Minnesota’s New ESST Law Takes Effect 1/1/2024.
The 2023 Minnesota Legislative session was a tough one for small business. Lawmakers couldn’t get enough of higher taxes and more regulations, including employment mandates like the new Earned Sick and Safe Time law.
In addition to fighting for your business at the Minnesota Capitol, NFIB MN also wants to help our members stay ahead of new laws. On October 18, we partnered with employment attorney and fellow NFIB member Martin Kappenman to host a webinar on compliance with the new ESST law. Learn more about Martin’s legal practice here: Martin D. Kappenman – Peters, Revnew, Kappenman & Anderson, P.A.
If you’re looking for a payroll processing vendor to take some of the hassle out of compliance, don’t forget that your NFIB Member benefits include discounted rates with Heartland.
NFIB MN ESST Webinar Q&A
Small business owners had plenty of questions about ESST. We’ve compiled them here for your convenience. Some questions have been edited for clarity.
Please note this does not constitute legal advice and we encourage you to discuss specific situations and circumstances with a qualified attorney.
Applicability & Scope
Q: Does this apply to all employers regardless of employee headcount?
A: Yes, this applies to all employers regardless of how many employees they have. Please note this differs from the Bloomington, Minneapolis, and Duluth sick time ordinances, which means the smallest businesses (< 5 employees) are no longer exempt from offering paid time under ESST.
Q. Does this apply to all employees regardless of how many hours they work per week or year?
A. Yes, ESST applies to nearly all employees regardless of how many hours they work per week, including seasonal, temporary, and part-time employees. ESST does not apply to independent contractors, federal employees, and certain airline employees. ESST also may be waived as part of a construction trade collective bargaining agreement. (For more information about union employees in the construction trades, see below.)
Q. Does ESST apply to employees who are part of a union?
A. The ESST law allows for the requirements of ESST to be waived in a collective bargaining agreement for union employees in a building and construction trade union.
Q. Are the same rules required for full-time and part-time employees?
A. As long as all employees have access to the minimum requirements of ESST, an employer can continue to have different paid time off policies above and beyond ESST for employees based on non-discriminatory criteria such as full-time, part-time status, or length service. Employers can also decide whether employees accrue ESST on an hours worked basis or receive it in a block at the beginning of the year based on non-discriminatory criteria.
Q. As an owner, do I need to include myself in ESST?
A. If you call yourself an employee for other purposes, you likely need to track ESST for yourself.
Q. Is there a waiting period before a new employee can begin using ESST? Do the waiting periods in the local Sick Time ordinances still apply?
A. No, an employee who works more than 80 hours in a year can use ESST as it’s accrued. An employee begins accruing ESST on day one. The waiting periods in local ordinances (i.e., Bloomington and Minneapolis) are no longer permitted under the state law.
Q-i. Can an employer require that an employee take ESST in increments of at least two hours?
Q-ii. Our PTO is required to be used in 8 hour increments. With this ESST law, will this require the company to allow employees to use PTO down to the .25 hour, since that is how the hourly employees are paid?
A. An employer must allow the employee to take ESST in the smallest increment of time tracked in the employer’s system. In other words, if you track time worked in 15 minute increments then the employee must be able to use ESST in 15 minute increments. Per the law, the smallest increment of time cannot be more than four hours.
Q. Duluth already has a safe & sick time policy. Do I follow this policy or the new state policy?
A. Both state law and the local ordinance may apply. Where one is silent on an issue, the other may impose certain requirements on employers. Where they both impose requirements on an issue, the law that is most favorable to the employee is the one that the employer should follow.
For instance, Duluth’s ordinance allowed for a 90-day waiting period and exempted the smallest employers (< 5 employees). The state law has no waiting period, only a requirement that the employee have worked 80 hours for the employer. The state law has no exceptions based on employer size. Since the state law is more favorable to employees, the state law controls and is the one that employers should follow on those issues.
Q. If the employee does not have any PTO rollover, do we have to front load ESST?
A. An employer is not required to front load ESST hours under the law. An employer may front load ESST hours as part of limiting carry over (must also pay out unused hours), based on an employee’s status, for administrative convenience, or for other reasons.
Frontloading, Unused Hours, Carry Over & Pay Out
Q. Do I have to pay out unused ESST for an employee who quits, resigns or is terminated?
A. No, the ESST law does not require payout of unused time upon separation from employment.
Q. If the employee comes back, do they still have access to the hours accrued prior to the break employment?
A. If the employee returns to work with the same employer within 180 days of separation, the employee has access to unused hours accrued prior to separation. If the separation lasted longer than 180 days, the employer does not have to restore the unused accrued ESST hours.
Q. If we have a PTO policy that pays out upon termination or separation, are we required to restore the balance if they rejoin our business?
A. No, the balance goes down to zero if the employee is paid out for their unused hours.
Q. Do ESST hours carry over if employees do not use it?
A. An employee can carry over ESST hours from year to year, up to a maximum of 80 hours.
Q. Should an employer frontload ESST hours each year or is there a benefit to have them accrue ESST?
A. This may depend on the nature of the business and the tenure of the employee. The benefit of frontloading ESST at the beginning of the year is that, if the employer also pays the employee for unused ESST at the end of the year, the employer can prohibit the employee from carrying over unused ESST from year to year. Under the law, an employee can bank up to 80 hours of ESST at one time, meaning they can carry over unused hours from year to year up to that limit. The employer must frontload and payout for unused hours in order to preclude carry over of unused hours.
Q. If an employer frontloads 80 hours of PTO for an employee, does the employer need to provide an additional 48 hours of ESST?
A. So long as an employer provides the minimum amount of PTO and clearly states in writing that an employee can use PTO for ESST, you do not need to provide additional hours.
Q. Can you start an employee off on an accrual basis and then frontload the remainder after 90 days?
A. The law does not explicitly address this question. We recommend consulting an employment attorney prior to adopting this policy.
Q. If we offer 15 days (120 hrs) of PTO and we are required to allow 80 hours of rollover, are we now extending their PTO to 200 hours?
A. No, if an employer does not prohibit carry over by paying out unused time at the end of the year and frontloading 48 hours at the beginning of the next year, the ESST law only requires employers to allow the employee to maintain a bank of 80 ESST hours at any given time. Employers can opt to allow an employee to carry over more hours or accrue a larger bank of PTO/ESST at their own discretion.
Q. Currently we only allow 40 hours of carryover, do we need to change our policy to 80 hours?
A. Under the law, an employee can bank up to 80 hours of ESST at one time, meaning they can carry over unused hours from year to year up to that limit. If an employer would like to reduce the amount of carry over or prohibit carry over, the employer must frontload and payout for unused hours at the end of the year.
Q. If we front load PTO on the employee’s anniversary date, does this fulfill the requirement for ESST? If an employee uses all PTO for vacation and then becomes sick, do we need to pay the time off for sick time?
A. Per MN DLI: A “year” means any consecutive 12-month period of time as determined by an employer and clearly communicated to employees. Most employers will find it helpful to use one of the following: calendar year (Jan. 1 through Dec. 31); tax year; fiscal year; or year based on the employee’s anniversary date of employment. While the employer may determine the accrual year, it is important to note that all employees must either 1) start accruing hours on Jan. 1, 2024, or 2) have at least 48 hours front loaded on Jan. 1, 2024.
Once an employee has used their allotted ESST or PTO (if inclusive of ESST) for the year, the employer is not required to pay additional sick time.
Q. We front load PTO and do not allow carry over. Since we front load, do we need to allow the 80 hours of carry over?
A. To prohibit carry over of unused hours, the employer must frontload and payout for unused hours at the end of the year.
Q. Can we require a doctor’s note if the employee chooses to use Earned Sick for either themselves or their family member?
A. If the employee uses ESST for an absence lasting longer than three days, an employer can require a doctor’s note. If the employee is unable to provide a doctor’s note, the employer must accept a written statement from the employee that the employee is using ESST.
Q. Can an employer require that an employee seek a second opinion if the employer disagrees with the doctor’s assessment that an employee needs to use ESST for a specified period of time that exceeds three days?
A. This situation is not addressed the ESST law, but we recommend caution with regard to seeking additional documentation outside of what an employer is explicitly permitted in
Q. Is there any ongoing eligibility verification (e.g., one-week follow-up) that an employee’s condition or circumstance still qualifies for ESST?
A. This situation is not addressed the ESST law, but we recommend caution with regard to seeking additional documentation outside of what an employer is explicitly permitted in law.
Q. If an employee is hospitalized overnight, can we require documentation for return to work and to cover ESST?
A. If the employee returns to work in three days or less, the employer cannot require the employee to provide documentation. The law is silent on requiring documentation for return to work.
Q. Does the employee need to state they want to use ESST or PTO when reporting out?
A. Per MN DLI: An employer may require notice of up to seven days in advance when the need to use ESST is foreseeable. If the need is unforeseeable, an employer may require notice as soon as practicable. If an employer requires notice, the employer must have a written policy regarding notice procedures and must provide a written copy of the policy to employees; if the policy is not provided to employees, then an employer cannot deny use of ESST to an employee on the grounds that the employee did not follow the notice policy.
Q. Can we require documentation for return to work and cover ESST payment?
A. An employer can require the employee to provide documentation if ESST is used for more than three consecutive days. The law does not impose limits on requiring documentation for return to work.
Q. If an employee starts in the middle of a benefit year and the employer frontloads ESST hours, can the employer prorate the amount ESST hours frontloaded?
A. We are awaiting guidance from MN DLI on this question and will update as soon as we receive more information.
ESST Rate of Pay
Q. How do we manage ESST for an employee works on commission and does not have a set schedule?
A. As of 10/18/2023, we are still awaiting guidance from the Minnesota Department of Labor and Industry (MN DLI) on this matter. In general, the employee accrues 1 hour of ESST for every 30 hours worked and the rate of pay for commission-based employees can be their base rate.
Q. How do we determine the rate of pay for ESST for a commission-only employee?
A. This is not specifically addressed in the law, but further guidance may be provided by MN DLI prior to 1/1/2024.
Q. If an employee is paid at three different rates during one shift, at what rate is ESST paid for that time?
A. An employer should pay ESST based on what the employee would have made if they worked their typical shift that day.
Q. If an employer front loads 48 hours at the start of the year and an employee receives pay increases over the course of the year, at what wage does the employer have to pay ESST?
A. The employer should pay ESST at the wage rate the employee would have received on
the day they used ESST time.
Q. We pay lots of overtime. At what rate is ESST paid?
A. ESST is paid at the rate the employee would have received had they worked during the time the employee used ESST.
Sick Time vs Holiday vs ESST vs PTO
Q. If our business provides 120 days of PTO to a manager, should we make PTO inclusive of ESST?
A. Martin recommends having a consolidated PTO policy instead of separate sick, ESST, vacation allowances that meets the minimum requirements of the ESST law.
Q. If our business combines vacation and sick together into PTO, how do we keep track of PTO used as sick or as vacation?
A. The business would no longer track vacation and sick separately. The use of PTO is generally unrestricted, unless the business has specific days when employees are not permitted to take time off. In the case of those days, there are protected forms of leave (including ESST) that cannot be limited by company policy.
Q. Can an employee opt to take unpaid sick day instead of ESST?
A. Employers can decide whether to deduct the sick day from ESST or not, similar to FMLA.
Q. If an employee requests ESST over multiple days, including a holiday, does the holiday count as ESST?
A. No, the holiday hours are not deducted from accrued ESST. Similarly, an employer need not allow an employee to use ESST time on an unpaid holiday when they were not scheduled to work.
Q. If an employer has a policy that requires an employee to work the day before and the day after a holiday in order to be paid for the holiday, and an employee uses ESST on one or both of those days, do we still need to pay out for the holiday?
A. So long as the same policy applies to both ESST and any other kind of leave that prevents the employee from working, the holiday need not be paid if the employee does not satisfy the work requirements. This limitation cannot be exclusive to ESST.
Q. If we cover ESST under an unrestricted PTO policy, do we still need to include ESST on the pay statement?
A. No, but the employer must still provide the total PTO hours accrued and available, as well as the number of PTO hours used in the pay period, on the pay statement. At the beginning of employment and/or the enactment of ESST on 1/1/2024, employers should clearly communicate in writing to employees that PTO is inclusive of ESST.
Q. Our workers are provided with paid leave hours based on the number of years worked and we have sick time. Do I have to make a separate line for ESST?
A. As with PTO, if sick time is inclusive of ESST, then an employer does not need to separately state ESST hours accrued, available, and used on the employee’s pay statement. The employer should clearly state in writing that sick time is inclusive of ESST and may be used for all reasons permitted in the ESST law.