How paid leave mandates could impact Minnesota manufacturers

By Doug Loon
President and CEO
Minnesota Chamber of Commerce

As we've been discussing in previous podcasts, the legislative session is quickly wrapping up. They have a constitutionally required adjournment date of May 19th this year, and do the math, friends – that's not very far away, and we have much to accomplish yet.

If you were with us last week – and if you missed it, you can go back and check the show – we had Lauryn Schothorst, the Chamber's lead lobbyist on workforce and labor issues. She unpacked the pending legislation we're anxious to see considered to address the paid family and medical leave law. The new program starts January 1st, 2026.

Again, do the math with me – that’s a short eight months from now when the state will roll out this extensive new mandate and government-run insurance program that will affect all employers in the state, large and small, across every sector, including public sector employers like municipalities and school systems. It’s an expensive new mandate with expansive leave and a payroll tax that both employers and employees will be required to pay into. We're going to go a little deeper on that topic today because we’re eager for progress at the Capitol.  

Doug Loon: With me today, I’m thrilled to have Ross Widmoyer. He is the CEO of Faribault Mill in Faribault, and a Chamber board member. We’ve been talking over the past months about what this law means for his business and employees. Ross, thank you for being with us. Tell us a little about yourself and the business, and we’ll jump into how this new law could impact your business.

Ross Widmoyer: Yeah, it's great to be with you, Doug. Thanks for having me.

Faribault Mill has been around since 1865. We're proud to say we’re the longest-standing manufacturer in Minnesota. Those who know Faribault Mill know us for our artisanal wool blankets. We also now make cotton blankets as well. We've seen quite a bit of growth over the last few years as the company has experienced a bit of a renaissance.

We have about 85 employees – most of them are here in Faribault. We have some out in Maine and in the Twin Cities in our retail outlets. But we do all our manufacturing here in the United States, and we’re really proud of that.

DL: As a consumer of your product, they’re beautiful – blankets and other furnishings, even some clothes I’m proud to sport on occasion. Thanks for creating great products right here in Minnesota. You have one very happy customer in the Loon family.

Let’s talk about paid family and medical leave. This goes into effect next year and will impact not just cost but your workforce. Give us a sense of how you view the law in its current form and how it might affect your business and employees. You have a unique manufacturing platform with specialized roles. Talk about how you see the challenge of complying with this new law.

RW: As I mentioned, we have about 85 employees. Those employees handle about 20 unique steps to make one of our handcrafted blankets. We're vertically integrated – we literally take the wool off the sheep’s back, turn it into yarn, weave it into fabric, wet, dry, finish it, cut, sew, label and ship it. It’s a complex operation.

In many of those steps, we have one or two individuals who’ve developed expertise running machines or perfecting processes over several years.

We have longstanding relationships with many of our employees – some are second, third, even fourth-generation craftspeople. We offer a generous benefit program and good pay. If someone needs time off, we figure it out based on the needs of the business.

So I see the current law as a bit of an overreach, especially for small to mid-size companies like ours who rely on a few individuals in critical roles. It’s going to be a challenge for us.

DL: There’s a payroll tax attached to this. It's a state-run insurance product that all employers and employees must participate in. Right now, the payroll tax is pegged at 0.88%, nearly 1%. Talk about what that might mean to your payroll and how it could affect the benefits you already offer your employees.

RW: As you said, it's currently 0.88%, but it could go up depending on the program’s cost once rolled out. We’ll split it 50/50 with our employees, and we're starting to talk to them about that now.

We’ll pick up half; they’ll pick up the other half. It’s not a great time to add another burden on payroll. Our employees in southern Minnesota working manufacturing jobs are already feeling inflation with gas, groceries and more. Adding another half percent in payroll tax is going to be tough.

DL: And that’s just the payroll tax. You’re likely already offering leave and working with employees to backfill positions when needed. One challenge with this new law is that employees will go to the state to request leave, not the employer. That removes the employer from the conversation, making backfilling more difficult. Many of your employees are uniquely trained. So how do you cover that? Will you be adding more staff or more training?

RW: It’s a real challenge for us. Over the past year, we’ve ramped up our cross-training so that someone who's an expert in one part of the process can be functional in a second or third step.

We're not big enough – and I’d guess this is true for many small to mid-size manufacturers – to maintain a large bench of employees to fill in as needed. Cross-training will be key. Beyond that, we’ll have to figure it out as we go.

I’ve worked at large and small companies. The way this law is written will pose a particular challenge for small to midsize manufacturers with multiple steps in their production process.

DL: The law currently allows for 12 weeks of medical and 12 weeks of family leave – up to 20 weeks total. That’s nearly 40% of an employee’s work year. Backfilling in a tight labor market creates real challenges.

The good news is there’s a meaningful proposal at the Capitol to reform this law before it goes into effect. We talked last week with Lauren about how this proposal would scale back the law to something more aligned with the federal unpaid family and medical leave law – around 12 weeks total.

That would reduce costs for employers and employees by lowering the payroll tax. As you think about the scaled-back approach, Ross, what would you say to legislators about the current law and this reform proposal?

RW: Number one, any pushback on the law in its current state is not about denying employees time off to deal with a sick spouse or a newborn. We already do that. We offer a generous PTO policy, and if an employee runs into a hardship, we work with them.

This isn't about shortchanging employees – we need them to run the business. This is about a poorly written law. It’s an overreach and a one-size-fits-all mandate.

Our needs as a company with 85 employees are very different from a large corporation like Target. If I were talking to a legislator, I’d say: let’s get as close to FMLA as possible. Let’s revise this policy to resemble the federal program, which we already follow successfully. That’s worked well for both employees and for us as a sustainable, functional business.

DL: I couldn’t agree more. The proposal is bipartisan as it has support from both Democrats and Republicans. We’re looking for action in the coming days. There are only about two and a half weeks left before adjournment.

The Chamber has worked with other organizations and employer groups to push this strategy. We’re calling on the Legislature – both parties, both chambers and the governor – to come together and make meaningful reforms this year.

We need to ensure this law doesn’t harm Minnesota’s economic competitiveness or its workforce. As you said, Ross, without workers on the job, our economy can’t operate at full capacity.

So again, we’re urging the Legislature to make these reforms happen and get them to the governor’s desk well before the law goes into effect on January 1st, 2026.

Ross, thank you for being with us. Your work in Faribault and around the country is highly valued. You represent a Minnesota-made brand known across the U.S., and we’re proud of that. Thanks for your leadership with the Chamber.

That’s it, folks. Thanks for being with us. We look forward to catching up with you on next week’s Minnesota Business Podcast. Have a great weekend.