Minnesota PFML, One Year Later: What Employers Have Learned

Minnesota PFML, One Year Later: What Employers Have Learned

Minnesota’s Paid 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. Christensen Group recently hosted a webinar with employment attorneys Brian Bankstein and Penny Phillips of Felhaber Larsen to unpack what’s working, what’s not, and what employers should be doing differently heading into 2027.

Good News on Premiums: No Rate Increase for 2027

The Minnesota Department of Employment and Economic Development (DEED) recently announced that the PFML premium rate will remain at 0.88% for 2027. This comes as a relief to many employers who expected an increase given how heavily the program was used in its first several months.

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

The Biggest Complaint: Delays and Missteps

Across both state and private plans, employers are reporting significant delays and administrative hiccups. Based on client feedback, the state plan has generated more complaints than private plans, particularly around claim processing delays and lack of communication.

The real-world consequence: when an employee is out and an employer has no update on their claim status, it becomes difficult to hold that employee accountable from an attendance standpoint. There is a fine line between employees legitimately navigating 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 a single theme repeated throughout the webinar, it was this: DEED expects employers to do more than simply notify employees that other leave will count against their Minnesota PFML entitlement. Employers must also be able to prove the employee acknowledged that notice.

Here’s why this matters. Say an employee takes Minnesota parenting leave but doesn’t apply for Minnesota PFML at the time. If that employee later applies for PFML, the employer cannot simply tell the state “they already used this time.” DEED will ask for proof that the employee was notified their parenting leave would count against 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 not necessarily intend.

The practical fix: Build acknowledgment language directly into your leave request or PFML application process. For example, a signature block that states something like, “By applying for leave, I acknowledge my understanding that Minnesota Paid Leave, FMLA, and other applicable benefits will run concurrently and this may reduce or alter the amount of paid leave available to me in the future.” This streamlines compliance without requiring one-on-one follow-up for every leave request.

Why You Need a Written PFML Policy

Many employers, especially smaller businesses relying on insured or private plans, assumed they didn’t need a formal internal policy. That assumption is risky. Minnesota PFML overlaps 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 interacts with PFML differently, and the gaps between them are where employers run into trouble. A written policy that clearly addresses how these leaves run concurrently, how offsets work, and what documentation is required helps close those gaps and gives HR staff a consistent framework to follow, particularly important for smaller employers without a dedicated leave administrator.

Three common missteps to avoid:

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

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

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

Switching Between Private and State Plans

If you’re unhappy with your current plan, Minnesota Statute 268B.10 lays out specific requirements for switching.

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

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

Is a Self-Insured Plan Worth Considering?

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

Short-Term and Long-Term Disability: Review Your Plans

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

If you haven’t reviewed the terms and conditions of your STD or LTD plans since PFML took effect, that should be a priority. The plans need to “play in the sandbox” correctly with the state program.

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

A key statutory rule to remember: an employee’s total combined pay from PFML, STD, PTO, and any other income source cannot exceed their usual salary. If an STD plan is structured to pay the full benefit amount on top of PFML, you may unintentionally be making the employee ineligible for PFML entirely, since they’re already being made whole through the employer’s plan. If your STD carrier 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 certain benefits that can make an employee ineligible for Minnesota paid leave:

• Unemployment insurance: Employees cannot collect UI and PFML at the same time. If you’re a seasonal business that lays off employees and one of them applies for PFML while on unemployment, that should be reported to the state. DEED reportedly monitors this internally, but employers 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 narrow exceptions.

Key Reminders Employers Keep Getting Wrong

The attorneys reiterated several rules that continue to trip up employers:

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

2. Employees can choose to use PTO in lieu of applying for PFML. If they do, and they later apply for state benefits, you can 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 have documented notice and acknowledgment from the employee at the time.

3. Total combined pay cannot exceed usual salary. PFML, STD, PTO, and any other income sources are capped at what the employee would normally earn.

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

5. Set clear policies and communicate supplemental benefit options before leave begins. Ambiguity after the fact creates disputes.

Be Very Careful With Suspected Abuse

A client called frustrated because an employee on bonding leave was apparently out playing golf several times a week. The instinct was to fire the employee for abusing the program. The attorneys’ guidance: be very careful.

The state’s position is that employers should not be the arbiter of whether there is fraud in the PFML program. That determination belongs to the state. When Penny asked DEED directly about a similar situation on behalf of a client, the response was essentially that the employer should not concern itself with what an employee is doing while on parenting leave.

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

Insurance Premiums While on Leave

Employees are required to continue paying their share of insurance premiums while on PFML. This is a significant pain point, especially when an employee leaves the company during or after the leave and the employer is left chasing unpaid premiums.

Options include having a written agreement to deduct premium payments from the employee’s PTO balance, or paying the full premium and using a repayment agreement when the employee returns. Under Minnesota law, you must have a proper payroll deduction authorization to recoup premiums. You cannot simply take the money out of their check without one.

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Worked-Through Examples: Why a Checklist Matters

The attorneys walked through several leave scenarios to illustrate how even small changes in facts produce completely different outcomes. The recurring message: employers need a checklist approach to evaluate every leave request, because the interaction 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 leave through PFML plus two weeks of bonding time

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

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

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

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

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

• FMLA exhausted after 12 weeks

• Eight weeks of PFML remaining (out of the 20-week maximum)

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

• ESST available only during the medical recovery period, not for bonding

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

Example 3: The “worst case scenario”

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

More Q&A Highlights

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

Several employees got approved almost immediately. Is that typical? No. Consider it fortunate. It may come down to the specific agent handling the file or the simplicity of the certification.

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

Can an employer ask an employee to hold 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 is to calculate the appropriate supplement amount yourself rather than relying on the employee to wait. With some applications taking five to seven weeks to process, asking an employee to wait indefinitely is not always realistic.

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

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

Are there changes to how we communicate PFML information during onboarding? No new statutory requirements. Many employers have built PFML notifications into their onboarding modules for efficiency, but the underlying obligations haven’t changed.

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

Do private plan employers need to report anything to the state proactively? Even with a private plan, employers still have reporting obligations to the state, including wage data submissions through the normal process. On the recordkeeping side, employers should maintain their own tidy records of private plan administration in case of a complaint to the DEED commissioner or private litigation. The private plan handles most of the work, but employer-side records are your compliance evidence if something goes sideways.

Are there policy templates available? DEED indicated it would provide a sample policy, but the attorneys found it lacking. They recommend working with your employment attorney to draft a policy tailored to your situation, since employers have strong and differing opinions on how these policies should be structured.

The Bottom Line for Year Two

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

For Christensen Group clients, the Felhaber Larsen legal hotline is available for PFML and other employment law questions. Contact your account team if you haven’t used it before and want to get connected.

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

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