MN Employers: Communicate Accrual Year or Default to Jan 1 Under New ESST Rules

For HR leaders, the final ESST rules translate directly into a checklist of immediate operational changes: decide whether to stick with the calendar‑year default or carefully communicate an alternative accrual period, train supervisors on what 'good faith' means when assessing new hires’ projected hours, and most importantly, accept that employees have the final say in taking ESST—with discipline only available as a back‑end remedy for nonqualifying use. Every HRIS and leave‑management system serving Minnesota workers must now be configured to comply with these granular standards, making this a critical opportunity to update policies and avoid costly missteps.

On July 6, 2026, the Minnesota Department of Labor and Industry (MNDOLI) adopted final administrative rules clarifying the state’s Earned Sick and Safe Time (ESST) statute, bringing much‑needed interpretive guidance for employers navigating what had been an often ambiguous compliance landscape. The rules do not alter the underlying statute but provide concrete answers on accrual‑year designation, eligibility thresholds, employee control over usage, and the interaction with Minnesota’s Paid Leave program. With an estimated 1.5 million workers in Minnesota potentially affected, these clarifications materially reduce the risk of inadvertent violations while imposing specific communication and recordkeeping obligations that will ripple through HR departments and legal compliance teams alike.

At the heart of the clarifications is the default accrual year. Unless an employer affirmatively designates and communicates—in writing—a different accrual period, the ESST year defaults to the calendar year. Any subsequent change to the accrual year must not negatively affect an employee’s ability to accrue leave, must be communicated in advance in writing, and must comply with Minnesota’s Wage Theft Law. This makes the initial designation a critical one‑time decision with ongoing consequences. For employers that shift from an accrual model to frontloading—or vice versa—the rules require advance written notice and mandate that the change take effect only on the first day of the next accrual year, preventing mid‑year disruptions that could shortchange workers.

Eligibility for ESST turns on a “good faith” determination that an employee will work at least eighty hours per year in Minnesota. The rule clarifies that such a determination requires, at a minimum, evaluating the employee’s anticipated work schedule and location of hours in a manner that is not knowingly false or made in reckless disregard of the truth. This subtle standard has significant implications: employers cannot simply assert a blanket assumption; they must engage in a reasonable, documented analysis. For exempt employees, the rules further specify that an employer cannot deduct more ESST than the number of hours for which the employee is deemed to work for accrual purposes when they take a full day of leave, preventing employers from unilaterally reducing accrued balances in ways that might conflict with salary‑basis requirements under the Fair Labor Standards Act.

Employee control over ESST usage is a pivotal, and potentially surprising, aspect of the rules. Employees—not employers—control whether ESST is used. However, if an employee uses ESST for a nonqualifying purpose, that time is not protected by the statute and may be subject to discipline according to the employer’s standard policies. This means employers cannot preemptively restrict ESST usage but can retroactively address misuse, provided the disciplinary action is consistent with existing policies. Furthermore, the rules confirm that Minnesota Paid Leave—a separate statutory program—is excluded from ESST requirements, eliminating a common point of confusion where employers feared double liability.

The administrative rules, effective July 6, 2026, also address how ESST interacts with broader paid time off (PTO) policies. When an employer offers PTO or other paid leave that exceeds the ESST minimum, that leave is subject to ESST standards only when used for a qualifying ESST purpose. Otherwise, the employer’s standard PTO policy governs. This distinction is crucial for employers attempting to integrate ESST into a single, simplified leave program: they must still track which portion of leave is taken for ESST‑qualifying reasons to ensure statutory protections apply.