Minnesota small businesses bracing for cost of billion-dollar paid leave law: 'It's just crazy'

Small businesses in Minnesota brace for economic impact after the state passed a billion-dollar paid leave law, prompting concerns that the cost might be too much to bare. 

"Innovated Building Concepts" co-owners Jerrilynn and Pat Sweeney spoke out on the new law during "Fox & Friends," saying they might have to close their doors over the costs accrued as a result of the policy. 

"We have to with the sick and paid time off, we have to accrue… up to 48 hours every year for each employee that we have, which will be an expense to our financial statement and make things very difficult," Jerrilynn told Joey Jones Tuesday. 

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"That's a lot of wages to be accruing for if they don't use it, or they use it, and it's still costing us money," she continued.

Minnesota workers will be able to take up to five months of paid time off when the new paid leave law takes effect in 2026. 

Gov. Tim Walz, D., signed the bill into law back in May, which will allot workers 12 weeks of family or medical-related leave. The law caps the paid leave at 20 weeks if it is combined. 

The new policy includes benefits for seasonal and temporary workers as well as full-time employees. 

But while proponents of the law have backed the measure citing equality in the workplace, small business have been concerned about the financial impact it will have on their bottom line. 

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"I think that they should all, every one of them in office, should own a business, successful business, before they're elected into office. They'll get educated real quick," Pat said. 

The program, which is estimated to cost $1.5 billion, will operate similarly to unemployment insurance. It will be funded by a new 0.7% payroll tax on employers that will take effect in 2026. 

Employers can deduct half of their premiums from workers' wages. The law contains protections against retaliation for workers who take the time off. It also includes premium relief for smaller companies.

But Jerrilynn said her company already works with their employees to accommodate such requests, and she is worried about the long-term impact it will have on her business. 

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"Right now we try to work with our employees and give them as much time as they need," Jerrilynn said. "We tried to incorporate a generous PTO policy to help with that, too. But… if it's 20 weeks, and they can say 12 weeks for one issue and back to back, say ten weeks for another, it's just crazy."

Minnesota will become the 12th state plus the District of Columbia that have some form of a paid family and medical leave program. Walz said the legislators, activists and administration officials who developed it have worked closely with those states to learn from their programs and how to improve on them.

"We have 20 people. How do you expect us to pay for this and have an employee… come in and sub because it could be up to five months?" Jerrilynn said. "There is a million different routes."

"But then again, if it's going to be a temp employee, a temporary agency is going to charge us for the costs that they incur and this is the same costs we are incurring, so now we're paying double," she continued. 

The Associated Press contributed to this report.