Legislative and Judicial Updates

Category: Legislative and Judicial Updates

Public Comment Period Open for Office of Cannabis Management Proposed Rules

The Minnesota Office of Cannabis Management (OCM) has published their draft rules for review and public comment. The rules outline the requirements for all aspects of a cannabis business operation including record keeping, security, labeling, storage, etc. For those looking to apply for a license, you should review and become familiar with the rules as you begin to prepare your operation and security plans. The public comment period starts Monday, Jan. 13, 2025 and runs through 4:30 p.m. on February 12, 2025. For those considering applying for a cannabis business license, you may want to engage in this public comment period. Draft rules can be found here: https://mn.gov/ocm/assets/RD4844-11295180100844890568-011325_tcm1202-664935.pdf Public comment must be entered here: https://minnesotaoah.granicusideas.com/discussions/40360-minnesota-office-of-cannabis-management-notice-of-intent-to-adopt-expedited-rules-without-a-hearing Where Does Minnesota Stands with Cannabis? Following Minnesota’s legalization of adult-use cannabis in May 2023, the state has tried to ensure a thoughtful and equitable rollout of cannabis laws and business licenses. This process includes addressing consumer health and safety, ensuring safe products and creating opportunities for communities disproportionately impacted by past cannabis laws. Throughout the process, the OCM has engaged with stakeholders to gather input and refine its approach. In October 2023, the OCM conducted surveys and meetings with partners to identify considerations for rulemaking. An earlier draft of the rules was shared for public feedback in 2024; this current version incorporates much of the 2024 public input. What Happens Next? Once the public comment period closes, the OCM will review and incorporate feedback into the draft rules. The revised rules will then undergo judicial review and approvals by Secretary of State Steve Simon and Governor Tim Walz. The final rules are expected to be released by the end of March 2025. Larkin Hoffman will continue to follow developments as they unfold. Stay tuned for further updates and contact our team if you have questions regarding cannabis licensing.

January 13, 2025

Legislative and Judicial Updates

Navigating the Legalization of Marijuana: Update Your Drug and Alcohol Testing Policies – Part One

On August 1, 2023, recreational marijuana and cannabis products became legal in the state of Minnesota. Employers are now asking how this new law affects their employment policies and procedures. In the first of a two-part series of blog posts on how the legalization of marijuana affects drug and alcohol polices, we address whether employers need to modify their drug and alcohol testing policies in light of this significant change in the law. Here are some things to consider in changing existing testing policies and procedures. Understanding the Law Employers are concerned that employees are now allowed to come to work stoned. In fact, the opposite is true. The Minnesota Drug and Alcohol Testing in the Workplace Act (“the Act”) has always prohibited impairment in the workplace, and that has not changed. Under the law, an employer is not required to permit or accommodate cannabis use, possession, impairment, sale, or transfer while an employee is working or while an employee is on the employer’s premises or operating the employer’s vehicle, machinery, or equipment. Although an employer is not permitted to restrict an employee’s lawful off-duty use of cannabis, Minnesota law does not require that employers accommodate or permit an employee’s on-the-job possession or use. Consequently, drug and alcohol policies should include a provision explicitly prohibiting the use of cannabis, drugs and alcohol while working, operating company vehicles or on company premises. Review Your Drug and Alcohol Testing Policy The first step in modifying an existing drug and alcohol testing policy is to review the portion of the policy which prohibits the use of drugs (and alcohol) while working. With certain exceptions, which will be discussed below, the Act removes marijuana and cannabis products from the definition of “drug” for purposes of drug testing, and the substance is now considered separate from drugs and alcohol. Therefore, the definition of “drug” in the policy should no longer include cannabis; nor should it be so broad that it encompasses personal use of the substance off-premises during nonworking hours. Drug and alcohol testing policies should add cannabis to the provision prohibiting the use of drugs and alcohol while working, operating company vehicles or on company premises (e.g. “The Employer prohibits the use, possession, impairment, sale, or transfer of cannabis, drugs, and alcohol…”). When is Drug Testing Allowed? It is permissible to test for cannabis under the new law under certain scenarios, most of which will be familiar to employers with existing drug and alcohol testing policies. Employees may be subject to random testing for cannabis while working in safety-sensitive positions. Employees may also be tested when there is reasonable suspicion that they: Are under the influence of cannabis or other drugs; have violated the employer’s written work rules prohibiting the use, possession, sale, or transfer of cannabis, drugs, or alcohol; have sustained (or caused another to sustain) a personal injury; or have caused a work-related accident or were operating or helping to operate machinery, equipment, or vehicles involved in a work-related accident. Employees may also be tested during the post-treatment period (up to two years, depending upon the employer’s policy). Despite the fact that employers may still test under these circumstances, many drug and alcohol testing policies will nevertheless need to be amended because they have defined prohibited drugs to be those governed by the federal Controlled Substances Act, and while cannabis is a prohibited controlled substance under federal law, it is not a prohibited substance under Minnesota law. Under most circumstances, testing applicants for cannabis is no longer permissible, and the detection of marijuana in a drug test cannot be used as a reason for rescinding a job offer. However, for the following specific positions, applicants may continue to be tested for cannabis: Safety sensitive positions (jobs where impairment caused by cannabis usage would threaten the health and safety of any individual) Peace officers and firefighters Positions requiring face-to-face care, training, education, supervision, counseling, consultation, or medical assistance to children, vulnerable adults, or patients receiving medical, psychiatric, or mental health care services Positions requiring a commercial driver’s license or operating a motor vehicle for which state or federal law mandates drug or alcohol testing Employment funded by a federal grant or any other position for which state or federal law requires testing a job applicant or employee for cannabis Additionally, the employee protections for the use of marijuana as described above do not apply to all employees. There are exclusions when the specific work being performed requires that employees and job applicants undergo drug and alcohol testing or cannabis testing where: Federal regulations preempt state regulations regarding drug and alcohol testing or cannabis testing for specific employees and job applicants; Federal regulations or requirements are necessary for operating facilities under federal regulation; Drug and alcohol testing or cannabis testing is conducted pursuant to federal contracts for security, safety, or protection of sensitive or proprietary data; or State agency rules adopt federal regulations applicable to the interstate component of a federally regulated industry and the adoption of those rules is for the purpose of conforming the non-federally regulated intrastate component of the industry. Conclusion Considering marijuana’s lingering presence in the bloodstream, some employers might forgo testing altogether. However, those employing workers in safety-sensitive positions are likely to have a different perspective, since an employee coming to work under the influence could cause serious accidents, injury and even death to themselves or others. One thing is certain—all employers must reconsider their drug and alcohol testing policies to account for the legalization of recreational marijuana and cannabis products.

August 24, 2023

Legislative and Judicial Updates

Navigating the Legalization of Marijuana: Updating Drug and Alcohol Policies – Part Two

Last week, we posted a blog addressing how the recent legalization of recreational cannabis in Minnesota may affect employee drug-testing policies. We now direct our attention to employers with questions about their general drug and alcohol policies. Here are some things to consider when changing an existing drug and alcohol policy. Understanding the Law As discussed in the prior blog, the Minnesota Drug and Alcohol Testing in the Workplace Act (“the Act”) has always prohibited impairment in the workplace, and that has not changed. Under the new law, an employer is not required to permit or accommodate cannabis use, possession, impairment, sale, or transfer while an employee is working or while an employee is on the employer’s premises, or operating the employer’s vehicle, machinery, or equipment. Therefore, even though another Minnesota law, the Consumable Products Act (the “CPA”), prohibits an employer from restricting an employee’s lawful off-duty use of cannabis, nothing in the law requires employers to accommodate or permit an employee’s on-the-job possession or use. Review Your Drug and Alcohol Policy When looking to an existing drug and alcohol policy, employers should pay attention to ensure that the policy does not restrict an employee’s off-duty rights. For instance, we often see policies that broadly prohibit an employee’s use of “controlled substances” unless prescribed by a physician for treatment. Marijuana and cannabis products are no longer considered “controlled substances” as they were prior to August 1st of this year, so that prohibition is problematic under the law. In light of this definitional shift, and because pursuant to the CPA an employer may not discipline or discharge an employee because he or she engages in the lawful use of cannabis products off-premises during nonworking hours, employers should consider an impairment-based policy instead. By shifting the focus to what is prohibited while at work, the employer eliminates the risk of restricting what the employee is legally free to do during their off time. Train Supervisors Minnesota law continues to permit an employer to discipline, discharge or take other adverse personnel action against an employee for using, possessing, selling or being impaired while an employee is working, on the employer’s premises, or operating the employer’s vehicle machinery, or equipment. The Act allows an employer to take adverse action against an employee if, as the result of consuming cannabis, the employee “does not possess that clearness of intellect and control of self that the employee otherwise would have.” The person most likely to identify an employee who meets this standard is the employee’s supervisor. Employers should provide employers with training on the symptoms of impairment that can result from use of cannabis products so that supervisors can recognize an impaired employee. Supervisors should be made aware of their critical role in evaluating whether an employee is impaired as a result of using cannabis. Considerations for Job Applicants Employers should be mindful of how the legalization of cannabis alters the rights of not only existing employees but applicants as well. The CPA also protects an applicant’s use of lawful consumable products off the employer’s premises during nonworking hours. Therefore, regardless of whether an employer actually conducts pre-employment testing, the law now makes it unlawful to withdraw an offer of employment based on the candidate’s off-duty, off-premises use of marijuana and cannabis products. Conclusion With the passage of Minnesota’s recreational cannabis law, employers will need to revisit their drug and alcohol policies, as well as any hiring policies and practices affected by the law, to ensure they are legally compliant. Employers need to work with supervisors to assist in recognizing an employee who, as the result of consuming cannabis products, does not possess the clearness of intellect and control that the employee usually has. Employers who have questions about any of this new legislation should contact a Larkin Hoffman attorney.

August 24, 2023

Construction

Project Labor Agreements are Now Required for Large Federal Construction Projects

Last week, I wrote a blog post predicting that President Biden may be requiring project labor agreements (PLAs) on projects funded by the Infrastructure Investment and Jobs Acts, effective November 15, 2021 (link here). That prediction has now become reality. On Friday, February 4, 2022, President Joe Biden signed Executive Order 14063 (EO 14063). EO 14063 requires PLAs on federal large-scale construction projects. A “large-scale construction project” means a federal construction project for which the total estimated cost of the construction contract is $35 million or more. Federal agencies, awarding any contract in connection with a large-scale construction project, must require every contractor or subcontractor engaged in construction on the project to agree, to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations. Any project labor agreement reached pursuant to EO 14063 must: Bind all contractors and subcontractors on the construction project through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents; Allow all contractors and subcontractors on the construction project to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements; Contain guarantees against strikes, lockouts and similar job disruptions; Set forth effective, prompt and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement; Provide other mechanisms for labor management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety and health; and Fully conform to all statutes, regulations, Executive Orders and Presidential Memoranda. EO 14063 contains some exceptions to the PLA requirement. A senior official within an agency can grant an exception by providing a specific written explanation of why as least one of the circumstances described in EO 14063 exist: Requiring a PLA would not advance the federal government’s interests in achieving economy and efficiency in federal procurement. Such a finding must be based on the following factors: The project is of short duration and lacks operational complexity; The project will involve only one craft or trade; The project will involve specialized construction work that is available from only a limited number of contractors or subcontractors; The agency’s need for the project is of such an unusual and compelling urgency that a PLA would be impracticable; or The project implicates other similar factors deemed appropriate in regulations or guidance which may be issued pursuant to EO 14063. Based on inclusive market analysis, requiring a PLA on the project would substantially reduce the number of potential bidders so as to frustrate full and open competition. Requiring a PLA on a project would otherwise be inconsistent with statutes, regulations, Executive Orders, or Presidential Memoranda. President Biden stated that nothing in the Executive Order prohibits an agency from voluntarily requiring a PLA even though they are not required to do so by EO 14063. EO 14063 is effective immediately and will apply to all solicitations for contracts issued on or after regulations are issued by the Federal Acquisition Regulatory Council (FAR Council). The Order states that the FAR Council must propose implementation regulations within 120 days of, February 4, 2022. Both union and non-union contractors should be alert to this significant new requirement for large-scale federal construction projects. Union contractors should be aware that a PLA could apply certain working conditions to the project which are not contained in the contractor’s existing collective bargaining agreement(s). EO 14063 is a dramatic shift from the Executive Order President George H.W. Bush issued in 1992, which was rescinded by President Bill Clinton in 1993, and the Executive Order President George W. Bush signed in 2001, which was rescinded by President Barack Obama in 2009, both prohibiting the use of PLAs for federal construction projects. Please see Phyllis Karasov’s explanation of what a PLA is here.

February 8, 2022

Legislative and Judicial Updates

Larkin Hoffman’s Government Relations Team Releases Guide to Federal Funding for Nonprofits and Government Entities

The United States House of Representatives announced a new era for congressional influence over how the federal government spends some of the $1.4 trillion in discretionary spending approved every year. As of today, the Senate has not yet announced its plan but both chambers are in negotiations to implement this in a transparent and responsible way. The House plan calls for resurrecting earmarks in the form of “Community Project Funding.” Earmarks are targeted spending projects that individual lawmakers can insert into large spending bills without a direct vote to deliver something to the lawmaker’s home district. The idea is that the members have first-hand knowledge of their community needs and can work to directly help organizations deliver those services. Lawmakers can only submit earmarks to eligible nonprofit organizations. Nonprofits with qualified programs need to act now to assist their representatives in Congress to get all materials submitted for funding of their high-priority projects, specifically projects that address core infrastructure and community service needs. Larkin Hoffman’s Government Relations team has put together a Guide to Federal Funding for Nonprofits and Government Entities to keep you updated on the status of congressionally directed spending and assist nonprofits and government entities in navigating important next steps. To view or download a copy of the guide, click here. Our team has also put together a podcast to help clarify who is eligible and what they need to do to qualify for funding. Listen to the podcast below: Larkin Hoffman’s Government Relations team is ready to assist those interested in preparing proposals for program funding and to guide the projects through the entire process at the Capitol. Please reach out to Megan Knight or any of our team members for more information.

March 19, 2021

Legislative and Judicial Updates

Hold on to Your Hats! What to Expect Under President Biden’s Administration in Labor and Employment Law

Change in the political party of an administration can be expected to impact the development and interpretation of federal law and regulation. This is particularly true in the transition between former President Trump’s administration and that of President Joseph R. Biden. President Biden has only been the President for two weeks, yet he has already made significant changes in the agencies that enforce federal labor and employment law. Below are some of the changes already made and what you can expect. National Labor Relations Board The National Labor Relations Board (NLRB) is a five-person board appointed by the President with Senate consent, for 5-year terms. At the present time, there are three Republican and one Democratic members of the NLRB. President Biden has appointed the sole Democratic member, Lauren McFerran, as chair. One position on the NLRB is vacant, and it is expected that President Biden will fill the fifth seat in the near future. In August and September, the terms of two of the Republican members will expire, and President Biden will undoubtedly replace them with his own appointees. Thus by September, the Democrats will have the majority on the NLRB. The General Counsel of the NLRB is responsible for determining what types of cases should be prosecuted by the regional offices. The General Counsel often issues memoranda directing regional offices to issue Complaints based on specific factual situations and theories. Often the General Counsel seeks cases to challenge existing precedents to secure changes in the law. Within hours of being sworn in as President, President Biden’s administration asked Peter Robb, the General Counsel under former President Trump, to resign from his position. The General Counsel is appointed for a four-year term and President Biden asked Peter Robb to resign his position approximately 10 months earlier than his four-year term would have expired. Previous Presidents have waited until the expiration of the General Counsel’s term before replacing them. When Peter Robb refused to resign, he was immediately terminated. The following day, the Biden administration terminated the Deputy General Counsel, Alice B. Stock, after she refused to resign. President Biden has appointed Peter Sung Ohr to serve as Acting General Counsel. Mr. Ohr is a career NLRB attorney, having begun his career with the NLRB in the Honolulu subregional office. It can be expected that once the majority of the NLRB is Democratic, combined with a new General Counsel, this newly comprised NLRB will be issuing decisions and promulgating rules which expand employee and labor union rights. Department of Labor (DOL) President Biden has appointed Marty Walsh as his Secretary of Labor. Mr. Walsh served as the president of Laborers Union Local 223 and was publicly endorsed by AFL-CIO President Richard Trumka. Employers should expect that because of Mr. Walsh’s priorities, the DOL will be issuing rules focused on promoting and protecting the interests of labor unions and employees, and restoring many of the gains realized by labor unions and employees under President Obama. It can be expected that some of the initiatives issued by the Department of Labor under former President Trump will be rescinded. For example, on January 6, 2021 the U.S. Department of Labor announced its Final Rule to provide guidance on the classification of a worker as an independent contractor under the Fair Labor Standards Act. The Final Rule is slated to take effect on March 8, 2021. The Final Rule makes it easier to prove an individual is an independent contractor rather than an employee. President Biden has indicated he will halt or delay all regulations which the Trump administration issued immediately prior to President Biden’s inauguration, including the independent contractor rule. Office of Federal Contracts Compliance Policy (OFCCP) On September 22, 2020, President Trump issued Executive Order 13950, which instructed government contracting agencies to add clauses to government contracts prohibiting the use of workplace training which includes any form of race or sex stereotyping. President Trump’s Order prohibited federal contractors and subcontractors from providing certain workplace diversity training and programs, such as implicit bias training. On January 20, 2021, President Biden issued Executive Order 13985, titled “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” Among other things, Executive Order 13985 revoked the Trump administration’s Executive Order 13950. As part of the withdrawal of President Trump’s Executive Order 13950, the telephone hotline and email address that was established to collect complaints about contractors’ alleged non-compliance with Executive Order 13950 has been shut down and all complaints of alleged non-compliance received through the hotline or any other means have been administratively closed. Occupational Safety and Health Administration (OSHA) On January 21, 2021, President Biden issued an Executive Order on Protecting Worker Health and Safety which directs the Department of Labor to issue revised guidance for employers within two weeks. The Executive Order also recommends that OSHA consider issuing emergency temporary standards for businesses to follow during the pandemic. The Executive Order instructed OSHA to examine mask-wearing requirements to offer additional resources to help employers protect their employees and to partner with state and local governments. On January 29, OSHA issued new guidance, entitled “Protecting Workers: Guidance on Mitigating and Preventing the Spread of COVID-19 in the Workplace“. OSHA states this guidance is intended to inform employers and workers in most workplace settings outside of healthcare to identify and address risks of exposure to COVID-19. OSHA had come under criticism under the Trump administration for failing to issue any new standards or regulations regarding COVID and directing businesses how to protect employees from the spread of COVID in the workplace. In addition, President Biden appointed James Frederick, a United Steelworkers Union official, to a top OSHA position. It can be expected that under Mr. Frederick’s leadership, OSHA will be issuing more worker-friendly regulations and enforcement than previously. Federal Worker Protections President Trump issued several Executive Orders which limited the right of federal workers to collectively bargain, set time limits on negotiating collective bargaining agreements with federal labor unions, and removed civil service protection for certain federal employees. President Biden has revoked all of these restrictions, signaling his approach on employee rights and labor union protections. Conclusion New Executive Orders and federal agency appointments all point to the likelihood that we will see more worker-friendly and union supportive regulations and interpretations of existing law. Under President Trump, many of the priorities of President Obama were weakened or reversed and we are now seeing a reversal of this reversal of priorities. Employers should assume that federal labor and employment agencies will be issuing new regulations and rolling back agency directives and rules which leaned employer-friendly. Hold on to your hats!

February 5, 2021

Legislative and Judicial Updates

Did You Know There Is a New Independent Contractor Ordinance in the City of Minneapolis Effective January 1?

The City of Minneapolis determined that many freelance workers (independent contractors) need legal and economic protections since they are not covered by employment laws. The City, therefore, enacted the Minneapolis Freelance Worker Protections Ordinance (the “Ordinance”). This Ordinance, effective January 1, 2021, requires companies to enter into written agreements with most freelance workers. The Ordinance contains provisions applicable to a commercial hiring party, and other requirements applicable to an individual hiring party. Commercial Hiring Party A commercial hiring party means any person or entity regularly engaged in business or commercial activity, including a digital network-based entity, who retains a freelance worker to provide any service as part of that business or commercial activity. A commercial hiring party that retains freelance workers to perform work in the City of Minneapolis must have a written contract with each worker if the worker will perform a minimum of: $600 worth of work within a one year period; or $200 of work within one week. The Ordinance applies to a commercial hiring party that retains a freelance worker not only when the worker provides services directly to that company. It also applies to a freelance worker who provides services through a digital network to a third party. “Retains” means to enter into a contract through which the freelance worker provides services either to the hiring party or to a third party (such as a digital platform). For example, if food is delivered in the City of Minneapolis via a digital network, the digital network must have a written agreement with the driver. The written agreement must be signed by the freelance worker and contain the following minimum elements: The name and address of the hiring party and the worker; An itemization of all material services to be provided by the worker; The compensation for the services, including the rate or rates and method of compensation; and The date on which the hiring party must pay the agreed-upon compensation or the mechanism by which the date will be determined. Where the parties are not able to specify the total compensation prior to performance, the written contract must describe the method by which the total compensation will be determined and identify which party is responsible for maintaining the information necessary to determine the compensation (such as tracking the number of hours worked, the applicable project or other method by which the freelance worker is paid). If the commercial hiring party is responsible for tracking the information necessary to determine the compensation, the commercial hiring party must provide the freelance worker with an earnings statement setting forth the total compensation being paid and a detailed calculation by which the amount was determined. When the independent contractor/freelance worker is responsible for keeping track of this information, they must provide the commercial hiring party with an invoice stating the total compensation amount and a detailed calculation by which the amount was determined. If the contract does not specify the date or mechanism for when payment becomes due, payment must be made no later than 30 days after the completion of services. Individual Hiring Party Individual hiring party means any person who retains a freelance worker to provide any service in the City of Minneapolis when the person is acting in a personal capacity and not as part of or on behalf of a business or commercial activity. These provisions could apply to painters, handymen, cleaning persons, nannies, groundskeepers, and other freelancers who perform services for an individual. The Ordinance applies if the compensation is $600 or more, either by itself or when aggregated with all contracts for services between the same individual hiring party and freelance worker during the calendar year, for work performed in the City of Minneapolis. Individual hiring parties and freelance workers performing services in the City of Minneapolis are required to have a written contract only if the freelance worker requests a written contract. The freelance worker must present a proposed written contract to the individual hiring party before the work begins. The written contract should include the same information described above for a commercial hiring party and both parties must sign the contract. The Ordinance does not obligate an individual hiring party to retain the services of a freelance worker who has proposed a written contract, nor does it require either party to enter into a contract if the parties are unable to agree upon the terms. Penalties The Minneapolis Department of Civil Rights investigates and enforces the Ordinance. It is a violation of the Ordinance for a hiring party to fail or refuse to pay the agreed-upon compensation or require the freelance worker to accept as a condition of timely payment less compensation after the work has commenced. If a hiring party is found to have violated the Ordinance, a freelance worker may be able to recover compensatory damages in the amount of the unpaid sum and liquidated damages up to double the compensatory damage award. There are also additional civil fines, fines for repeat violations and the City’s Department of Civil Rights can seek reimbursement for investigation costs. If a commercial hiring party fails to create a written contract, it is subject to a fine of up to $250 for each violation, if the freelance worker can establish they requested a written contract and made the hiring party aware of the requirement that the contract be in writing. A freelance worker who passes only incidentally through the City in the performance of the contract is not covered by this Ordinance. No Effect on Contract Validity The Ordinance provides that it is a defense to any alleged violation under the Ordinance that the freelance worker has not completed the services contracted for, unless the failure to complete such services was caused by the hiring party’s failure to cooperate in good faith with the freelance worker. The hiring party cannot withhold timely payments for completed services because of a dispute over whether other services had been completed. The Ordinance makes clear that the existence of a written contract that complies with the Ordinance is not be construed as evidence that an individual is properly classified as an independent contractor. Recommendation Any commercial hiring party which uses an independent contractor to perform any services in the City of Minneapolis should review their written contract to ensure that it contains the above-described elements. If no contract exists, the company should immediately prepare such a contract. If you have any questions as to whether this Ordinance applies to a particular freelance worker or any other questions concerning the requirements of this new Ordinance, you can contact a Larkin Hoffman labor and employment law attorney.

February 1, 2021

Legislative and Judicial Updates

Conflicting Messages: An Executive Order vs. Affirmative Action

The EEOC has encouraged employers to voluntarily modify employment practices and systems which create barriers to equal employment opportunity, without waiting for litigation or formal government action. The EEOC has said that the principle of nondiscrimination in employment because of race, color, religion, sex or national origin and the principle that each employer should take voluntary action to correct the effects of past discrimination and to prevent present and future discrimination are mutually consistent and interdependent methods of addressing social and economic conditions which were the reasons why Title VII was originally enacted. EEOC regulations enacted in 2012 stated that “… persons subject to Title VII must be allowed flexibility in modifying employment systems and practices to comport with the purposes of Title VII. Correspondingly, Title VII must be construed to permit such voluntary action, and those taking such action should be afforded the protections against Title VII liability which the [EEOC] is authorized to provide…” Employers, in carrying out their commitments not to discriminate on the basis of race, color, religion, sex or national origin often provide training to employees and supervisors and hold supervisors and managers accountable for complying with EEO policies. If the employer has an affirmative action plan, training is an important component of the plan to further ensure that those persons responsible for hiring, promoting and disciplining employees are aware of the employer’s commitment to create increased job opportunities for minorities and women. Since September 24, 1965, the federal government has required that federal contractors adopt non-discriminatory practices in hiring and employment and affirmative action plans. If a company wants to do business with the federal government, they must have an affirmative action plan. Many federal contractors offer training as part of their commitment to non-discrimination and affirmative action. On September 22, 2020, President Trump issued an Executive Order that has thrown a monkey wrench into the training programs federal contractors implement to advance non-discrimination and affirmative action. Executive Order 13950 bars federal contractors from conducting “divisive” racial sensitivity training. The Executive Order states that many people are “pushing” an ideology that is rooted in the “pernicious and false belief that America is an irredeemably racist and sexist country.” The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued guidance on Wednesday, October 7, 2020, to clarify President Trump’s September 22 Executive Order. The guidance states that unconscious or implicit bias training is prohibited to the extent it teaches or implies that an individual, by virtue of his or her race, sex, and/or national origin, is racist, sexist, oppressive, or biased, whether consciously or unconsciously. The guidance also states that training is not prohibited if it is designed to inform workers, or foster discussion, about pre-conceptions, opinions, or stereotypes that people – regardless of their race or sex – may have regarding people who are different, which could influence a worker’s conduct or speech and be perceived by others as offensive. President Trump’s Executive Order makes training based on implicit bias illegal – federal contractors must immediately cease training which is deemed to be divisive racial sensitivity training. Labor Secretary Eugene Scalia stated that “particular types of training…that are highly offensive, such as seminars where people are told that they are racist because, for example, they are White, or that people being color blind should regard one another as equal is wrong and offensive.” The OFCCP has created a hotline for complaints about training. Companies that offer training which is inconsistent with the Executive Order can have their federal contracts canceled, terminated or suspended, in whole or in part. Examples of workplace training explained in the guidance that are off-limits include a Treasury Department seminar encouraging employees to avoid color blind narratives, as well as materials from the Argonne National Laboratories discussing systemic racism. As part of the government’s effort to end training now deemed to be unlawful, the OFCCP issued a Request for Information on October 21st asking for comments, information and materials from the public relating to workplace trainings that involve race or sex-stereotyping or scapegoating. The Request for Information is directed to contractors and their employees, and asks for copies of any “training, workshop, or similar programming having to do with diversity and inclusion as well as information about the duration, frequency and expense of such activities.” Confusion and Uncertainty Executive Order 13950 has created great confusion among employers as to what types of training are and are not permissible. The description of what training is acceptable vs. what training is unlawful is blurry at best. Although many employers are not federal contractors, we can expect that the principles described in the Executive Order will trickle down to non-federal contractors and employers will begin to modify their messaging and training regarding systemic racism. The U.S. Chamber of Commerce has indicated that they have heard from many companies who are suspending all diversity and inclusion training. It can be expected that since the OFCCP is asking employees to report to the OFCCP about training which the employees deem to be inappropriate, many employers are going to be reluctant to offer any training at all. To add to the confusion, the U.S. Department of Labor’s OFCCP has started at least two investigations of major American companies to determine whether there is a violation of previous executive orders. In early October, the OFCCP opened a probe into whether Wells Fargo’s plan to double its Black leadership conflicts with the bank’s anti-discrimination obligations. Wells Fargo’s CEO, Charlie Sharf announced in June that Wells Fargo intended to increase diversity in the top ranks. The OFCCP has stated that this objective “appear[s] to imply that employment action is being taken based on race.” Interestingly, Wells Fargo recently settled an OFCCP claim of hiring discrimination in 34,000 instances and agreed to pay $7.8 million to resolve these allegations. In that case, the OFCCP found that there were significant disparities against Black applicants in the company’s hiring process. As part of the settlement, Wells Fargo is to track the race of applicants and the race of those employees hired to help to monitor racial discrimination. One would think that the goal to double the number of minorities in leadership would be consistent with the settlement of the claim of past hiring bias but apparently, it is not. A similar investigation is also ongoing at Microsoft, which announced a goal of doubling its Black leadership. It is unknown how many other companies have received similar letters from the OFCCP. Many major employers have made public statements in light of the George Floyd protests pledging to increase diversity and inclusion initiatives. Our government is sending out mixed messages concerning the goal of increasing diversity in America’s workforce and designing a more inclusive work environment. While many employers are attempting to create systems to enhance and encourage the hiring and promotion of minorities and women, the government seems to be pushing back these efforts. Affirmative action, diversity and inclusion cannot be accomplished without the training of employees and supervisors. Employees need to understand that racism and sex discrimination can be systemic and can occur without specific individual intent. The government has indicated that, at least for federal contractors, efforts to educate employees on systemic racism is illegal. Without education, there will be more challenges in achieving diversity and inclusion in corporate America. Meanwhile, federal contractors must immediately review their training programs and determine if their training programs are inconsistent with Executive Order 13950. Federal contractors must evaluate how much legal risk they are willing to accept by announcing goals and objectives in increasing diversity and addressing race-based discrimination in their company.

October 23, 2020

Construction

Diversity Training Now a Construction Conundrum

The construction world is changing rapidly like everything else. Tech is making its way ever deeper into the construction industry. The shortage of labor has become chronic since the Great Recession. Covid-19 has only made that problem worse. At the same time, the pool of potential new hires is inexorably growing more diverse. Diversity is a buzzword in business generally, but the realities of the construction industry need to give it real life. Contractors need to find ways to recruit and retain from non-traditional communities. This is a challenge construction needs to meet in order to succeed. Those potential hires also bring an expectation of a more inclusive and creative work environment than construction has traditionally offered. Larger companies may hire trainers to talk about diversity and placement firms to search for hires, but much of the construction world really happens in smaller subcontractors that need to hire from the same diversifying pool. Hence the industry’s “diversity necessity.” How does a subcontractor or even a general contractor reshape itself to find and keep the talent it needs? The future construction industry workforce will need a broad range of tech skills in addition to strong backs. As general contractors increasingly push more technical and management responsibilities down to subcontractors, even smaller firms will need to be able to understand and use document management systems, CRM systems and building information modeling (BIM) among others. In recognition, construction can begin to look more and more like a real career path for young tech-oriented candidates. Construction needs to “re-brand” itself to overcome old workplace culture tropes. Companies are already mandated to not discriminate, but it takes much more than that to make a company truly inclusive and welcoming to a diverse and inclusive workforce. It will require active outreach and educating the existing workforce in the new more inclusive reality. The Associated General Contractors is launching its new Culture of CARE program to help member firms develop their workplace environments to attract, nurture and retain the workforce of the future. Others in the industry should take note. While all of this may seem obvious and necessary for survival, there are other crosswinds blowing. The economic impacts of Covid-19 are still playing out. The turbulent political environment may also create headwinds. Recent Executive Orders have put into question the kinds of diversity and inclusion training sessions in use at the federal level. The stated purpose of the Orders is to combat what is described as destructive pernicious and false ideologies. There are to be punishments for failure to implement the review and end offending trainings. The Executive Orders take aim most directly at federal agencies which are acting to curtail their equal employment, anti-harassment, anti-discrimination, and diversity and inclusion training at the very time when they may be most needed. The guidance on what training is acceptable is still developing as is the story of the future enforcement of these Orders. The contractors involved in federal work need to take note and watch how this develops. The Orders as written appear to cover most federal contractors who do over $10,000 in Government business in one year. Those federal contractors may be required to certify that they have complied. If the Orders remain in force they will inevitably ripple down to subcontractors and suppliers who may, themselves, be called upon to certify. One could foresee an adverse impact on workplace culture. Contractors in the federal sphere should consult counsel for guidance. Those outside of federal contracting should probably stay the course for now with their diversity and inclusion training to grow their future workforce. Navigating this environment in our turbulent times remains challenging but the future likely depends on it.

October 16, 2020

Legislative and Judicial Updates

Who’s Paying the Price for Gov. Walz’s Eviction Moratorium?

We are nearly 9 months into the so-called COVID-19 global pandemic. While not without historical precedent, COVID-19 has wreaked havoc on the physical and economic health of millions both within the United States and around the world. In Minnesota and across the country, governors and their public health departments have exercised “peacetime” emergency powers designed both to limit the spread of the virus but also to minimize its adverse impacts, both physical and financial, to the broader population. The success of these measures has been mixed. While much is being written and debated regarding the merits of social distancing, including masking policies, as a means of protecting public health, less is being written and debated regarding the direct economic effects of some of these policies, which in any other context, would spawn enough litigation to swamp state and federal courthouses in all 50 states. In Minnesota, there have been few such challenges to the emergency powers exercised by Gov. Tim Walz. These challenges have targeted public health decrees relating to social distancing, including mandatory stay-at-home and business closure orders. The author is not aware of any such challenge finding success in a courtroom, probably due to the underlying legal authority granted to state leaders, but also the perceived public health benefit of these orders. Certainly stay-at-home orders, including business closure orders, have imposed massive economic hardship, but their public health premise has thus far shielded Gov. Walz and other national leaders from successful legal challenges. Less discussed are those policies that actually impose a government-sanctioned cost on businesses and individuals with no direct public health connection, akin to a government taking of property with no due process or compensation for the loss. The clearest example is the COVID-related policy that blocks landlords from evicting or non-renewal of a lease of a residential tenant for non-payment of rent. In Minnesota, Gov. Walz imposed a restriction on tenant evictions almost immediately, along with other prescriptive measures. The prohibition on evictions or lease terminations is nearly universal in scope, allowing evictions or lease terminations only when there is clear evidence of criminal activity occurring in the leasehold premises that endangers the safety of others, such as threats of violence or illegal drug use. But for this limited exception, landlords have no remedy for a tenant’s failure to pay rent, whether willful or otherwise. The actual economic plight of the tenant, if any, is irrelevant. What’s ironic is that thousands of tenants facing sudden unemployment have benefitted from state and federal cash grants to supplement traditional unemployment benefits. Not only have such policies not been tied to meeting existing lease obligations, they have actually led business owners to complain that they can’t attract workers back to their jobs. Yes, under the emergency orders the tenant has a continuing legal obligation to pay rent when due, but a tenant needs no excuse, no permission, no reason at all, to withhold payment of rent. Meanwhile landlords, including thousands of small property owners, are forced to eat the cost of this policy, hoping to be made whole some other day, if they are not first foreclosed upon by an unforgiving lender. Someday the moratorium on tenant evictions will be lifted and a flood of eviction proceedings will commence in district court across Minnesota and across the country, searching for the attention of a backlogged court system. Yet the high cost of seeking a court remedy paired with a low likelihood of actually collecting past-due rent means that in the end, landlords will solely bear the financial cost of this COVID-19 policy notwithstanding the undisputed government-sanctioned “taking” being imposed on private property owners

August 28, 2020

Legislative and Judicial Updates

New Developments in the Families First Coronavirus Response Act

Employers in real estate and construction with fewer than 500 employees are required to provide leave to employees who are unable to work because of the pandemic under the Families First Coronavirus Response Act (FFCRA). The U.S. Department of Labor (DOL) issued a Final Rule effective April 6, 2020 expanding on the requirements of the FFCRA that would go into effect. Following the publication of the Final Rule, the State of New York sued the DOL in federal district court arguing that several features of the Final Rule exceeded the agency’s authority under the statute. The U.S. District Court for the Southern District of New York, issued an order on August 3, vacating certain provisions of the Final Rule. The open question as a result of the decision is whether it applies only in the state of New York or if it applies nationwide In light of the court’s decision, employers should consider modifications to their leave policy with regard to the following: Is an employee eligible for FFCRA leave if the employer doesn’t have work available? The Final Rule excludes employees from FFCRA leave if their employers do not have work for them. The Court decided that requiring that work be available for an employee in order to take leave is inconsistent with the FFCRA. If this ruling is recognized nationwide, employees who are on a temporary layoff (furlough) or other leave of absence will be eligible for FFCRA leave, even if the employer doesn’t have work for them. Do employees need an employer’s consent for intermittent leave? The Final Rule permits “employees to take Paid Sick Leave or Expanded Family and Medical Leave intermittently only if [both] the Employer and employee agree,” but the court determined that to the extent an employee can telework, they may be able to take leave intermittently for illness-related reasons, since there is no public health risk of exposure to others in the workplace. Further, if the reason for the leave is to care for a child whose school or place of care is closed due to COVID-19, the employee can take leave intermittently without the employer’s consent. We recommend that employers consider allowing intermittent leave to employees for reasons that would not cause the spread of infection in the workplace. Can an employer require documentation before leave? The Final Rule requires that employees submit to their employer “priorto taking FFCRA leave” certain documentation indicating “their reason for the leave, the duration of the requested leave, and when relevant the authority for the isolation or quarantine order qualifying them for leave.” However, the FFCRA’s language does not suggest such a requirement. The Court found that the Final Rule’s documentation requirement is unsupported by the statute and struck it down. In light of this decision, we recommend employers consider revising policy to allow employees to submit documentation for a leave after they go on the leave rather than requiring that it be submitted prior to the leave. The Court did not specifically indicate that its order to vacate the portions of the Final Rule discussed above applies nationwide or if it is limited to New York. The DOL could voluntarily revise the Final Rule to address the issues raised by the court, appeal the decision to the U.S. Court of Appeals, or decide to announce the agency does not agree with the court’s ruling and refuse to follow it outside of New York. Until the DOL decides how to proceed, employers are left with the potential of being in violation of the FFCRA if they do not make the above-described changes to their implementation of the FFCRA. Therefore, until there is further clarification on the significance of the New York court decision, we recommend employers consider modifying their FFCRA leave policy in light of these developments and continue to monitor DOL announcements. If you have any questions regarding the above recommendations; or other employment-related issues, please reach out to Phyllis Karasov, pkarasov@larkinhoffman.com.

August 13, 2020

Legislative and Judicial Updates

Still No Deal after Second Special Session; Legislature Looks Towards August Primary

This week Margaret Vesel and Matthew Bergeron recap the Minnesota legislature‘s second special session and the ongoing negotiations over a capital investment bill, a tax bill, and a supplemental appropriations package. They also turn their attention towards the August 11 primary election and discuss a number of key races to watch. Our Team The Larkin Hoffman Government Relations team is engaged daily with key state government decision-makers to gain assistance and remove barriers critical to our clients’ ongoing operations, and perhaps even their survival. We are available to assist you on issues ranging from influencing the governor’s Executive Orders to requesting waivers from state government requirements to revising legislative proposals that will become law.

August 3, 2020

Legislative and Judicial Updates

A Summer of Special Sessions: Is July’s Special Session the Last Chance for a Deal on Bonding, COVID-19 Relief & Police Reform?

Margaret Vesel and Matthew Bergeron recap the Minnesota Legislature’s week-long June special session and preview the special session beginning on July 13, 2020. They discuss the ongoing negotiations over law enforcement reform, capital investment, and bonding and examine how the seemingly unrelated issues are interconnected when it comes to finding a “comprehensive deal”. Our Team The Larkin Hoffman Government Relations team is engaged daily with key state government decision-makers to gain assistance and remove barriers critical to our clients’ ongoing operations, and perhaps even their survival. We are available to assist you on issues ranging from influencing the governor’s Executive Orders to requesting waivers from state government requirements to revising legislative proposals that will become law.

July 10, 2020

Construction

Preparedness Plan Requirements Guidance for Construction Revised with Little Real Change

This post is co-written by Phyllis Karasov and Mike Schechter. On Wednesday, June 24, we wrote an article on the Minnesota Department of Labor and Industry’s guidance that requires a preparedness plan for the construction industry. The guidance was confusing and placed onerous responsibilities on contractors, owners and public entities, including ensuring that plans among owners, generals, subcontractors, and others align. AGC of Minnesota and Housing First Minnesota have been advocating for meaningful clarification and change in the guidance on behalf of the construction industry. DLI updated its guidance on Thursday, June 25th. The effective date of Monday, June 29 has not changed. Given the ongoing vagaries, late and continued updates, challenges to comply, and general confusion, AGC is working to delay this effective date to permit better dialogue with DLI, hopefully more workable guidance and communicate the guidance with the industry. As it stands now, the updated guidance does little to address the construction industry’s concerns. The guidance lists most of its protocols as “required” with a few protocols described as “recommended.” Many additional mandates have been added. The latest updated guidance also loosens the general contractor’s responsibility for compliance by subcontractors and others on the job site, although the general contractor is still responsible for ensuring that businesses performing work activities at the worksite have COVID-19 preparedness plans that meet the requirements of the guidance. General contractors must also ensure diligent investigations are conducted at the worksite to evaluate and assess instances of exposure, whether actual or potential, involving workers who have COVID-19 or there is reason to believe may be COVID-19 positive. We recommend that construction contractors contact OSHA Consultation with their concerns and questions to elevate the significance of the challenges these requirements pose. OSHA Workplace Safety Consultation can be reached at OSHA.consultation@state.mn.us . You can also contact Phyllis Karasov with questions or for assistance with the drafting of a Preparedness Plan. About the Authors Phyllis Karasov, Larkin Hoffman Phyllis Karasov is chair of the Larkin Hoffman labor and employment law practice group and advises businesses on labor and employment matters. Her clients come from a variety of sectors, including construction, manufacturing, higher education, K-12 private education, nonprofit and healthcare. She provides counsel in all areas of human resources, including hiring, handbooks, regulatory compliance, discrimination, sexual harassment, discipline and termination, Americans with Disabilities Act, OSHA rules and the Family and Medical Leave Act. As a former National Labor Relations Board attorney, Phyllis is often called upon to represent clients in labor union matters including arbitrations, collective bargaining agreements and union contracts. Phyllis is also on the Board of Directors for the Associated General Contractors of Minnesota. Mike Schechter, Associated General Contractors of Minnesota Mike Schechter is the General Counsel and Director of Labor Relations for the Associated General Contractors of Minnesota. AGC serves the construction industry to improve construction conditions, create jobs, promote safety, and benefit the communities. It works with government, unions, community groups, and related businesses and associations. You can learn more about Mike at https://www.linkedin.com/in/mikeschechter.

June 26, 2020

Construction

How Far Can the Governor Go On His Own? Part 2

Recently I commented on a growing level of concern regarding Gov. Tim Walz’s use of his statutory public safety “emergency” authority to promulgate wide-ranging and consequential executive orders affecting the state’s economy and citizens. While many groups, including health care and service organizations, were required to suspend their operations for at least two months, the construction industry was deemed “essential” and, thus, allowed to continue normal operations, albeit subject to COVID-related “best practices”. The good news is that the construction industry has been able to maintain its operational capacity notwithstanding a general pause in business and commercial spending. The better news is that the construction industry seemingly has done so with very limited COVID-related infections. You would think that would count for something? You would be wrong. With this backdrop, it was a surprise to see the new “guidance” with Executive Order 20-74 released by the state’s Department of Labor and Industry (“DLI”) which imposes significant new mandatory requirements on the construction industry. This guidance, which has the force of law, comes with limited input from the construction industry itself. To the extent it did consult, it chose not to listen to the concerns raised by construction industry representatives about the scope of DLI’s new policies. These new policies “mandate” site-specific safety plans for all participants in the construction industry, whether they are general contractors, sub-contractors, suppliers, service consultants or owners. On the surface, the notion that this industry should have credible COVID safety plans in place makes sense—which have been required since March 2020. But DLI’s new mandatory policies turn common sense on its head by mandating an overly bureaucratic safety program for the construction industry that will be expensive, prone to errors and likely will not measurably affect safety. Construction is unique in that the “job site” can change by the day, week or hour. Sub-contractors and their workers come and go with no pre-determined schedule. Combine that with the task of managing many, perhaps dozens, of active job sites, and one begins to understand the record-keeping and compliance challenge posed by the new DLI directive. Why do this? And why do this now? Who knows? Certainly, nobody within DLI or other state agencies have identified a problem they are seeking to solve. It’s as though we’ve arrived at a spot in managing COVID risks in which someone’s random idea of public safety can be now be implemented simply at the stroke of a pen, with virtually no public input and dubious public policy justification, consequences be damned. As a reminder, the governor’s authority to promulgate “emergency” Executive Orders is essentially a policy-mandating blank check. It’s application in the modern era is without precedent and is virtually unchecked. State legislators and the electorate will (hopefully) learn a lot from the COVID-related experiences; much of it undoubtedly beneficial, but plenty to raise legitimate cause for concern. We do want state leaders to have the authority to respond to bona fide public safety emergencies, and Gov. Walz and his administration have done that. But about a month ago, they passed the threshold of true COVID crisis management and have missed the opportunity to bring the rest of the state along with their long term response to COVID. It’s not too late. Executive Order 20-74: Continuing to Safely Reopen Minnesota’s Economy and Ensure Safe NonWork Activities during the COVID-19 Peacetime Emergency Order Preparedness Plan Requirements Guidance –Construction

June 23, 2020

Legislative and Judicial Updates

How Far Can the Governor Go On His Own?

Minnesota businesses and citizens have been operating under a Peacetime Declaration of Emergency, Executive Order 20-01, since March 16, 2020. The impetus for the Declaration was the rapidly-emerging Coronavirus as a global health crisis with far-reaching implications. Since the original Declaration, the governor has issued 75 Executive Orders addressing various COVID-related topics from health care to real estate to construction to education. He also has acted several times to extend the timeline under which his Peacetime Declaration remains in effect; the most recent Order extends the emergency powers until July 13, until the Executive Order is rescinded by proper authority, or until it is terminated by a 2 majority vote of each house of the Legislature pursuant to Minnesota Statutes 2019, section 12.31, subdivision 2(b), whichever occurs earlier. The Executive Orders have legal effect; many Minnesotans have been cited for violating them, including the owner of a saloon in central Minnesota who dared to challenge the restrictions on his business. For the most part Minnesotans have accepted the governor’s Orders as a necessary component of preserving public health and safety. However, over the past 30-45 days a growing number of people are questioning how far the governor can go in implementing new Executive Orders, which have the effect of a duly promulgated law, albeit a law that was not created by the Minnesota Legislature nor even one resulting from normal public rulemaking. Here’s the thing: the Minnesota Constitution vests the authority to promulgate new laws solely in the legislature, subject to a possible veto by the governor if he disagrees with what has been passed. In addition, the governor, through his executive branch agencies, has the authority to promulgate rules to implement existing statutory authority, but those rules must go through a public review process and are subject to court review, all of which takes time. The authority exercised by Governor Walz has, thus far, superseded all traditional checks and balances imposed by the Constitution. A growing number of legislators are objecting to this usurpation of authority by the governor but, thus far, have not been able to muster sufficient bipartisan support to rein in his actions. Furthermore, no Minnesota court has yet issued a ruling enjoining Governor Walz from acting unilaterally under the Peacetime Declaration. This is likely due, at least in part, to the structure of the law which authorizes the governor’s actions, but also the unease that would attach to any court order that could unintentionally contribute to the spread of the virus.

June 19, 2020

Legislative and Judicial Updates

Larkin Hoffman’s Government Relations Team Launches Podcast Series

Introducing our new CapWatch podcast series which is an extension of the Larkin Hoffman Podcast Briefing series. In this series, we discuss the end of Minnesota’s 2020 legislative session and the special session in June. The CapWatch podcasts cover the political dynamics at the Minnesota Capitol and give an overview of the policy and spending issues being discussed by Minnesota lawmakers. In our most recent podcast, Minnesota’s Special Session Begins Without an End in Sight,we discuss the start of the Minnesota Legislature’s unique special session, including legislative votes to end Gov. Walz’s COVID-19 peacetime emergency and the myriad of policy and spending issues to be addressed in the coming weeks. This post will be updated throughout the special session with news and future podcasts.

June 19, 2020

Legislative and Judicial Updates

Minnesota Supreme Court Holds Minneapolis Paid Sick and Safe Time Ordinance Applies to Employers Outside of Minneapolis

On June 10, 2020, the Minnesota Supreme Court issued a decision affirming the Court of Appeals and upholding the determination that the Minneapolis Paid Sick and Safe Time Ordinance (“Ordinance”) applies to employers outside of Minneapolis, finding that the Ordinance was not preempted by state law and did not violate the extraterritoriality doctrine. In 2016, the Minneapolis City Council passed the Sick and Safe Time Ordinance. The Ordinance allows employees who work in the geographic boundaries of the City of Minneapolis for at least 80 hours a year, to accrue one hour of sick and safe time for every 30 hours worked, up to a maximum of 48 hours in a calendar year. After its passing, a number of business entities lead by the Minnesota Chamber of Commerce sued the City of Minneapolis for a declaration that the Ordinance is invalid to the extent it purports to apply to employers with no offices or other physical location within the city limits. The district court upheld the validity of the Ordinance as it applied to employers within Minneapolis, but issued an injunction preventing the Ordinance from applying to employers outside of the city. For more details about the Ordinance and its procedural posture, please click here. In Minnesota Chamber of Commerce v. City of Minneapolis, the Minnesota Supreme Court first analyzed whether Minnesota state law preempted the Ordinance under two different theories: conflict preemption and field preemption. The Court found that the state law, Minn. Stat. § 181.9413, governing employer-provided sick and safe time, and the Minneapolis Ordinance did not present an irreconcilable conflict between each other. Therefore, the Ordinance was not preempted under the theory of conflict preemption. The Court further found that the subject matter of the Ordinance, employer-provided sick and safe time, has not been “so fully covered by state law as to have become solely a matter of state concern,” nor was there any legislative intent that the state law was meant to preempt local action by occupying the field of sick and safe time. Additionally, the Chamber could not show that the local regulation would have unreasonably adverse effects upon the general population of the state. Therefore, the Court found that the state law does not occupy the field of employer-provided sick and safe time. The Supreme Court then considered the extraterritoriality doctrine, for only the third time in its history. The majority stated that a court must look to the purpose and effect of the regulation when facing a challenge to a local ordinance based on the extraterritoriality doctrine. The court ultimately found that the Ordinance’s purpose was to safeguard the public health and welfare of all persons working in the city of Minneapolis, regardless if their employer is located outside the city, and to regulate activity within the geographic limits of the city. For the foregoing reasons, the court found that the Ordinance was a valid exercise of municipal authority and did not violate the extraterritoriality doctrine. Justice Anderson, joined by Chief Justice Gildea, wrote a dissent arguing that the Ordinance violated the extraterritoriality doctrine due to its reach beyond the borders of Minneapolis. “[T]he Ordinance applies to businesses outside of Minneapolis and requires those businesses to perform activities outside of Minneapolis, and both the City and the court concede as much.” Justice Anderson warned that the majority created a new test by looking to the primary purpose and effect of the Ordinance, rather than the statutory authority as established in prior case law. He stated that the court’s application of this new test is alarming and ignores the broader, state-wide effects of the Ordinance. To read the full decision, please click here. Any business with employees who work in Minneapolis, whether or not the business has offices within the city, should be aware of and comply with the Ordinance. Larkin Hoffman employment attorneys stand ready to assist businesses who are impacted by this ruling.

June 11, 2020

Legislative and Judicial Updates

How Does the Recent PPP Flexibility Act Affect You?

The Paycheck Protection Program Flexibility Act of 2020 was enacted on June 4th as a means of providing relief to PPP borrowers as to requirements that were considered to be onerous. The podcast will review the provisions of the Act and identify potential opportunities and pitfalls created by the Act. Just as PPP borrowers’ management of their employees and payrolls were heavily influenced by the loan-forgiveness provisions of the CARES Act, this new Act may cause borrowers to revisit these issues and projections of loan forgiveness and repayment. About the Larkin Hoffman Podcast Briefings The Larkin Hoffman Podcast Briefings series was developed to discuss issues affected by the COVID-19 crisis. Our attorneys address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation, and other matters in this series. Over the next few weeks, there will be several podcasts on developing matters. Larkin Hoffman is available to help. Please reach out for additional guidance.

June 5, 2020

Legislative and Judicial Updates

Favorable (along with some troubling) Updated Guidance from the SBA on the Forgiveness of PPP Loans

On May 18th, the SBA issued guidance on PPP loan forgiveness in the form of an application for such forgiveness. This podcast reviews and analyzes this guidance describing both opportunities and pitfalls. The SBA just released an application for loan forgiveness as the form of guidance on this area of issues. While some new issues were created, many areas of uncertainty have been clarified. Listen to the podcast here. About the Larkin Hoffman Podcast Briefings The Larkin Hoffman Podcast Briefings series was developed to discuss issues affected by the COVID-19 crisis. Our attorneys will address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation, and other matters in this series. Over the next few weeks, there will be several podcasts on developing matters. Larkin Hoffman is available to help. Please reach out for additional guidance.

May 21, 2020

Legislative and Judicial Updates

Shelter in Place: Take It or Leave It?

Minnesota, like many states across the country, is gradually trying to loosen the restrictions on its citizens so that we can try to return to some level of normalcy. Most recently, Gov. Tim Walz (D-MN) let his “shelter in place” executive order lapse. This means that a broad mix of businesses, non-profits and government agencies can attempt to resume normal operations. However, the governor has retained a prior order that will keep bars, restaurants, theaters, etc. and other similar uses closed for a few more weeks. For many, especially small business owners and their employees, re-opening means a chance to save their company or organization and/or get a paycheck to pay the rent and buy groceries. But what does the push to “re-open the economy” really mean? If you are in the construction business, your life, along with your employees, goes on pretty much as it has since the governor’s original shelter order went into effect at the end of March. The construction industry, including suppliers and service providers, was declared “essential” under the governor’s original order and, thus, allowed construction companies and their employees to continue their work. This was a big relief to the construction industry and, especially, the home construction industry given the acute and growing demand for housing of all types and price ranges. There may have been suppliers or service providers who were affected by closure orders in other states or countries which, in turn, affected the construction industry in Minnesota but these impacts were limited from we have seen and heard. But that isn’t the same as saying that the affected employees at these companies are universally happy to be at work given the real health risk that has influenced everyone’s thoughts and actions over the past two months. In fact, the real question is whether the general public will react to the removal of shelter orders with a shrug and essentially ignore it. After all, the coronavirus risk is still present, testing is not yet widely available, contact tracing is even less available and no vaccine is available for general inoculation. Just because it’s possible to walk into a store doesn’t mean the public will feel safe in doing so, especially given the ongoing safety practices being recommended for businesses and organizations of all types. In the face of this fact, a larger percentage of public and private organizations will have a very hard time convincing a skeptical public, whether employees, consultants, customers or world travelers, that it is safe to venture out and reengage the world. After all, who wants to venture out to a restaurant to be served by a waiter wearing a mask keeping his or her “social” distance from you? Plus, only a quarter to half of the available seating can be occupied (and for now likely will have to be outside the building, which is fine for a summer day, but not fine in December or in a rain storm). For homebuyers, the opportunity to tour homes personally vs online will be challenging as both the potential buyer and the seller will be leery about exposing each other, respectively to a risk of infection. At a minimum, those assisting with the sale of a home will need to take care that all surfaces likely to have been touched during a tour are sanitized—not good. We all want to resume our lives in the most normal way possible. But the honest truth is that until each of us feels safe in venturing out that sense of normalcy is a long way off. Please Join Us Join Peter Coyle on Thursday, May 21st at 3:30 PM for Bisnow’s Twin Cities Deep Dive: Projects in Progresswebinar. Peter will be joined by Blake Hastings, President of Oppidan, Anne Behrendt, CEO of Doran Companies and Mark Jepson, Executive Director and Managing Partner of Commercial Investment Properties to discuss “How Developers are Weathering the Storm and Completing Projects Amidst Uncertainty”. Topics discussed will include: What cost implications has the pandemic had on development projects? What measures are developers taking to ensure the safety of their workers on construction sites? How are developers managing investor relations and delayed timelines. How are companies handling supply delays? What will the Twin Cities real estate market look like after this pandemic? Please click here to register: Twin Cities Deep Dive: Projects in Progress

May 20, 2020

Legislative and Judicial Updates

Navigating State and Local Governments During a Pandemic: How Continuing Government Action on Major Issues Can Impact Your Investments

Peter Coyle and Jacob Steen discuss the land use, government relations and regulatory environment during the COVID-19 pandemic. They share examples of how Larkin Hoffman has been able to assist clients in overcoming the unique challenges presented by a statewide stay-at-home order and discuss the ways that the global pandemic has shaped the local land use and zoning approval process. About the Larkin Hoffman Podcast Briefings The Larkin Hoffman Podcast Briefings series was developed to discuss issues affected by the COVID-19 crisis. Our attorneys will address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation and other matters in this series. Over the next few weeks, there will be several podcasts on developing matters. Larkin Hoffman is available to help. Please reach out for additional guidance

May 1, 2020

Construction

Are Attorneys’ Fees Recoverable on a Mechanics’ Lien Claim Involving a Homestead?

Under Minnesota law, a contractor may collect reasonable attorneys’ fees in a mechanics’ lien foreclosure action even if the property is a homestead. The amount of the award is in the discretion of the court. That is not the case in every state as recently illustrated in Iowa. Historically, Iowa has liberally construed its mechanics’ lien statute to promote restitution and prevent unjust enrichment. Iowa also has a longstanding history of protecting the homestead. Until recently, Iowa courts had never addressed the interplay between these competing interests. The Iowa Supreme Court recently decided Standard Water Control Systems, Inc. v. Jones, examining the intersection between Iowa Code chapter 561 concerning homesteads and chapter 572 regarding mechanics’ liens. The Supreme Court concluded that attorneys’ fees cannot be recovered by a mechanics’ lien claimant from a homestead foreclosure provided that the homeowners assert their homestead rights before a foreclosure decree is entered. Standard Water Control Systems, Inc. v. Jones In June 2013, Iowa homeowners hired a contractor to waterproof their basement. With 95% of the project completed, the contractor accidentally drilled through the home’s water and sewer lines. After the homeowners refused to pay their $5,400 bill or permit the contractor to finish the project, the contractor filed a mechanics’ lien foreclosure action against the homeowners. Following more than three years of litigation, the Iowa Court of Appeals ordered the homeowners to pay most of the contractor’s bill but sent the attorneys’ fee issue back to district court. The district court entered a revised decree granting the contractor the right to foreclose a mechanics’ lien against the home for both the principal amount due and the contractor’s attorneys’ fees. Two weeks before a scheduled sheriff’s sale of the home, and after the revised decree, the homeowners asserted their homestead exemption for the first time, claiming that the district court violated their homestead rights by including attorneys’ fees in the mechanics’ lien foreclosure decree. The homeowners argued that their house could not be sold to pay the attorneys’ fees because it was their homestead. Iowa Supreme Court’s Decision The Iowa Supreme Court decided that “homestead rights generally prevail over a mechanics’ lien including attorney fees.” It concluded, however, that homeowners must raise the homestead exemption before a foreclosure decree is entered. In this case, the homeowners asserted their homestead rights too late because the foreclosure decree had already been executed. Therefore, they waived their right to claim the homestead exemption and the attorneys’ fees were properly included in the lien foreclosure. Of course, the Iowa Supreme Court decision is nothing that cannot be changed by the state’s legislature. Such a bill, S.F. 458, is working its way through the Iowa Legislature and, if passed, will make it clear that attorneys’ fees would be recoverable in the foreclosure of a mechanics’ lien against a homestead. Subscribe to this blog and we will keep you posted on the outcome of that effort.

February 26, 2020

Legislative and Judicial Updates

2020 Minnesota Legislative Session: Public Infrastructure & Housing to Headline Discussion

On Tuesday, February 11, 2020, the Minnesota Legislature returned to the Capitol for the start of the 2020 legislative session. Having passed a biennial state budget in 2019, this year’s “short session” will run until May 18, 2020. With the only politically divided state legislature in the nation and all 201 legislators on the ballot this November, most Capitol insiders don’t expect much in the way of significant legislation—apart from a statewide infrastructure proposal—to become law this year. The slate was set in early January when Gov. Tim Walz (DFL) released an ambitious capital investment proposal, calling for approximately $2 billion in public works projects. The proposal is intended to utilize the state’s strong bond rating and low-interest rates to address the state’s aging infrastructure and create shovel-ready employment opportunities in the coming years when many economic experts are predicting significant economic slowdowns. The governor’s proposal was greeted with enthusiasm from legislative Democrats, including leadership in the House of Representatives, while Republicans, including Senate Majority Leader Paul Gazelka (R-Nisswa), urged caution that the state not over-extend itself and take on excessive debt. A central piece of the governor’s capital investment proposal was the calling for $276 million to develop affordable housing options. This included $200 million in housing infrastructure bonds to support the construction of affordable housing units and permanent housing for individuals experiencing homelessness as well as $60 million to preserve, repair and upgrade existing public housing complexes, and $10.7 million for maintenance and repairs to the state’s 58 veterans’ homes. While the role of the state in supplying affordable housing options is likely to be debated throughout the session, issues related to housing will also likely extend well beyond state funding. In recent years, industry and advocacy organizations have brought a variety of proposals to the state legislature intended to examine the impact that state, municipal, and other local government regulations have on the cost of new housing construction. This session, legislators are likely to examine proposals related to local zoning and density, development permitting and fees, and local design and aesthetic mandates as they look to bring down the cost of new housing construction and increase the stock of market-rate housing in the state. Legislators will also focus on a variety of workforce-related proposals intended to increase and diversify participation in the building trades. While most of these proposals are likely to be multi-year initiatives, the focus on housing affordability and workforce are likely to be central to most land use and development discussions at the Capitol.

February 14, 2020

Construction

When do Statutes of Repose Begin to Run on Condominium Projects?

A statute of repose defines the date by which a particular type of claim must be asserted before it becomes untimely, or “stale,” and can no longer be pursued. This provides designers and builders of construction projects some security that, after a certain date, they cannot be hauled into court to answer for their alleged breaches of contract, negligence, or breaches of warranty. What if the claim involves the construction of a condominium project? Would the statute of repose be calculated based on the completion of each condominium unit, each separate building of the complex or to the entire complex? The Minnesota Supreme Court recently provided much-needed clarity regarding the application to condominiums of the statutory repose periods for breach of warranty and other claims in Village Lofts v. Housing Partners III Lofts, LLC. Statutory Residential Warranties and the Statute of Repose Minnesota Statutes Ch. 327A provides certain statutory warranties with respect to the construction of new homes and the renovation or remodeling of existing homes, including condominiums. Village Lofts involved the assertion by a condominium homeowners association of claims against the developer and builder for, among other things, breaching the 10-year statutory warranty against major construction defects. The project involved the construction of two separate condominium buildings, each of which was completed and occupied on different dates. In Minnesota, claims for breach of the statutory warranties are barred by the statute of repose if they “accrue” more than 10 years after the “warranty date.” This analysis involves answering two important questions: (1) On what date does a statutory warranty claim accrue? and (2) What is the applicable “warranty date” that starts the 10-year statute of repose running? When Does a Warranty Claim Accrue? The Supreme Court cited a case from 2004, Vlahos v. R&I Constr. of Bloomington, in stating that a breach of warranty claim accrues “ . . . when the homeowner discovers, or should have discovered, the builder’s refusal or inability to ensure the home is free from major construction defects.” In Village Lofts, the Court concluded that the claims for breach of warranty accrued in May, 2015, at the earliest, when the Association notified the developer and builder of the alleged problems and the developer and builder did nothing. Therefore, the Court reasoned, if the “warranty date” for the statutory warranty claims is prior to May, 2005, then the claims are barred by the 10-year statute of repose. What is the Applicable Warranty Date? Chapter 327A defines “warranty date” as “the earliest of: (a) the date of the initial vendee’s first occupancy of the dwelling; or (b) the date upon which the initial vendee takes legal or equitable title in the dwelling.” This definition works well with single-family homes, but it does not work well for condominiums. In Village Lofts, the Association argued (and the Court of Appeals agreed) that the warranty date is to be determined for each individual condominium unit. The developer and the builder argued that the warranty date has to be determined for each of the separate buildings based on when the first occupant (in each respective building) occupied or took title to that unit. The Court determined that the statute was ambiguous, which enabled it to go through a detailed exercise to interpret the Legislature’s intent and allowed it to look beyond the words of the statute. The Court concluded after much discussion that “ . . . the Legislature intended that there be a single warranty date for a condominium building rather than different warranty dates for each unit.” This conclusion saves us from the absurd and impractical result of having to determine warranty dates for each individual unit and permits the calculation of the statute of repose using the first unit in a building that is occupied or to which title has transferred. Non-Warranty Claims The Court also considered the statute of repose for Village Loft’s non-warranty claims. Claims for defective and unsafe improvements to real property are governed by Minn. Stat. § 541.051, Subd. 1(a), which provides a statute of repose of 10 years “ . . . after the date of substantial completion of the construction.” The issue in Village Lofts was whether the two condominium buildings, Buildings A and B, were considered one “improvement” or two. The Court concluded they were two separate improvements because, among other things, (a) each was given a separate Certificate of Occupancy on different dates, (b) each building independently meets the Court’s definition of an improvement, and (c) the Legislature intended the trigger, substantial completion, to be determined when the contractor can turn the building over to the person that hired the contractor to be used for its intended purposes. Because each building was its own improvement, the Association’s non-warranty claims were barred by the statute of repose. Conclusions and Take-Aways The “Warranty Date” for the statute of repose applicable to claims of breach of statutory warranties for condominium projects is determined on a “per building” basis, and not on a “per unit” basis. When a condominium development involves multiple buildings, each of which is deemed its own improvement, the determination of substantial completion for purposes of the application of the statute of repose for defective and unsafe improvements to real property is determined on an improvement (building) by improvement (building) basis.

January 29, 2020

Construction

Another City Attempts to Collect Illegal Transportation Fees – Struck Down by the Court Again

The development community has long maintained that the practice of cities exacting transportation fees or charges from developers as a condition of development approval is illegal, but the issue had not been directly and fully addressed by the courts until the Minnesota Supreme Court handed down its decision in Harstad v. City of Woodbury in August 2018. The supreme court confirmed that cities have no legal authority to impose transportation (also called “infrastructure” or “impact”) fees or charges and that this practice is illegal and unenforceable. Despite the supreme court’s unambiguous holding, and over the objections of builders and developers, including advocacy-group Housing First Minnesota, the City of Dayton enacted an “offsite transportation charge” requiring developers to pay these banned fees. Last week, this practice was (again) declared illegal and unenforceable when the Hennepin County District Court struck down Dayton’s fee. Dayton, a northwest Twin Cities suburb, was one of several Minnesota cities collecting transportation fees from developers when the Harstad decision was issued. In response to theHarstad ruling, Dayton admitted its transportation fee was illegal, removed the fee from its fee schedule and enacted a moratorium on development so that it could “study and respond” to the Harstad decision. After a ten-month development moratorium, Dayton announced plans to resurrect its transportation fee practice pursuant to a new policy and procedure that required developers to pay an “offsite transportation charge” in one of two forms—either a “Project Specific Transportation Charge” or a “General Transportation Fee.” Dayton, before it adopted its repackaged and relabeled transportation fee, was on notice from the building and development community that its transportation fee policy and ordinance was illegal and would be challenged in court. The city ignored these warnings and adopted its re-branded transportation fee in July 2019. Housing First Minnesota challenged Dayton’s transportation fee in court. Last week, the Hennepin County District Court, citing the recent Harstad decision, struck down the city’s transportation charge and the associated policy, procedures and ordinances implement the fee as “illegal, null and void and unenforceable” and permanently enjoined the city from enforcing its transportation fee. This is now the fourth court (including the district court and appellate courts in Harstad) to reject a city’s attempt to impose transportation fees. We fully anticipate, should there be future attempts to enact such fees, that they will meet a similar fate.

January 22, 2020

Construction

The New Labor PRO Act Won’t Help Contractors

Whether a business’s employees are represented by a union or not, all builders should be concerned about the pending Protecting the Right to Organize Act (“PRO Act”) being considered by Congress. If enacted, the PRO Act will alter fundamental principles of labor law and significantly prejudice the rights of employers. Supporters of the PRO Act claim that this legislation is needed to increase employee wages and create an environment in which unions can negotiate better collective bargaining agreements. Here are a few examples of the changes which would result if the PRO Act is enacted. Employees’ Rights to Unionize and to Negotiate Contracts are Strengthened The proposed bill removes the NLRA’s prohibitions on employees engaging in secondary boycotts. This change means that unions can sponsor protests and pickets against any employer, even if the employer does not have a dispute with the union. Requires an employer to mediate and arbitrate the initial collective bargaining agreement following an election if the union and the employer are unable to reach an agreement within one year of the certification of the union. This requirement means an arbitrator would decide on the terms of the contract. Prohibits companies from permanently replacing striking workers. Prevents an employer from requiring employees to attend meetings in which the employer plans to persuade employees to vote against the union in a representation election. During an election campaign, the NLRB could issue an order that requires an employer to bargain with the union if the NLRB decides that the employer has made it impossible to conduct a fair election. Punish Violations of Workers’ Rights Outside of the NLRB Currently, the NLRB is the sole and exclusive forum in which an employee or labor union can file unfair labor practice charge against an employer. This bill would allow employees and unions to file private actions against an employer and seek damages. Allows the NLRB to levy civil penalties for violations of the NLRA, including compensatory damages and penalties on officers and directors, when the employer is found to violate the NLRA. The bill allows the NLRB to go to court and obtain an injunction to immediately reinstate a terminated employee while the investigation is ongoing if the NLRB believes the employer has terminated the employee for engaging in union activities. What Does this Mean for Contractors? This bill, if passed by Congress, will make it very difficult for employers to meet with employees and talk to them about why they should not vote for the union. It gives the NLRB significant power to penalize employers that the NLRB deems to have violated the law, including requiring an employer to reinstate a terminated employee while the investigation is pending. Employers who are concerned about this pending legislation should write their representatives and senators to make their concerns and objections to this bill known. This law would turn well-settled precedent upside down and poses a great danger to all employers, whether a union currently represents their employees or not.

November 20, 2019

Construction

Minneapolis Piles Notice Requirements on State’s New Wage Theft Laws

The Minnesota Legislature passed sweeping new amendments to statutes which create criminal penalties for the failure to pay wages and impose requirements for employers (including contractors) to document the terms of employment with their employees. The new amendments took effect July 1, 2019. Then, on August 8, Minneapolis passed an ordinance, essentially piggybacking on the new law, requiring employers (including contractors) to provide new notices to employees effective January 1, 2020. The ordinance applies not only to employers with brick and mortar locations within the City’s limits, but also employers outside the City with employees who work at least 80 hours each year inside its limits. Let’s take a closer look at these new laws and what actions an employer needs to take. State Changes Wage Theft Effective August 1, 2019, Minnesota law makes clear that prison time can be imposed for wage theft. “Wage theft” is defined as occurring “when an employer with intent to defraud” fails to pay an employee all wages, salary, gratuities, earnings, or commissions at the employee’s rate or rates of pay or at the rate or rates required by law, or makes or attempts to make it appear in any manner that the wages paid to an employee were greater than the amount actually paid to the employee. Wage theft is now punishable by imprisonment of up to twenty years and a fine of $100,000 for wage theft in excess of $35,000, ten years and a fine of $20,000 for wage theft exceeding $5,000, and five years and a penalty of $10,000 for wage theft exceeding $1,000. Earnings Statement As part of the new legislation, effective July 1, 2019, employers are required to provide employees, at the end of each payroll period, an earnings statement which includes the following information (newly added requirements are italicized): the name of the employee; the hourly rate or rates of pay and basis thereof, including whether the employee is paid by hour, shift, day, week, salary, piece, commission or other method; allowances, if any, claimed pursuant to permitted meals and lodging; the total number of hours worked by the employee unless exempt from minimum wage and overtime; the total amount of gross pay earned by the employee during the period; a list of the deductions made from the employee’s pay, the net amount of pay after all deductions are made, the date on which the pay period ends, the legal name of the employer and the operating name of the employer if different from the legal name, the physical address of the employer’s main office or principal place of business, and a mailing address if different, and the telephone number of the employer. Information at Commencement of Employment Employers must also provide new employees at the start of employment with the following written information: the rate or rates of pay and basis thereof, including whether the employee is paid by the hour, shift, day, week, salary, piece, commission or other method, and the specific application of any additional rates; allowances, if any, claimed pursuant to permitted meals and lodging; paid vacation, sick time or other paid time off accruals and terms of use; the employee’s employment status and whether the employee is exempt from minimum wage and overtime, and on what basis; a list of deductions that may be made from the employee’s pay; the number of days in the pay period, the regularly scheduled pay date, and the pay day on which the employee will receive the first payment of wages earned; the legal name of the employer and the operating name of the employer if different from the legal name; the physical address of the employer’s main office or principal place of business, and a mailing address if different; and the telephone number of the employer. Employers must also keep a copy of this notice signed by each employee acknowledging receipt of the notice. They must also provide the employee any written changes to the information contained in the notice prior to the date the changes take effect. The notice must be provided to each employee in English, and include text provided by the Commissioner of the Minnesota Department of Labor & Industry that informs employees they may request that the notice be provided in a language other than English. If requested, employers must provide the notice in the language requested by the employee, but the Commissioner must assist employers with translation of the notice in the languages requested by their employees. List of Personnel Policies As of July 1, 2019, employers (including contractors) must maintain a list of the personnel policies provided the employee, including the date the policies were given to the employee and a brief description of the policies as well as a copy of the notice provided to each employee, including any written changes to the notice. It is possible that providing a list of the table of contents of an employee handbook may suffice with respect to policies contained within the handbook. Employers must keep these records readily available for inspection by the Commissioner within 72 hours of a demand. Failure to keep the proper records allows the Commissioner, in a wage dispute, to make his or her own determination of any wages that are due based on available evidence. A $5,000 fine for “each repeated failure” may be levied. The new legislation also imposes criminal penalties upon employers who hinder or delay the Commissioner in the performance of his or her duties. The New Minneapolis Ordinance Under the new Minneapolis ordinance, employers (including contractors) are required to provide a written notice at the time of hiring, and prior to the commencement of work, which includes the following information (which is new and additional to what is required under the State wage theft law): the date on which employment will start; the employer’s policy regarding tips, and state that tip sharing is voluntary under Minnesota law (if the employee will be in a position to receive tips); the employer’s overtime policy applicable to the employee’s position and the rate of pay that will apply to straight time and overtime; and details about the employee’s rights under the Minneapolis Sick and Safe Ordinance (our previous article regarding the Minneapolis Sick and Safe Ordinance is attached here ). The notice regarding the Minneapolis Sick and Safe Ordinance must provide how sick and safe leave is accrued, the first date when the employee will be entitled to use any accrued time under the ordinance, and the beginning and end dates of the employer’s year for purposes of sick and safe time accrual. Unlike the State’s wage theft notice requirement, the Minneapolis ordinance explicitly allows the notice to simply reference the employer’s handbook or other policies, which contain the required information, as opposed to repeating that information, in full, in the notice. But like the Minnesota wage theft notice, the Minneapolis ordinance requires employees to sign the pre-hire notice in order to acknowledge its receipt (electronic signatures are acceptable). Any changes to the information contained in that pre-hire notice will require an additional written notice to the employee prior to the date the changes take effect (which does not need to be signed). The Minneapolis ordinance also requires that any employee who is employed prior to January 1, 2020, be provided the equivalent of the full, pre-hire notice. The State wage theft law, to the contrary, allows employers to wait to provide the information required in the pre-hire notice to employees who were employed prior to its July 1, 2019, effective date until their terms of employment change. The Minneapolis ordinance requires that the notice be provided to all existing employees, who were hired prior to January 1, 2020, no later than the end of the first full payroll period in 2020 (i.e. employers are not allowed to wait until a change is made in their terms of employment to provide the information required in the pre-hire notice). The new Minneapolis ordinance also requires that earning statements be provided to employees every payroll period which include the amount of accrued sick and safe time available to the employee. What Should Employers and Contractors Do Now? The State’s Wage Theft Law has been enacted, so employers need to be in compliance now. The Minneapolis ordinance doesn’t take effect until the beginning of the year. We recommend that employers hold off on preparations to comply with the Minneapolis ordinance until closer to January 1. A case is currently pending before the Minnesota Supreme Court which could affect the applicability of the Minneapolis Sick and Safe Ordinance to employers physically located outside the City. In addition, the City may issue guidance on the new ordinance in the future which could be of assistance. The Minneapolis ordinance provides an array of penalties that may be imposed on employers who fail to comply. Civil fines up to $2,000, liquidated damages and other remedies are available. Please contact one of your employment lawyers at Larkin Hoffman for any questions or assistance in complying with the new Minneapolis ordinance.

August 14, 2019

Legislative and Judicial Updates

US Supreme Court Reinstatement of Constitutional Takings Claim May Not Benefit Landowners

One of the most consequential decisions of the recently concluded term of the U.S. Supreme Court involves the reversal of a 30-year precedent and reinstatement of a landowner’s right to seek redress in federal court for an alleged taking of property without just compensation. The 5-4 majority decision in Knick v. Township of Scott, PA, authored by Chief Justice John Roberts, reflects the decidedly conservative bent of the current court. The decision in Knick affirms that an aggrieved landowner may initiate a 5th Amendment takings claim in federal court without first seeking redress in state court. The ruling overturns Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, which was decided in 1985. Private property advocates have long sought to overturn Williamson and are celebrating the reinstatement of a direct federal claim without first resorting to state court. The thought is that federal courts are better qualified to address constitutional questions and arguably are staffed by judges more accustomed to reviewing constitutional challenges. The question, though, is whether Knick will matter in any but the most extreme cases? Here’s why it may not: (1) any litigation (state or federal) is very expensive and few can afford to pursue it (even contingent fee arrangements may not reimburse or absolve the plaintiff landowner from traditional costs of litigation, such as deposition fees, expert witness fees, etc. which can be substantial by themselves); (2) litigation in federal court traditionally can be much more expensive than that conducted in state court due to more stringent judicial procedure requirements; (3) litigation in federal court traditionally takes much longer to resolve contributing to the high costs; (4) a private party challenging the government in court (state or federal) has to overcome several significant obstacles, starting with the cost of the litigation (government attorneys are already on the taxpayer payroll) along with the inherent presumption that the government has acted correctly; and (5) engaging in any sort of litigation is not for the faint of heart, but once you engage, the rules compel that the case follow certain procedures to a resolution which can wear down the parties. One clear advantage of pursuing a claim in state court is the opportunity to get other pertinent non-federal issues addressed that may resolve the litigation on a faster, less expensive basis. In fact, federal court review may well be limited to federal jurisdictional matters only leaving valid state claims unaddressed. Admittedly this procedural dichotomy poses a difficult trade-off; landowners will need advice on the relative merits of alternate federal and state law claims to assess merit and potential for success. I try very hard to give my clients clear-eyed advice when it comes to pursuing any sort of litigation, for all the reasons noted above. But the most practical piece of advice may, in the right circumstance, be that of simply moving on without pursuing a claim regardless of the merits. I want my clients to firmly own the decision to pursue litigation; I challenge them to consider all the variables and to set aside their emotions in making their decision. More often than not, practicality prevails and the aggrieved party will decide to avoid the stress and financial burden of bringing an uncertain claim against the government.

July 16, 2019

Legislative and Judicial Updates

Inclusionary Zoning Expands its Footprint in Minnesota

Last week the City of Bloomington adopted an expansive “inclusionary zoning” ordinance for the purpose of compelling developers of single and multifamily housing to include a portion of their new housing as affordable based on prescribed income standards. “Inclusionary zoning” refers to a policy that compels developers to include some land use component desired by a given city as part of a development project being proposed in that city. It is justified in the affordable housing context to address the need in Minnesota and nationally to supply more affordable housing to a greater number of people, either through subsidy or otherwise. Under Bloomington’s ordinance, any developer proposing 20 units or more of single or multifamily housing must commit at least 9 percent of such units to be affordable based on specified income and affordability parameters (the city backed away from imposing the requirement on existing housing based on objections from multi-family from owners of such properties. The ordinance does outline a set of “credits” that are potentially available to the developers of new housing to offset, at least partially, the financial burden of the new ordinance requirements, such as increased density or other performance criteria. The city reserves to itself the question of whether any such credits would be awarded for a given project, leaving the developer on the hook until that determination is confirmed. A developer seeking to avoid entanglement in the city’s evaluation process can buy its way out through a substantial payment to the City. Bloomington’s ordinance adds to those ordinances previously enacted by the cities of Minneapolis and Edina. Undoubtedly other cities will follow the lead of these cities. In the author’s opinion, while laudable for their legitimate objective of addressing an important social policy, the approach of compelling private developers to contribute land or cash as a condition of securing an approval for new housing is quite plainly a regulatory taking. In no other segment of our development economy do we require private developers to commit their private funds to help solve a broad societal problem, such as housing affordability, absent clear legal authority from the legislature. For example, developers are routinely required to contribute land or cash to cities for the creation of new park systems as part of new developments based on an explicit grant of legislative authority; notably this policy applies to all forms of development, such as commercial and industrial, not solely housing. No such legislative grant of authority has been extended to so-called inclusionary housing ordinances. If challenged, it is most likely that Minnesota courts would render invalid such ordinances as lacking either constitutional or statutory support. Recently the Minnesota Supreme Court unanimously determined that a city’s general transportation fee policy was invalid and illegal because it lacked appropriate statutory authority, which authority cities have been seeking from the Minnesota legislature for many years. The transportation fee was imposed in addition to costs incurred by developers to construct all the necessary transportation improvements for given development projects. The policy enabled cities imposing such a fee to illegally secure millions of dollars from developers, willingly or unwillingly, as the price of receiving approvals to which the developers were otherwise entitled. Fortunately, virtually all cities who had been collecting a general transportation fee suspended this practice based on the unequivocal decision of the Supreme Court. The same argument applies to the spate of inclusionary housing ordinances. Credit Bloomington with constructing a thoughtful ordinance that seeks to balance its regulatory stick with the possibility of a bag of carrots to offset the financial burden imposed by its ordinance. But the ordinance is selectively applied to only a segment of new housing construction and there is no certainty of receiving an offsetting “credit” once the city completes its review. Make no mistake, Bloomington’s ordinance, as with those of Minneapolis and Edina, are sticks first, with no assurance of a sweet-tasting carrot in the end; developers will hesitate to pursue new housing projects in the city absent certainty of the financial trade-offs required under the new ordinance. Unfortunately, the real losers under the city’s ordinance may be those most in need of new housing.

March 4, 2019

Legislative and Judicial Updates

Opportunity Zones Attract Attention of Real Estate Investors

Real estate investors across the country are asking how to tap tax benefits for investing in projects in low-income areas, known as “Opportunity Zones” under an obscure provision of the 2017 Tax Act. They may not have to wait much longer – the federal government just released guidance for comment. Nuts and Bolts A little background is needed since the program is so new. As part of last year’s Tax Cut and Jobs Act, authors of the bill included tax benefits to defer or reduce capital gains taxes. According to the IRS, an Opportunity Zone is an economically distressed area of a community where new investments, under certain conditions, may be eligible for preferential tax treatment. After the bill became law, the Governor’s office, designated 128 low-income census tracts as Opportunity Zones eligible for investment under the new law and the U.S. Secretary of Treasury approved the designation. The principle benefit of investing in an economic development project within an Opportunity Zone is the deferral of taxes on prior capital gains. In addition, if an the investor holds the investment in an Opportunity Fund for at least 10 years, the investor would be eligible for an increase in basis equal to the fair market value of the investment on the date that the investment is sold or exchanged. A qualified Opportunity Fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in an Opportunity Zone and that utilizes the investor’s gains from a prior investment for funding an Opportunity Fund. Investors don’t need to live in the Opportunity Zone to take advantage of the tax benefits. Investors simply need to invest in a qualified Opportunity Fund. Tax Benefits To qualify for the tax benefit, the investor self certifies. In other words, there is no approval by the IRS to certify eligibility. The taxpayer completes a form issued by the IRS and attaches that form to their taxpayers Federal Income Tax Return for the taxable year. As an example, if an investor sells stock in 2018 and invests in a qualified opportunity fund within 180 days of that sale, the investor can defer the gain on the sale. At the time of filing a federal tax return, the taxpayer may elect to defer all or some of the gain. There are a few important things to keep in mind when deciding whether to use this economic development tool to spur redevelopment of the property. This is an investor incentive, not one that is awarded to individual companies. All incentives relate to capital gains, present and future, not operating revenue or cost. There are no upfront appropriations by local, state or federal government. Because the program is market based, investors will determine whether or not they see tax benefits through investment in economic development projects. In short, the program offers investors three specific incentives for investing unrealized capital gains in eligible projects. Deferral – an investor may defer capital gains taxes until 2026 by investing and keeping unrealized gains in an Opportunity Fund. Reduction – the original amount of capital gains on which an investor has to pay deferred taxes is reduced by 10 percent if the Opportunity Fund investment is held for five years and another 5 percent if held for seven years, for a total reduction of 15 percent. Exemption – any capital gains made on investments made through the Opportunity Fund accrue tax free as long as the investor holds them for at least ten years. Proposed Guidance Released The Treasury Department and the IRS recently released guidance for the Opportunity Zone tax incentive and will take public comments until a hearing for January 10, 2019. After that, the guidance will be finalized to give better direction on how investors can use this new economic development tool. In the meantime, investment firms have already begun creating Opportunity Funds by aggregating investments based on the assumption that there will be a limited window in which to make qualified investments.

October 23, 2018

Legislative and Judicial Updates

Minnesota Supreme Court Invalidates Transportation Fee

Recently the Minnesota Supreme Court invalidated a municipality’s use of an unauthorized transportation fee to fund projects that are not directly tied to a specific project. It also invalidated a city’s use of a development contract to “negotiate” such an illegal fee into the contract. Minnesota cities have long contended that development contracts are bona fide arms-length agreements which reflect true give-and-take between the parties. The Supreme Court rejected this argument on the basis that a city’s police power authority created an overarching pressure on a developer to concede the transportation fee or risk project denial. You would think this settles, finally, once and for all, this vexing issue. You would be wrong. Work-arounds The association for Minnesota cities has communicated to its members that there are still several work-arounds available to cities that are determined to collect these fees. For example, a city could deny projects that are deemed premature owing to a lack of necessary infrastructure. The irony is that the court decision involved a developer who already had committed to pay for the necessary transportation improvements, inside and outside his development; this in fact is quite routine. What cities are objecting to now is their inability to collect such fees and save them for future roadway projects some other place at some other time, rather than relying on taxpayers to fund such improvements (assuming another developer doesn’t agree to construct them). One city, and there may be more, has tentatively decided to impose a city-wide development moratorium so it can evaluate how to continue collecting the fees. This will adversely affect multiple development projects that are queued up for approval, putting their long-term viability at risk depending on the duration both of the moratorium and the current real estate cycle. The battle between developers and cities seems never-ending as cities continue to perceive developers as ripe for fee extraction. And, frankly, too many developers have accommodated cities in their thinking. It might be time for the development community and city representatives to sit down and negotiate a truce.

September 13, 2018

Legislative and Judicial Updates

Will Property Owners Finally Be Allowed Immediate Entry Into Federal Court on Regulatory Taking Claims?

For more than 30 years, a property owner who claimed that a regulatory action by the government amounted to a compensable taking under the Fifth Amendment to the U.S. Constitution has been required to litigate the issue in state court first, before being allowed to gain entry to federal court. The 1985 case of Williamson County Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 105 S.Ct. 3108 established a peculiar form of “ripeness” that required property owners first to exhaust their administrative remedies, and then exhaust their state court remedies before they would be permitted to sue out a federal takings claim in federal court. In other words, the federal courts would not consider a regulatory takings claim to be “ripe” for hearing in federal court unless and until the property owner had first jumped through both administrative and state court exhaustion hoops. Williamson County ’s ripeness doctrine has created confusion for courts and frustration and delays for litigants since it was handed down. The U.S. Supreme Court now seems to be interested in reconsidering Williamson County, signaled by its granting review of a Pennsylvania case that squarely raises the issue of whether property owner Rose Mary Knick may go directly to federal court to litigate her unconstitutional taking claim arising from local officials seeking to enter onto her 90-acre farm to search for ancient burial sites. Fifteen years ago, a Minnesota litigant’s unsuccessful attempt to entice the Supreme Court to reconsider Williamson County illustrates the dilemma to litigants caused by the case’s ripeness doctrine. Rochester real estate developer Franklin P. Kottschade obtained approval from the City of Rochester in 2000 to develop townhomes on about 16 acres of his 220-acre development site in south Rochester. The city approved the townhomes, but attached numerous conditions to its approval, which resulted in the project becoming economically unfeasible for Mr. Kottschade. A court decision by the Minnesota Court of Appeals described the effect of the city’s conditions on the development: “The city’s imposition of the conditions reduced the buildable area to 4.93 acres, and resulted in a site that could accommodate only 26 of the proposed 104 townhome units[1].” In a nod to Williamson County’s administrative exhaustion requirement, Mr. Kottschade asked the city for a variance from the conditions that it had just imposed. Unsurprisingly, the city denied the variance request. In an about-face from Williamson County, however, Mr. Kottschade did not follow the state court exhaustion requirement by suing out his regulatory takings claim in state court; instead, he sued directly in federal court for a regulatory taking. Both the U.S. District Court and the U.S. Court of Appeals for the Eighth Circuit dismissed the case based on the controlling authority of Williamson County. The Eighth Circuit pointed out, however, the dilemma that litigants like Mr. Kottschade face because of Williamson County: The plaintiff [Mr. Kottschade] points out, and justly so, that if he is required to seek a post-deprivation remedy in a state-court inverse condemnation action, he may end up being altogether denied a federal forum for what is undoubtedly a federal right. Such a federal forum, he urges, is guaranteed by 42 U.S.C. § 1983 [the federal civil rights statute] … and a plaintiff has a right to bring a § 1983 claim in a federal trial court, at his option. If plaintiff must go to the state courts, he would presumably need to show, in order to prevail … that a taking had occurred, and that just compensation had not been paid. If the state courts hold for the plaintiff, then all is well, from his point of view, and there would be no need for recourse to a federal forum. But if they hold against him, for example, on the ground that no taking has occurred, doctrines of former adjudication may be a bar to a new action under § 1983 in a federal trial court[2]. What the Eighth Circuit is pointing out is that a property owner may fall victim to two different doctrines of federal adjudication. If the property owner follows Williamson County and sues in state court first – and loses – then when the property owner attempts to seek relief in federal court, another federal doctrine may further thwart federal court consideration of the claim on the merits, under the theory that the claim has already been decided. Rose Mary Knick may resolve this dilemma. It is being briefed now, but is unlikely to be decided until the Supreme Court’s next session, which will begin in October. Stay tuned. [1] Kottschade v. City of Rochester, 760 N.W.2d 342, 345 (Minn. App. 2009) [2] Kottschade v. City of Rochester, 319 F.3d 1038, 1041 (8th Cir.), cert. denied, 540 U.S. 825 (2003)

May 16, 2018

Legislative and Judicial Updates

Tax Bill Update – Private Activity Bonds Spared in New Law

Last month, the House tax bill threatened to eliminate private activity bonds – a financing tool that has been used for years by local governments to fund critical infrastructure, such as educational facilities, hospitals and affordable housing. Municipal bond experts projected that 20 to 25 percent of the bond market would be lost under this provision, stalling millions of dollars of investment in new projects. The final tax bill, signed into law just before the end of 2017, did not include the provision. As a result, private activity bonds are still available to fund eligible projects. However, the new law does eliminate tax-exempt refunding of government and nonprofit debt after Dec. 31, 2017. This provision generated a wave of refunding activity in the last weeks of December.

January 3, 2018

Legislative and Judicial Updates

House Tax Bill Targets Private Activity Bonds

An obscure provision of the House tax bill (H.R. 1, Section 3601) threatens to end a financing tool that has been used by local governments for years to fund critical infrastructure such as airports, seaports, hospitals, educational facilities, affordable housing and tollways, to name a few. Private activity bonds, as they are called, are tax-exempt bonds that are typically issued by municipalities to finance private projects that serve a public purpose. Some estimates put the loss to the municipal bond market at 20 percent of the $3.7 trillion market – that is the share of the market held by private activity bonds. Consequently, housing advocates, finance officers and local government officials are working hard to raise their concerns with members of Congress as the Senate and the House must now reconcile competing bills. The Senate bill does not contain a similar provision aimed at eliminating the tax exempt financing program. So why would House members seek elimination of such a widely used financing tool? First and probably foremost, they have to find ways to pay for a reduction in corporate and individual tax rates. One estimate puts the savings at $38.9 billion over ten years beginning in 2018 (see Government Finance Officers Member Alert). In addition, members of Congress argue that the federal government shouldn’t subsidize financing of private development when some competitors don’t qualify for the bonds. Supporters argue that the private development serves a public purpose and the bonds are widely available to competitors in the market place. Meanwhile, now that the Senate passed its version of the tax bill, calls to spare private activity bonds from the congressional ax will grow louder. A number of industry groups are actively lobbying the issue and circulating talking points to constituents. However, if these efforts are unsuccessful, billions in new projects may be shelved or delayed as proposers look for new sources of project financing. The Minneapolis Star Tribune published an article recently that describes how this provision has caused concern for affordable housing advocates.

December 5, 2017

Legislative and Judicial Updates

2017 Tax Reform Bill Would Eliminate Federal Historic Tax Credit Program

One of the current tax code provisions that would be eliminated under the House-proposed tax reform bill is the popular federal Historic Tax Credit program (HTC). The HTC dates back to the Reagan Administration and currently provides a federal tax credit in the amount of 20 percent of qualified rehabilitation expenditures for any certified historic structure. Certified historic structures are those that are either listed in the National Register of Historic Places, or located in a registered historic district and certified as being of historic significance to the district. The tax credit, which can be taken over a five-year period following completion of the rehabilitation of the structure, has spurred a lot of “main street” revitalizations and funded everything from asbestos abatement to insulation replacement. The obvious purpose of the program is to encourage redevelopment of historic and abandoned buildings. According to the National Trust for Historic Preservation, since the inception of the HTC program in 1981, it has been used to renovate more than 40,000 structures and channeled $117 billion into private investment to rehabilitate these structures. The apparent purpose of eliminating the HTC program would be to increase tax revenue needed to offset tax cuts provided in the tax reform bill. Ironically, an economic impact report by the National Park Service and Rutgers University concluded that for every dollar of tax credits given under the program, $1.20 in construction activity, business taxes, income taxes and property taxes was created. The HTC program generated 86,000 jobs in 2015 alone. Id. Loss of the HTC program would eliminate what has grown to be an important incentive for promoting public-private investment in revitalizing downtowns, neighborhoods across the country. In a further irony, President Trump used the HTC program to develop the Old Post Office in Washington, D.C. into the Trump International Hotel, which earned the developer $40 million in tax credits. Minnesota also offers a 20 percent credit that largely follows the federal HTC, but must be taken against Minnesota state taxes. The Minnesota program would appear to be affected if the federal HTC goes away because in order to claim the Minnesota credit, the taxpayer must be allowed the federal credit. While the tax reform bill is a long way from becoming law, provisions in the 400-page document will impact many programs in ways that are still coming to light, including the federal HTC program.

November 8, 2017

Legislative and Judicial Updates

Cities Cannot Require Payment of Fees for Future Road Improvements

Forgive developer Martin Harstad if he thought he was in Potterville and not Woodbury when the city told him he had to pay nearly $1.4 million in “road assessments” as a condition of approval for his “Bailey Park” residential development. Harstad sued Woodbury to challenge its authority to demand the road assessments and won in both the trial court, and now the Minnesota Court of Appeals in a published decision released September 18. For now, it’s a wonderful life for Harstad, other developers and for property owners who have been troubled for years over whether Minnesota cities have the power to condition development approvals on the payment of (frequently hefty) fees for future road improvements to accommodate new growth and development. Here, the court of appeals struck down what amounted to an impact fee assessed by Woodbury, but sidestepped the longstanding question of whether impact fees are legal in Minnesota. As is the case for other developers, Harstad was already paying significant amounts for transportation infrastructure that would be needed within the Bailey Park development. Woodbury attempted to rationalize its road assessment policy by declaring that new development must not only “pay its own way,” but also pay “all associated costs” for “public infrastructure.” This meant, according to the city, that if a proposed development is perceived as contributing to the need for unspecified, offsite road improvements at unspecified locations outside the development, at unspecified points in the future, then road assessments under the city’s formula must be imposed and collected now as a condition of approval for the development. The court of appeals said that Woodbury can only exercise powers conferred by the state legislature and that Woodbury overstepped its powers here. The court said of the statute on which the city pinned its hopes for upholding the assessment (Minn. Stat. Sec. 462.358, subd. 2a): “In fact, subd. 2a does not authorize collection of any type of assessment. Rather subd. 2a authorizes city planning.” While Woodbury called its fees “major road assessments,” these types of charges have a variety of names, including “transportation improvement district fees,” “trip charges” and “transportation fees.” The name may vary, but the purpose is the same: cities are seeking to capture revenues for anticipated future upgrades to area roads to accommodate growth from new development. Regardless of a particular city’s label, the commonly-recognized name for this revenue-raising practice is “impact fee.” Impact fees were defined by the Minnesota Supreme Court in Country Joe, Inc. v. City of Eagan,560 N.W.2d 681, 685 (Minn. 1997), as fees: (a) in the form of a predetermined money payment; (b) assessed as a condition to the issuance of a permit or plat approval; (c) justified as within local government powers to regulate new growth and development and to provide for adequate infrastructure; (d) levied to fund large-scale, off-site public facilities and services necessary to serve new development; and (e) in an amount proportionate to the need for the public facilities generated by new development. Country Joedid not clearly decide, however, whether impact fees were illegal in Minnesota. The court in Harstad did not address whether Woodbury’s road assessment was an impact fee, or whether impact fees are legally authorized in Minnesota. [This blogger made the case that such fees are not legally authorized in Minnesota in a March 2009 article in Hennepin Lawyer entitled“Road Improvements: When Are Special Assessments Legitimate?” The court of appeals in Harstad also did not address whether Woodbury’s road assessment was an illegal tax. Country Joeheld that the City of Eagan’s “Road unit connection charge” was an illegal tax under state law that limits municipal taxing powers. The court of appeals in Harstad did not address the illegal tax issue because it was raised only by amicus parties and not by either of the parties to the litigation. The City of Woodbury has until October 18 to decide whether to petition the Minnesota Supreme Court for review.

September 21, 2017

Legislative and Judicial Updates

Badger State Leads the Way – Introducing Property Rights Legislation

Property owners and lawmakers joined forces last month in an attempt to reverse the erosion of property rights in Wisconsin which resulted from two landmark decisions, one issued by the U.S. Supreme Court and the other issued by the Wisconsin Supreme Court. In Murr v. Wisconsin, the highest court in the land sided with local officials in a 5-3 decision holding that the Wisconsin Court of Appeals was correct in upholding a requirement that two nonconforming lots be treated as one for zoning purposes (see Jake Steen’s post on Murr v. Wisconsin). In the second significant decision, a sand mining case known asAllEnergy v. Trempealeau County, the Wisconsin Supreme Court upheld denial of a conditional use permit to mine sand. In upholding the lower court’s decision, the Supreme Court relied on a record of objections raised by residents though the applicant had supplied expert reports and testimony refuting the concerns and addressing the conditions for approval in the zoning ordinance. At the outset of a day-long symposium on property rights in Madison, lawmakers announced an initiative known as the “Homeowners’ Bill of Rights” designed to roll back government regulations that threaten property rights and home ownership in Wisconsin. Two of the initiatives seek to reverse the impact of the Murr and AllEnergy decisions. Legislation proposed by Senator Tom Tiffany and Representative Adam Jarchow would grandfather existing lots so property owners would not lose rights to build simply because the rules change over time. Another initiative would propose legislation modeled after Minnesota’s conditional use permit case law which requires that a municipality issue a conditional use permit if the applicant satisfies the conditions and standards in the zoning ordinance. In recent years, a Republican controlled legislature in Wisconsin has passed laws that give property owners a leg up in negotiations with government zoning officials, particularly where officials seek to downzone property or deny construction along the state’s vast shorelines. Under new laws, the right to build vests when an application is submitted instead of when a building permit is issued. This prevents loss of development rights if an owner takes time to put together building plans or financing – and is particularly important for development phased over time. Other changes no longer require deference to state agency interpretations of certain land use laws and provide for direct notice to property owners of zoning changes. At least one recent change may be modified in the next legislative session – a change designed to protect reconstruction of boat houses on Wisconsin lakes has resulted in the construction of a few three-story boat houses which the bill’s author said was not the intent. Bill Griffith was a featured panelist at the University of Wisconsin Law School’s first annual “Property Rights and Land Use in Wisconsin” symposium.

August 16, 2017

Legislative and Judicial Updates

What the Supreme Court’s Murr v. Wisconsin Decision Means for Property Owners

To what extent can the government restrict the ability of property owners with lakefront and riverfront property from developing their land before those restrictions go “too far”? A recent U.S. Supreme Court ruling may change the threshold. In a decision that may have substantial impacts on property rights throughout the state and the region, the U.S. Supreme Court recently ruled 5-3 in a decision that sided with governmental regulators and environmentalists. In Murr v. Wisconsin, four siblings challenged a state law that prohibited the development of two adjacent lots on the St. Croix River, the border between Minnesota and Wisconsin. The lots were acquired separately by the siblings’ parents in the 1960’s and conveyed to the siblings in 1994 and 1995. The siblings sought to sell one parcel to fund the improvement of the other parcel but were precluded from doing so under a state law requiring the “merger” of two adjacent commonly owned parcels if the parcels consisted of less than one acre of developable land. The St. Croix River is a designated Wild and Scenic River under the Wild and Scenic Rivers Act of 1972 (the “Act”). The Act required the state to develop a management and development program for land along the river in order to preserve the nature of the river corridor. The merger provision at issue in the case is similar to widely-used provisions that affect many of the waterfront properties in Minnesota and Wisconsin. By requiring adjacent substandard lots to merge into one, the siblings argued that the merger constituted a regulatory taking under the Fifth Amendment of the U.S. Constitution, which prohibits the taking of private property for public use without just compensation. The court considered the “ultimate determination” as to whether a regulatory determination has occurred: “What is the proper unit of property against which to assess the effect of the challenged governmental action?” Because a regulatory taking is determined by comparing the value taken from the property with the value that remains in the property, defining the “property” is the most critical consideration. The court’s opinion described a new three-factor test for making the ultimate determination of the property to be considered: 1) the treatment of the land under state and local law; 2) the physical characteristics of the land; and 3) the prospective value of the regulated land. The third factor, the court stated, should give special attention to the effect of burdened land on the value of other holdings. In applying these factors, the court ultimately held that the two parcels should be treated as a single property for the regulatory takings analysis. The court’s decision was based on: the fact that the merger provision had long applied to the property; the physical conditions of the property; and the fact that the lots were more valuable as a single parcel. This ruling may have significant implications for properties on the combined 30,000 plus lakes and rivers in Minnesota and Wisconsin. As both states and most communities have merger provisions for shoreland lots, this case will likely form the basis for broader efforts to limit the development along protected bodies of water. Environmental groups will likely see the establishment of a new rule as an opportunity to push for broader land use protections in shoreland areas, with the rule giving expanded cover to local governments to expand regulation.

July 11, 2017

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Category: Legislative and Judicial Updates

Public Comment Period Open for Office of Cannabis Management Proposed Rules

Navigating the Legalization of Marijuana: Update Your Drug and Alcohol Testing Policies – Part One

Navigating the Legalization of Marijuana: Updating Drug and Alcohol Policies – Part Two

Project Labor Agreements are Now Required for Large Federal Construction Projects

Larkin Hoffman’s Government Relations Team Releases Guide to Federal Funding for Nonprofits and Government Entities

Hold on to Your Hats! What to Expect Under President Biden’s Administration in Labor and Employment Law

Did You Know There Is a New Independent Contractor Ordinance in the City of Minneapolis Effective January 1?

Conflicting Messages: An Executive Order vs. Affirmative Action

Diversity Training Now a Construction Conundrum

Who’s Paying the Price for Gov. Walz’s Eviction Moratorium?

New Developments in the Families First Coronavirus Response Act

Still No Deal after Second Special Session; Legislature Looks Towards August Primary

A Summer of Special Sessions: Is July’s Special Session the Last Chance for a Deal on Bonding, COVID-19 Relief & Police Reform?

Preparedness Plan Requirements Guidance for Construction Revised with Little Real Change

How Far Can the Governor Go On His Own? Part 2

How Far Can the Governor Go On His Own?

Larkin Hoffman’s Government Relations Team Launches Podcast Series

Minnesota Supreme Court Holds Minneapolis Paid Sick and Safe Time Ordinance Applies to Employers Outside of Minneapolis

How Does the Recent PPP Flexibility Act Affect You?

Favorable (along with some troubling) Updated Guidance from the SBA on the Forgiveness of PPP Loans

Shelter in Place: Take It or Leave It?

Navigating State and Local Governments During a Pandemic: How Continuing Government Action on Major Issues Can Impact Your Investments

Are Attorneys’ Fees Recoverable on a Mechanics’ Lien Claim Involving a Homestead?

2020 Minnesota Legislative Session: Public Infrastructure & Housing to Headline Discussion

When do Statutes of Repose Begin to Run on Condominium Projects?

Another City Attempts to Collect Illegal Transportation Fees – Struck Down by the Court Again

The New Labor PRO Act Won’t Help Contractors

Minneapolis Piles Notice Requirements on State’s New Wage Theft Laws

US Supreme Court Reinstatement of Constitutional Takings Claim May Not Benefit Landowners

Inclusionary Zoning Expands its Footprint in Minnesota

Opportunity Zones Attract Attention of Real Estate Investors

Minnesota Supreme Court Invalidates Transportation Fee

Will Property Owners Finally Be Allowed Immediate Entry Into Federal Court on Regulatory Taking Claims?

Tax Bill Update – Private Activity Bonds Spared in New Law

House Tax Bill Targets Private Activity Bonds

2017 Tax Reform Bill Would Eliminate Federal Historic Tax Credit Program

Cities Cannot Require Payment of Fees for Future Road Improvements

Badger State Leads the Way – Introducing Property Rights Legislation

What the Supreme Court’s Murr v. Wisconsin Decision Means for Property Owners

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