Starting on February 21, 2025, every Michigan employer, regardless of size, must provide their employees with up to 72 hours of sick leave annually.

For five years, Michigan employers have been administering a paid leave law—the Michigan Paid Medical Leave Act (PMLA)—in its current form. However, the Michigan Supreme Court recently reinstated a voter initiative known as the Earned Sick Time Act (“ESTA” or “Act”), drastically changing the landscape for Michigan employers to provide sick time to employees. The ESTA is the original version of a law adopted by the Michigan Legislature that was immediately amended to create the PMLA, a more limited sick leave program applicable to many Michigan employers since 2019.

By court order, the ESTA will take effect on February 21, 2025, replacing the PMLA and covering all Michigan employers, which is just one of many differences between the PMLA and the ESTA. This Insight explains employers’ new obligations under the ESTA.

Who Is Covered Under the ESTA?

One of the biggest differences between the PMLA and the ESTA is the ESTA’s much broader application. While the PMLA applies only to employers that employ 50 or more individuals, the ESTA will apply to all employers with one or more employees, excluding the U.S. government.

Importantly, employer obligations and employee entitlements vary based on whether an employer qualifies as a “small business.” The Act defines a small business as one with fewer than 10 employees, based on individuals, not full-time workers or equivalents, meaning that each full-time, part-time, or even temporary worker on the employer’s payroll counts as an employee. If an employer employs 10 or more employees on its payroll during any 20 (or more) weeks of the current or prior calendar year, then it does not qualify as a small business under ESTA, even if the number of employees drops during that period. While the text of the ESTA is silent as to whether the 10-employee threshold is calculated based on total employees nationwide or just employees located in Michigan, guidance issued by Michigan’s Department of Labor and Economic Opportunity (LEO) suggests that the threshold is based on a nationwide employee count, as the PMLA similarly was.

While the PMLA exempted certain types of employees from coverage, including those who are part-time, temporary, and exempt under the Fair Labor Standards Act (FLSA), the ESTA does not include such exemptions and, in fact, applies to all employees in Michigan (except for federal government employees). Importantly, LEO has indicated that remote workers are covered under ESTA, such as in the case where an employee is located in Michigan and teleworks for an employer with no other presence in Michigan.

Comparing Current PMLA to Coming ESTA Requirements

Accrual

The Act provides that, as of February 21, 2025, covered employees will accrue earned sick time at a rate of one hour for every 30 hours worked, faster than the rate under the PMLA, which currently requires that covered employees accrue earned sick time at a rate of one hour for every 35 hours worked. Note that “hours worked” includes all hours worked, including overtime. FLSA-exempt full-time employees are presumed to work 40 hours per week unless their normal workweek is less than 40 hours.

Significantly, while the PMLA currently allows an annual accrual cap, the ESTA does not cap sick leave accruals but does cap usage, as referenced below. Most employers under the ESTA will not be allowed to cap paid sick leave accrual (either on an annual basis or a rolling basis). Under the ESTA, only small businesses will be able to cap accrual of paid leave at 40 hours. Thereafter, small businesses must continue to permit accrual of unpaid leave, which is uncapped. ESTA does not require employers to pay out an employee’s accrued, unused, earned sick time upon termination of employment, but employers could be obligated to do so under a written company policy.

Carryover

At present, PMLA permits carryover of a maximum of 40 hours of unused, accrued paid leave from year to year (unless the employer chooses to allow more). That limit will no longer apply under the ESTA, which instead requires employers to carry over all accrued, unused earned sick time. This carryover obligation applies even to temporary or seasonal employees, whose carried-over time should remain as long as the seasonal employment does not lapse for more than six months.

Frontloading

Currently, the PMLA expressly permits employers to frontload an employee’s leave, meaning that the total leave that can be used in a year is made available at the start of the year. The PMLA also permits employers that frontload to require employees to wait 90 days after hire to use accrued leave and to forego carryover of unused accruals.

The ESTA does not address frontloading an employee’s earned sick time, but LEO guidance states that there is nothing in the new Act that says an employer cannot frontload an employee’s earned sick time so long as the ESTA’s requirements are met. There is no indication, however, that employers who frontload will be able to forego carrying over unused time.

How Much Leave May Employees Take?

The Act permits all employers to require new hires to wait up to 90 days to start using accrued leave.

The ESTA allows employers to restrict the amount of earned sick time employees may use. For small businesses, employers must allow employees to use up to 40 hours of paid earned sick time and up to 32 hours of unpaid earned sick time per year. All other employers (those with 10 or more employees) must allow employees to use 72 hours of accrued paid leave per year. Employers may determine what timeframe constitutes a “year” so long as the period is a regular and consecutive 12-month period.

Under the ESTA, employees will be able to use earned sick time incrementally in the smaller of (i) hourly increments or (ii) the smallest increment that the employer’s payroll system uses to account for absences or use of other time. This provision is somewhat different than the PMLA rule, which has required usage in one-hour increments unless an employer’s written time-off policy allows different increments (which could be greater than one hour).

Permitted Reasons for Using Earned Sick Time

As under the PMLA, Michigan employees may take time off under the ESTA to use their earned sick time for a permitted reason. The permitted reasons are as follows:

1. The employee’s mental or physical illness, injury, or health condition; medical diagnosis, care, or treatment of the employee’s mental or physical illness, injury, or health condition; or preventative medical care for the employee[;]
2. For the employee’s family member’s mental or physical illness, injury, or health condition; medical diagnosis, care, or treatment of the employee’s family member’s mental or physical illness, injury, or health condition; or preventative medical care for a family member of the employee[;]
3. If the employee or the employee’s family member is a victim of domestic violence or sexual assault, for medical care or psychological or other counseling for physical or psychological injury or disability; to obtain services from a victim services organization; to relocate due to domestic violence or sexual assault; to obtain legal services; or to participate in any civil or criminal proceedings related to or resulting from the domestic violence or sexual assault[;]
4. For meetings at a child’s school or place of care related to the child’s health or disability, or the effects of domestic violence or sexual assault on the child; or
5. For closure of the employee’s place of business by order of a public official due to a public health emergency; for an employee’s need to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency; or when it has been determined by the health authorities having jurisdiction or by a health care provider that the employee’s or employee’s family member’s presence in the community would jeopardize the health of others because of the employee’s or family member’s exposure to a communicable disease, whether or not the employee or family member has actually contracted the communicable disease.

Most of the permitted reasons to use earned sick time under the ESTA are similar to those under the PMLA, but the ESTA includes the addition of reason “(d)” above.

Administrative Details

Significantly, the ESTA has expanded categories of individuals considered to be “family members” of employees that are not included under the PMLA. The ESTA’s definition of “family member” includes a “domestic partner,” meaning “an adult in a committed relationship with another adult, including both same-sex and different-sex relationships.” The Act further clarifies that a “committed relationship” means “one in which the employee and another individual share responsibility for a significant measure of each other’s common welfare, such as any relationship between individuals of the same or different sex.” Another category of individuals included as “family members” under the ESTA are other individuals “related by blood or affinity whose close association with the employee is the equivalent of a family relationship.”

When an employee plans to take leave for any reason above, employers may require advance notice of seven days or less prior to the date the leave is to begin, only if the employee’s need to use the sick time is foreseeable. If the employee’s use of sick time is not foreseeable, employers may only require that the employee give notice of their intention to use the sick time as soon as practicable under the circumstances.

If usage exceeds three consecutive workdays, an employer may require “reasonable documentation,” which the ESTA provides may include a document signed by a health care professional that need not explain the nature of the illness. If an employer requires medical documentation, then the employer is responsible for all out-of-pocket expenses the employee incurs to obtain such documentation. If the leave is used due to reasons related to domestic violence or sexual assault, a police report, court document, or signed statement from a victim and witness advocate constitutes reasonable documentation and need not provide details regarding the underlying incident.

Discrimination and Retaliation Prohibited

Similar to the requirements under the PMLA, the ESTA prohibits discrimination or retaliatory personnel action against an employee because the employee has exercised a right protected under the ESTA. The ESTA includes a detailed definition of “retaliatory personnel action” that encompasses denial of any right guaranteed under the ESTA, adverse employment actions (including against former employees), sanctions against an employee who is a recipient of public benefits, and interference with, or punishment for, participation in an investigation, proceeding, or hearing under the ESTA.

In contrast to the PMLA, the ESTA establishes a “rebuttable presumption” that an employer retaliated in response to an individual’s exercise of rights under the Act. This presumption exists if an employer takes adverse personnel action against an individual within 90 days after that individual files an administrative complaint with or civil action alleging a violation of the ESTA, informs any person about an employer’s alleged violation of the ESTA, cooperates with an investigation or prosecution of any alleged violation of the ESTA, opposes any policy, practice, or act prohibited under the ESTA; or advises any person of their rights under the ESTA.

Enforcement Provisions

Another stark difference between the PMLA and the ESTA is the breadth of remedies available to aggrieved employees, including expanded time to file an administrative claim as well as a new right to file a private civil action.

While the PMLA grants employees up to six months to file a claim with Michigan’s Department of Licensing and Regulatory Affairs (LARA), the ESTA allows three years to file a claim. Both laws allow LARA to impose various penalties and civil fines against employers and award aggrieved employees earned time previously withheld; however, the ESTA will also allow for the recovery of damages, such as back pay, and other remedies, including reinstatement if the employee lost their job.

The ESTA sets forth detailed procedures for complaints filed with LARA, including requirements for investigation and mediation and a procedure for an employer to appeal a decision, if LARA issues a notice of violation and/or imposes a penalty.

The state’s enforcement powers do not end there. If the agency determines that there is reasonable cause to believe that an employer violated the ESTA and is unable to obtain voluntary compliance by the employer within a reasonable period of time, LARA may bring a civil action on behalf of an employee. Available remedies include payment for used earned sick time, reinstatement, back pay with benefits, liquidated damages, costs, and reasonable attorney fees. The agency not only has the power to bring a civil action on behalf of the aggrieved employee but may both investigate and file a class action.

Further, unlike the PMLA, the ESTA permits a private right of action. Under the ESTA, employees have three years to file a lawsuit seeking redress. The statute expressly provides that filing a claim with LARA is “neither a prerequisite nor a bar to bringing a civil action,” meaning that a plaintiff’s failure to exhaust administrative remedies is not grounds for dismissal of a suit brought under ESTA.

Lastly, the ESTA imposes civil fines on top of the potential civil remedies noted above. Employers that fail to provide earned sick time in violation of the ESTA or take retaliatory personnel action against an employee or former employee are subject to civil fines of up to $1,000.

Notice, Posting, and Recordkeeping Requirements

When the ESTA takes effect, all Michigan employers must provide each current employee with written notice advising of their rights under the ESTA. This notice must also be provided to new hires going forward and must explain how much earned sick time may accrue, list the employer’s designated “year,” and explain how earned sick time may be used. LEO will prepare a notice for this purpose that will be made available in multiple languages since the ESTA requires employers to provide the notice in English and Spanish as well as any other language that is the first language spoken by at least 10 percent of the employer’s workforce.

Employers are also required to display a poster providing the above information in a conspicuous place that is accessible for viewing by all employees. Employers that willfully fail to provide the required notice to employees or post the required posting in their place of business are subject to a civil fine of up to $100 for each separate violation.

In addition, employers must retain records documenting hours worked and earned sick time taken by employees for at least three years. The Act requires employers to allow LARA access to records at a mutually agreeable time and with appropriate notice. It is key that employers maintain adequate records documenting employees’ hours worked and earned sick time taken, as failure to do so creates a rebuttable presumption that an employer has violated the ESTA. That presumption can only be rebutted by “clear and convincing” evidence.

Interaction with Other Leave Policies

The ESTA expressly provides that it does not prevent an employer from providing greater accrual or more generous terms for the use of sick leave than the Act requires. In a webinar given on August 27, 2024, LEO officials stated that employer paid time off (PTO) policies that provide at least as much paid leave as is required under the ETSA and provide employees with time off for covered reasons will be deemed compliant with the ESTA. The law also does not obligate employers to create or maintain separate banks of PTO.

Finally, the ESTA does not preempt any existing, currently operative collective bargaining agreement (CBA). The ESTA’s requirements, however, will apply to employees on the date that a CBA expires, even if the agreement contemplates remaining in force pending the execution of a new CBA.

Summary of Changes

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What Employers of Michigan Employees Should Do Now

Although the ESTA is not scheduled to go into effect until February 21, 2025, Michigan employers can mitigate their risk by taking steps now to make sure they are in compliance with the ESTA come the effective date. To that end, the following actions are recommended:

• Review and revise leave-related policies and procedures, including onboarding notices, timekeeping, and payroll mechanisms, to comply with the ESTA’s requirements.
• Ensure that human resources personnel understand the rights and protections afforded to employees under the ESTA, including administration of all leave policies, notice and posting requirements, and recordkeeping obligations.
• Train managers to avoid retaliating against an employee because the employee has exercised a right protected under the ESTA.
• Obtain and timely display copies of the required ESTA posters.
• Calendar any CBA expiration date and prepare for negotiating compliance with the ESTA.
• Watch for additional ESTA guidance and regulations.

Staff Attorney Elizabeth A. Ledkovsky contributed to the preparation of this Insight.