle suspected abuse on your own. The administrative friction is real, particularlyaround application delays and overpayment risk, but both attorneys expect thesystem to improve as the state and private plans gain experience.

For Christensen Groupclients, the Felhaber Larsen legal hotline is available for PFML and otheremployment law questions. Contact your account team if you haven’t used itbefore and want to get connected.

This post is based on awebinar presented by Brian Bankstein and Penny Phillips of Felhaber Larsen,hosted by Christensen Group. The information is for educational purposes anddoes not constitute legal advice.

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