Out-of-State Employers Hiring in Minnesota: 2026 Rules

Registration: Do Not Assume One Employee Is Invisible

Minn. Stat. § 303.03 provides that no foreign corporation may transact business in Minnesota unless it holds a certificate of authority. The statute then lists activities that do not, by themselves, constitute transacting business: defending a lawsuit, holding director meetings, maintaining bank accounts, holding security interests, conducting an isolated transaction completed within 30 days, and several others.

Employing people in Minnesota is not on that list. The list is expressly non-exclusive, so it does not resolve every case, but the safe harbor you might hope to land in is not there. Treat registration as the default when you put an employee in the state, and confirm your position before the first paycheck rather than after a dispute. Note also that § 303.03 says it does not establish the standards for tax nexus, so registration and tax exposure are separate questions that both need answers.

Unemployment insurance is a separate registration. Under Minn. Stat. § 268.042, subd. 1, each employer must register with the commissioner for a tax account on or before submitting its first wage detail report. The state registration obligations for remote employees article covers the broader multistate picture.

The Pay Floor: Wages and Overtime

Minnesota’s minimum wage is $11.41 an hour for all employers as of January 1, 2026, with a $9.31 training wage for workers under age 20 during their first 90 days of employment (Minnesota Department of Labor and Industry). The large-employer and small-employer split that Minnesota used for years no longer exists, and the state rate is well above the federal $7.25 floor. Paying the federal minimum to a Minnesota employee is a violation.

The state rate is a floor, not a ceiling. Minneapolis and Saint Paul each set a higher local minimum wage by ordinance, and each has its own sick and safe time ordinance. As of January 1, 2026, the Minneapolis minimum wage is $16.37 an hour for employers of every size, which is well above the state rate. Saint Paul sets its own rates, which vary by employer size and phase in on different dates. If your employee works from a home in either city, check the city rate and pay the higher of the city and state figures. Paying the state minimum to a Minneapolis-based remote worker underpays them by several dollars an hour.

Overtime is the trap that runs the other way. Minn. Stat. § 177.25, subd. 1, requires time and a half only after 48 hours in a workweek, which is more permissive than the federal 40-hour threshold. Do not read that as your rule. If your employee is covered by the federal Fair Labor Standards Act, as most are, the 40-hour federal standard governs because it is more protective. The state’s 48-hour rule matters only where the FLSA does not reach. The practical rule for a multistate employer is that both laws apply at the same time and the employee gets the benefit of whichever is more protective. That includes the exemption tests, which are not identical: an employee who is exempt under the federal standard is not automatically exempt under the state standard, so run both.

Earned Sick and Safe Time

Minnesota’s earned sick and safe time law reaches your remote worker faster than most employers expect. An employee is covered if the employer anticipates the person will work at least 80 hours in a year in Minnesota (Minn. Stat. § 181.9445). That is roughly two weeks of full-time work. There is no minimum company size.

Under Minn. Stat. § 181.9446, an employee accrues:

a minimum of one hour of earned sick and safe time for every 30 hours worked up to a maximum of 48 hours of earned sick and safe time in a year

Accrued but unused time carries over into the following year, and the running balance may reach 80 hours before an employer may cap it, unless the employer agrees to more. An employer may instead front-load hours in lieu of carryover, but only on the statute’s terms: 48 hours available for immediate use at the start of the year if the employer pays out accrued but unused hours at year end at the employee’s base rate, or 80 hours if the employer does not pay them out. Front-loading 48 hours without the year-end payout does not satisfy § 181.9446. The mechanics, including the permitted uses and the notice and recordkeeping duties, are covered in Minnesota ESST paid sick time compliance.

Paid Leave: Live as of January 1, 2026

This is the newest cost and the one most likely to be missing from an out-of-state payroll setup. Minnesota Paid Leave, codified at chapter 268B, began paying benefits and collecting premiums on January 1, 2026. It is a state insurance program funded by quarterly premiums on wages paid in covered employment, and it is separate from earned sick and safe time. An employee can be entitled to both.

The 2026 numbers, from Minnesota Paid Leave:

• The premium rate is 0.88 percent of wages, applied up to the Social Security wage cap.
• Qualifying small employers pay a reduced rate of 0.66 percent, which is 75 percent of the full rate. Qualifying is a two-part test under Minn. Stat. § 268B.14, subd. 5a: 30 or fewer employees and an average employer wage no greater than 150 percent of the state average wage in covered employment for the basis period. Headcount alone does not make you a small employer.
• Employers must contribute at least 50 percent of the premium and may collect the rest, up to 0.44 percent of wages, from the employee by wage deduction. A qualifying small employer must pay at least 25 percent of the full calculated rate and may not deduct from employee pay to fund the employer’s own portion.

Minn. Stat. § 268B.14, subd. 1, requires premiums to be paid quarterly and received by the department on or before the last day of the month following the end of the calendar quarter, and subd. 3 confirms the employer must pay a minimum of 50 percent of the annual premiums, subject to the small-employer rates in subd. 5a, with the employee’s share collected by wage deduction. An employer with an approved private plan under § 268B.10 may satisfy the obligation that way instead. See Minnesota paid family leave employer obligations for the full duty set.

Notices and Pay Transparency

The wage notice at hire. Under Minn. Stat. § 181.032(d), at the start of employment you must give each employee a written notice stating the rate or rates of pay and the basis, any meal or lodging allowances claimed, paid time-off accruals and terms of use, the employee’s employment status and whether the employee is exempt from chapter 177 and on what basis, and the deductions that may be made from pay, among other items. Paragraph (e) requires you to keep a copy signed by the employee acknowledging receipt, and to provide the notice in another language on the employee’s request. Paragraph (f) requires written notice of changes before they take effect. An offer letter is not a substitute for this notice.

Pay transparency in postings. Minn. Stat. § 181.173 applies to an employer with 30 or more employees at one or more sites in Minnesota and requires a job posting to disclose the starting salary range and a general description of benefits and other compensation. Count carefully: the threshold is keyed to Minnesota employees, so a large national company with a handful of Minnesota workers may fall below it while a mid-sized company with a Minnesota office does not. Detail is in Minnesota pay transparency requirements.

Your Noncompete Almost Certainly Does Not Work Here

If your standard offer letter carries a noncompete, stop using it for Minnesota hires. Minn. Stat. § 181.988, subd. 2(a), is categorical:

Any covenant not to compete contained in a contract or agreement is void and unenforceable.

The only exceptions in subd. 2(b) are a covenant agreed upon during the sale of a business, which must be temporary and restricted to a reasonable geographic area and a reasonable length of time, and a covenant agreed upon in anticipation of the dissolution of a business, which must be limited to a reasonable geographic area where the business has been transacted. Neither exception reaches an ordinary employee noncompete. The enacting law provides that the section “is effective July 1, 2023, and applies to contracts and agreements entered into on or after that date” (2023 Minn. Laws ch. 53, art. 6, § 1), so a noncompete your employee signed before that date is not voided by the statute. Anything signed on or after it is.

Two points that out-of-state employers get wrong here.

First, the ban is narrower than “all restrictive covenants.” Subd. 1 excludes nondisclosure agreements, agreements protecting trade secrets or confidential information, and nonsolicitation agreements from the definition of a covenant not to compete. Those tools remain available, and they are where your protection should now live. The older Minnesota case law many handbooks still reflect, including judicial blue-penciling of an overbroad noncompete into a reasonable one, does not save a covenant the statute voids outright.

Second, you cannot route around this with your home state’s law. Subd. 3 provides that an employer must not require an employee who primarily resides and works in Minnesota, as a condition of employment, to agree to a provision that would require the employee to adjudicate a Minnesota claim outside Minnesota or would deprive the employee of the substantive protection of Minnesota law, and any such provision is voidable by the employee. Subd. 3(e) limits that subdivision to claims arising under section 181.988, so it is not a general override of every choice-of-law clause, but it is fatal to the one carrying your noncompete. The Delaware choice-of-law and venue clause in your template does not make a Minnesota employee’s noncompete enforceable. Background on the underlying rules is in the Minnesota noncompete agreements FAQ.

Final Pay When the Relationship Ends

Minnesota’s separation-pay timing is stricter than many states. Under Minn. Stat. § 181.13(a), when you discharge an employee, wages actually earned and unpaid are immediately due upon the employee’s written demand, and if you do not pay within 24 hours of that demand, you are in default. The employee may then collect a penalty equal to their average daily earnings for each day you remain in default, up to 15 days. A payroll cycle that runs on your headquarters’ calendar will not protect you. The final pay rules for Minnesota employers cover the details, including resigning employees.

What to Do Before the Next Minnesota Hire

Work the list once and you will not have to work it again: confirm your registration position with the Secretary of State and register for a state unemployment account; set the pay rate against the higher of the state and any applicable city minimum, apply the 40-hour federal overtime threshold, and confirm exempt status under both the federal and state standards; add the employee to ESST accrual and to Paid Leave premium remittance; issue the § 181.032(d) wage notice and keep the signed copy; strip the noncompete from the Minnesota offer letter and replace the protection with a nondisclosure and nonsolicitation agreement; and set your separation process to pay final wages within 24 hours of a written demand.

The single most expensive assumption an out-of-state employer makes is that the handbook governing its home-state workforce travels with the job. It does not. For the broader practice area, see employment law.