Walz’s Budget

On Tuesday, Governor Tim Walz rolled out his full, $65 billion budget. Under the proposal, all but about $1.3 billion of the surplus would be spent, and two tax increases would be enacted: a 1/8 cent sales tax hike in the metro and a raise on taxes on large capital gains. Governor Walz also renewed his call for $1,000 direct checks to Minnesotans (this time calling for earnings caps), and proposed paying off the remainder of what is owed on the U.S. Bank stadium, then closing the Stadium Reserve Fund.

Walz’s Bonding Bill

In addition to the budget, the Governor announced his $3.3 billion bonding plan late this week:

• $650 million for roads and bridges
• $470 million for affordable housing
• $312 million for environmental resilience
• $260 million for buildings at the University of Minnesota and the Minnesota State College system
• $90 million for veterans’ homes

Clean Energy Bill

After seven hours of debate on the floor Thursday night, the House passed the bill to require all energy produced in Minnesota by public utilities to come from carbon-free sources by the year 2040; non-public utilities would be subject to a 60% clean energy standard. An author’s amendment was adopted, but debate centered around dozens of unsuccessful amendments offered by the minority party. The Senate will vote on their version of the bill in the coming weeks.

Mining Up North

Yesterday, U.S. Secretary of the Interior Deb Haaland announced a landmark 20-year ban on new mineral leases on 225,000 acres of land in the Superior National Forest. Absent a legal challenge, this rule effectively shutters Twin Metals’ plans for a copper-nickel mine in the Boundary Waters area of northern Minnesota.

No Signs of Slowing Down

January action at the legislature continues to proceed at a swift pace. This week, both chambers continued to pass major pieces of legislation through their committee stops. Paid Family and Medical Leave, Earned Sick and Safe Time, and adult-use recreational cannabis all made progress in their lengthy committee paths this week. Additionally, the Protect Reproductive Options Act, which would enshrine the right to abortion in statute, passed off the House floor late last week and is set for a vote in the Senate today.

Governor’s Budget Rollout

This week, Governor Walz began rolling out key features of his proposed budget with two press conferences focused on investments in economic and children and families initiatives. The $12 billion children and families proposal includes investments in child care tax credits, school lunches, and school funding, while the economic proposal, totaling $4.1 billion, would include workforce benefits, climate investments, and agriculture supports. Two more packages will be announced in the lead-up to the full budget announcement on January 24.

Cannabis

The House bill to legalize adult-use recreational cannabis, H.F. 100, was approved by the Judiciary Finance and Civil Law Committee this Thursday, and is set to be heard by Environment and Natural Resources Finance and Policy Committee early next week. Meanwhile, its Senate companion bill will have its first hearing in Judiciary and Public Safety Committee next week. A lengthy committee path remains ahead for this major piece of legislation.

Clean Energy

On Wednesday, the House Climate and Energy Finance and Policy Committee approved Majority Leader Jamie Long’s bill to require 100% carbon-free energy production in Minnesota by 2040. The bill provides “off-ramps” to utilities who do not believe they can reach this goal either for technological or financial reasons. H.F. 7 next heads to the House floor for a vote.

Earned Sick & Safe Time

House and Senate Labor committees each approved bills on Tuesday that would mandate that employers provide paid time off for sick leave. Both will make their next stops in the respective chamber’s State and Local Government committees.

Breakneck Pace

This session is off to a running start. Just three weeks into session, several major bills have passed off of the House floor and still more have been rapidly rounding their committee stops. While the action of the Senate has proceeded more slowly, we are still on pace for the busiest first month of session in recent memory. However, don’t be fooled into thinking legislators expect to finish their business anytime soon—Capitol observers suggest there will be multiple waves of major spending packages before session adjourns.

In a Notice of Proposed Rulemaking issued January 5, 2023, the Federal Trade Commission (“FTC”) proposes prohibiting employers from entering into non-compete clauses with workers and requiring employers to rescind existing non-compete clauses.  The FTC’s reasons for the proposed rule include its belief that non-compete clauses reduce workers’ wages, limit job mobility and hinder innovation. The proposed rule would supersede all state laws that are contrary to the FTC rule and it would invalidate non-compete clauses already in effect.

As written, the proposed rule would render it an unfair method of competition for an employer to enter or attempt to enter into a non-compete clause with a worker, maintain with a worker a non-compete clause, or represent to a worker that the worker is subject to a non-compete clause.  The proposed definition of “non-compete clause” is “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”  Thus, the rule would permit workers to voluntarily leave employment to start a business in direct competition with their former employer, for example.

The proposed rule’s definition of “worker” is incredibly broad, and includes all employees (no matter how senior) and independent contractors.   If the proposed rule goes into effect, as written, companies that have existing non-compete agreements will be required to formally rescind the non-compete clauses by providing written notice to all workers with a non-compete clause, including former employees and contractors, informing the workers that the non-compete clauses are rescinded.  The proposed rule contains model language for employers to use to rescind existing non-compete clauses.

There is a very limited exception, for the sale of a business, where non-compete agreements will be permitted under the proposed rule.  The proposed rule’s requirements would not apply to a non-compete clause entered into by a person selling a business, or by a person selling all or substantially all of the operating assets of a business, when the seller holds at least a 25% ownership interest in the business entity.

The proposed rule does not ban non-disclosure, confidentiality, or non-solicitation clauses outright.  However, the rule includes a functional test for whether a contractual term is a de facto non-compete clause.  If a clause “has the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment” then it would be considered invalid under the proposed rule. For instance, a non-disclosure agreement that is written so broadly that it effectively precludes the worker from working in the same field would be considered a de facto non-compete.

The proposed rule seeks public comment on a number of topics, in particular:

• Whether franchisees should be covered by the rule;
• Whether senior executives should be exempted from the rule, or subject to a rebuttable presumption rather than a ban; and
• Whether low- and high-wage workers should be treated differently under the rule.

Public comments will be received until March 10, 2023, and will be reviewed before the FTC makes any changes in a final rule.  Comments to the proposed rule may be submitted here.

The proposed rule, published under the authority of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45 and 46(g), has already come under considerable scrutiny.  The FTC voted 3-1 to publish the proposed rule, and the single dissenting member has already issued a statement identifying multiple grounds for possible legal challenge.  Certain trade groups are also contemplating legal challenges to the authority of the FTC to regulate issues of such vast economic and political significance.  If the proposed rule becomes final without any revision by the FTC, the rule will likely be tied up in the federal courts for a significant period of time before it will become effective.

Winthrop & Weinstine continues to monitor the situation and we will update you on this topic as the public comment and review process unfolds.  Employers who have a stake in the enforcement of non-compete agreements should consider reviewing the proposed rule and submitting comments to the FTC.  Employers do not necessarily need to take immediate steps regarding their existing non-compete agreements in response to the proposed rule, but it would be advisable for employers to know which of their employees and former employees have existing non-compete clauses in their agreements.  However, employers should keep in mind that narrowly-tailored agreements that protect legitimate business interests are more likely to be enforceable under the current framework of state and federal law. For more information about employment agreements, including non-competition, non-disclosure, and non-solicitation provisions, please feel free to reach out to any member of our Employment team.

In addition, our Employment Litigation team’s upcoming webinar, “Is Your Non-Compete Agreement Enforceable? These Common Mistakes Could Cost Your Company,” will address the proposed rule and other non-compete enforcement issues. If you are interested in attending, registration is available here.

Driver’s Licenses for All

In 2003, the Legislature passed a law requiring Minnesotans to show proof of legal residence in the United States in order to obtain a driver’s license. This year, a bill has been introduced that would make a change to allow driver’s licenses and state ID cards to be obtained by all Minnesotans regardless of immigration status. This bill was heard and passed the House Transportation committee this Tuesday after hours of testimony. The bill heads next to the Judiciary Finance and Civil Law committee.

Paid Family & Medical Leave

One of the cornerstones of the DFL’s legislative agenda this session is a bill to require all employers of a certain size to offer at least 12 weeks of paid family and medical leave to employees. The bill’s first hearing was supposed to be this week, but was postponed. The program would require a significant startup investment and is now set for its first hearing in the Senate Jobs Committee next Wednesday.

Recreational Cannabis

The bill to legalize and regulate adult-use recreational cannabis cleared its first committee stop with a hearing in the House Commerce Committee this past Wednesday. Dozens of advocates and opponents provided testimony and a handful of minor amendments were adopted. H.F. 100 will make the next of many committee stops to come when it is heard next week in the Judiciary Finance and Civil Law Committee.

Revenues

Minnesota Management and Budget released the January Revenue and Economic Update on Tuesday. Minnesota’s net general fund receipts for November and December of 2022 are now estimated to be $217 million (4.4 percent) more than was forecast in the November 2022 Forecast. Thus, the surplus just got bigger by this amount. It is clear that the state tax collections continue to exceed even the most recent forecasts. The forecast that will be released at the end of February will be the one that the Legislature and Governor use to complete the budget this session.

Senate Committee Rebalancing

After an explosive floor session in the Senate last week that saw dozens of GOP members speak up about disproportionate party representation on committees, Senate leadership announced they would add one additional Republican to nine different committees. All committees now have a one- or two-seat difference in party representation.

Bonus: Official Deadlines Just Released

• Friday, March 10 — Committees must act favorably on bills in the house of origin
• Friday, March 24 — Committees must act favorably on bills that met the first deadline in the other body
• Tuesday, April 4 — Committees must act favorably on finance bills
• Tuesday, April 4 at 5 pm through Tuesday, April 10 — Easter/Passover legislative break

Welcome Haley!

The Winthrop & Weinstine Government Relations team is thrilled to introduce the newest member of our team, Haley Cobb. Prior to joining Winthrop, Haley held numerous roles in the political arena since 2017, including most recently as Finance Director of Walz For Governor, the re-election campaign for Minnesota Governor Tim Walz. She also previously served as Legislative Assistant to Rep. Melissa Hortman, the Speaker of the Minnesota House of Representatives.

Priorities Presser

On Wednesday, House and Senate leadership held a press conference to communicate their top session priorities. The specific items they mentioned are:

• Paid family & medical leave
• Codified access to abortion
• Expansion of voting rights
• Tax conformity
• Ban on price gouging
• 100% clean energy by 2040
• Increased access to affordable childcare

Leaders also signaled support for at least one bonding bill, and committed to passing high-priority items as quickly as possible.

Tax Conformity

While the federal tax code changed significantly in 2019, Minnesota’s tax code never received important alterations to bring it into conformity. The bill to rectify this was approved by the House Taxes committee on Wednesday, and by its Senate counterpart on Thursday. The bill is expected to rapidly pass both chambers in order to take advantage of a January 13 deadline for state tax filers.

Reproductive Rights

The PRO Act, which would codify access to abortion, had its first committee stop with a hearing in the House Health & Human Services Finance committee this Thursday. Access to abortion is already protected in Minnesota under Doe v. Gomez, but remains vulnerable to future Supreme Court challenges. This bill is expected to pass through both chambers quickly and, along with tax conformity, become one of the first provisions signed into law this session.

Quiet Start?

It must be the first week of session: discussion topics during a 7-hour-long debate on the Senate floor about temporary rules ran the gamut from committee names to types of water bottles that might be allowed on the Senate floor. Floor and committee activity was largely slow to start this week as legislators acclimated to new surroundings and contended with a major snowstorm.

Next week, however, is shaping up to be a return to full session form, with more than 40 committee meetings scheduled between both chambers and a full docket of bills on deck to be heard. The recreational cannabis bill will start moving through the House on Wednesday.

DFL Sweeps State-wide Races

DFL incumbent Governor Tim Walz easily defeated Republican challenger Scott Jensen by a 52.2% to 44.6% margin. Walz built up huge vote margins in Hennepin and Ramsey counties early, and Jensen could not make up the ground outside the seven county metro area. DFL incumbent Secretary of State Steve Simon also easily won his race over Republican Kim Crockett by a 54.5% to 45.4% margin. The Attorney General and State Auditor races were much closer. Incumbent State Auditor Julie Blaha (47.47%) defeated Republican challenger Ryan Wilson (47.12%) by 8,745 votes out of 2,458,253 votes cast. The Attorney General race was also very tight. Incumbent Attorney General DFLer Keith Ellison (50.37%) defeated Republican challenger Jim Schultz (49.53%) by 20,857.

DFL Narrowly Takes Minnesota Senate

With only a one-vote majority (34-33), the DFL caucus will take control of the Minnesota Senate. Key to the Democrats’ success were three tight races. Republican Roger Chamberlain was the only Senate incumbent to lose, bested by first-time candidate Heather Gustafson in Senate District 36. An open seat in the eastern suburban Senate District 41 saw DFL candidate Judy Seeberger defeat Republican Tom Dippel, while two open House seats in the district were won by Republican candidates. Meanwhile, in a northern Minnesota seat long-held by retiring Senator Tom Bakk, the DFL candidate Grant Hauschild beat the well-known business leader Andrea Zupancich.

Democrats Grow Majority in House

In each of the last four mid-presidential-term elections (2006, 2010, 2014, and 2018) control of the Minnesota House of Representatives has changed hands. National and local trends in the economy seemed to suggest that this trend would continue. Consequently, for months, House Republicans had been predicting victory, and as Election Day neared, a big victory. Bucking all trends, the Democrat House leader, Speaker Melissa Hortman came out on top. Prior to the election the DFL held a 69-65 majority. After the election, this majority increased by one member to 70-64. Two rural DFL members lost: Rob Ecklund (3A-International Falls) and Mary Murphy (3B-Hermantown); while four Republicans lost: Susan Akland (18A-St. Peter), Donald Raleigh (32B-Circle Pines), Greg Boe (48B-Chanhassen), and Eric Mortenson (54A-Shakopee).

Minnesota Congressional Incumbents All Win

The Congressional races in Minnesota turned out to be a snooze-fest, as all incumbents won. The only race that was within ten percentage points was the hotly-contested District 2 race, a rematch between DFL incumbent Angie Craig and Republican Tyler Kistner. Though billed as one of the most likely “flips” in the country, Congresswoman Craig defeated Kistner by a relatively safe five-percent margin.

Other Takeaways

• It appears two state-level House races (3A and 3B) are close enough for a recount, but even if the results change, it won’t impact the majority.
• The far-right group Action 4 Liberty didn’t fare well, as its most high-profile candidates lost – including the only incumbent to identify with the group (Erik Mortenson).
• Republican Gubernatorial candidate Scott Jensen’s vote total of 1,119,182 was the lowest of any statewide Republican race, while Attorney General candidate Jim Schultz’s total was the highest, at 1,232,839. Both Secretary of State candidate Kim Crockett (1,119,215 votes) and State Auditor candidate Ryan Wilson (1,159,086) received more votes than Jensen.
• Approximately one-third of the legislature will be non-incumbents, although some of the “new” members have served in legislature before, either previously or in the other body.
• For a listing of the results of all Minnesota races, please click here.

Important: Please note that all of the results and analysis are based on the published results as of Wednesday morning. Results are subject to change as information is updated. Please check the Minnesota Secretary of State website for the latest results.

In this edition of WIT AND WISDOM OF WINTHROP, our Employment Litigation Newsletter, we take a look at factors that plaintiff’s employment litigators consider in deciding whether to take an employee’s case, steps employers can take to avoid being sued, best practices for handling personnel files to reduce litigation risk, and how employers can avoid common mistakes. We also review employment litigation trends, and as the holiday season approaches, the team shares some of their favorite holiday traditions!

If you have employees, supervise employees, are an employee or know employees, there will be something of interest to you!

Click here to read the issue!

Introduction

With the conclusion of the August 9 primary, the DFL and Republican ballots are set for the November 8 general election.  Every constitutional officer and all 201 seats in legislature will be on the ballot along with the eight congressional seats.

Constitutional Officers

The primary results for the constitutional officers are in the chart below.  The only primary that was seriously contended was the Republican attorney general race where endorsed candidate Jim Schultz was challenged by Doug Wardlow, the 2018 GOP endorsed candidate.  The endorsement proved enough for Schultz to edge Wardlow in the primary by a 52%-34% margin.

Italics denote candidates endorsed at Party Conventions

*Both Blaha and Wilson were not on the primary ballot as nobody else filed to challenge them.

Congress

Incumbent U.S. Representatives Angie Craig (2^nd District-DFL), Dean Phillips (3^rd District-DFL), Tom Emmer (6^th District-Republican), Michelle Fischbach (7^th District-Republican) and Pete Stauber (8^th District-Republican) all will be on the general election ballot in November.

Key Congressional Races
U.S. Representative Betty McCollum was challenged by political newcomer Amane Badhasso but beat Badhasso handily 83% to 15%.

U.S. Representative Ilhan Omar beat back a well-funded challenge from former Minneapolis City Councilmember Don Samuels by a 50%-48% margin in a race that was much closer than many anticipated.

The 1^st Congressional District held a special general election to fill the remaining five months of the term of the late U.S. Representative Jim Hagedorn who died in office.  This special election occurred in the pre-2022 boundaries of the 1^st Congressional District. At the same time, within the new 2022 redistricted boundaries, a primary election was held to see who would appear on the general election ballot on November 8^th.  Republican Brad Finstad defeated DFLer Jeff Ettinger by a 51% – 47% margin to fill the remainder of Hagedorn’s term. While in the primary election within the new district boundaries, Finstad defeated Jeremy Munson 76% – 24% and Ettinger easily won his uncontested primary.

State House and Senate

A new redistricting map along with challenges from the left in the DFL party and right in the GOP party meant there were many contentious primaries. Well-known incumbents in both parties faced serious challenges. The results from the key primaries are in the chart below.

Senate
The Senate GOP was seen as especially vulnerable given the number of well-organized primary challengers to incumbent Republicans.  In the end, the GOP Senate incumbents had a successful night, winning all but one race in an open seat.

On the Democratic side, the race to watch was in Senate District 56 (Rosemount, Apple Valley), where Erin Maye-Quade handily beat the DFL-endorsed candidate, Justin Emmerich.  Maye-Quade was previously the DFL-endorsed Lt. Governor candidate in 2018, but lost in the gubernatorial primary. Longtime incumbent Sandy Pappas also handily won the primary as well, turning away two challengers.

House
There were a number of GOP challengers to sitting legislators in various House seats, but all the incumbent Republicans prevailed. On the DFL side, challenger Liz Lee defeated John Thompson, who had been the subject of much controversy during his first term in the House.  Two races in the suburbs featured sitting legislators who were re-districted into the same district.  Steve Elkins defeated Andrew Carlson in Bloomington and Liz Reyer defeated Sandy Masin in Eagan.

*denotes Party endorsed candidate
(i) denotes incumbent

Key Senate Republican Primaries

Key Senate DFL Primaries

Key House Republican Primaries

Key House DFL Primaries

It is somewhat difficult to paint a sweeping narrative to describe the results of the primary. The Action for Liberty organization that had a number of candidates run to the right of sitting Senate Republicans had a few wins, but overall lost more than they won. Similarly, it is hard to draw broad conclusions from the results that a major push occurred related to an issue, like inflation, crime, or recent Supreme Court rulings.

What is clear is the general election campaign has begun.

In this edition of WIT AND WISDOM OF WINTHROP, our Employment Litigation Newsletter, we take a look at what’s happening in the news regarding the increasing number of companies using hybrid work models, and related policies. We also review a recent win for employers at the Minnesota Supreme Court dealing with the burden-shifting framework for analyzing claims of retaliation under Minnesota law.

If you have employees, supervise employees, are an employee or know employees, there will be something of interest to you.

Click here to read the issue!