The Michigan Legislature recently passed amendments to the Earned Sick Time Act and those amendments were signed into law by Gov. Gretchen Whitmer. Except for delays regarding notice requirements and the application of the law on certain small employers and some other minor changes, the amendments became effective Feb. 21, 2025. Required accruals of earned sick leave for large employers begin on that date. Large employers otherwise now have until March 23, 2025, to comply with the statute’s notice requirements.

Earned Sick Time

Sometimes procrastination pays. In the latest example, many employers across Michigan spent the last several months drafting policies and preparing for the Earned Sick Time Act (ESTA) to become effective following last summer’s Michigan Supreme Court decision in Mothering Justice v. Attorney General, only to wake up on Feb. 21 this year, the planned effective date, to learn many requirements of the law had changed. While the changes are not everything the employer community hoped for, the changes did offer some improvement. 

The amendments eliminated some of the most problematic provisions of ESTA, including those creating presumptions of guilt and providing individual rights to bring a lawsuit and recover attorney fees if successful. However, ESTA remains one of the most aggressive paid leave statutes in the country and continues to contain unclarified ambiguities, and the amendments still are applicable (without delay) to most Michigan employers despite only a few hours’ notice. 

As a result, despite the amendments effective Feb. 21, 2025, most employers in Michigan still are required to begin accruing for and provide their employees one hour of paid time off, which can be used for ESTA required purposes, for every 30 hours they worked. Salaried staff are still assumed to work 40 hours each week unless their normal workweek is less, in which case they are presumed to accrue time based on their normal workweek. However, the amendments revised the definition of who is an employee to confirm the following individuals are outside ESTA’s requirements:

• Those employed by the U.S. government
• Unpaid trainees and interns (under a rather strict and ambiguous definition)
• Individuals employed in accordance with the Youth Employee Standards Act
• An individual who works in accordance with a “self-scheduling policy” if both of the following conditions are met:
  • The policy allows the individual to schedule the individual's own working hours and
  • The policy prohibits the employer from taking adverse personnel action against the individual if the individual does not schedule a minimum number of working hours

The state’s updated FAQs also confirm that, generally, elected public officials, members of public boards and commissions, and other similar holders of public office are not considered employees for ESTA purposes unless the entity treats those individuals as employees.

Small businesses (i.e., those who average 10 or fewer, previously was defined as fewer than 10, employees over any 20 or more calendar weeks in a calendar year) were likely the biggest beneficiaries of the recent amendments. For them, the application of ESTA is postponed until at least Oct. 1, 2025, and the amendments also limit their leave obligations to 40 hours of paid leave in a 12-month period, eliminating the prior requirement that they provide 32 hours of unpaid leave in addition to the paid leave requirements.

Lastly, for small employers who did not employ an employee before Feb. 21, 2022, they are not required to comply with ESTA until three years after the date the employer employs their first employee, which means that some small businesses will not be subject to ESTA until well after the Oct. 1, 2025 deadlines, and new small businesses will have the benefit of a three year grace period before ESTA applies.

In addition to these changes, the amendments also provided the following:

• Confirms that all employers may frontload benefits to satisfy ESTA requirements and doing so removes any carryover obligations.
  • Employers can frontload time for part-time staff based on the hours they are expected to work so long as if the individual works more than the hours expected, they provide additional leave in an amount no less than they would have earned under the normal ESTA accrual rates.
• Confirms that an employer is not required to include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips or gratuities in the normal hourly wage or base wage upon which paid earned sick time compensation is based.
• Caps carryover requirements at 72 hours (40 for small businesses) annually and allows an employer to avoid carryover obligations by paying the employee the value of any unused accrued paid sick time at the end of the year in which it was earned.
• Maintains the ability for unforeseeable absences an employer can require employees to provide notice of an absence immediately after the employee becomes aware of the need for paid sick time so long as the employer:
  • Provides employees with a written copy of the policy requiring notice and setting for the procedures for providing notice of the need for leave (and any changes thereto within five days)
  • The notice requirement allows the employee to provide notice after they become aware of the need for ESTA qualifying leave

Absent satisfaction of these two requirements, ESTA continues to limit an employer’s ability to require notice of an absence to “as soon as practicable” and:

• Allows an employer to require employees to return reasonably required documentation related to absences of more than three consecutive days within 15 days of the employer’s request.
• Provides special rules for employers who are subject to a collective bargaining agreement that requires contributions to a multi-employer plan.
• Allows an employer to require employees hired after Feb. 21, 2025, to wait up to 120 calendar days to use accrued benefits.
• Reduces the period of time an employee can leave and be re-hired without obligating an employer to honor previously accrued benefits from six months to three months, and confirms that it is not required at all if an individual is paid the value of their accrued but unused benefits at the time of transfer or separation.
• While employers are still prohibited from awarding attendance points for ESTA related absences, they can now undisputedly discipline employee who uses paid time for purposes other than those provided by ESTA. Not only does this change better allow employers to use a single bank of time, but it opens the door to allow employers to discipline staff who might be tempted to use paid leave fraudulently subject to adequate employer proof.
• Confirms that employees covered by a collective bargaining agreement are only exempt from ESTA to the extent the collective bargaining agreement “conflicts with” the statute.
• Maintains the requirement that successor employers honor the benefits accrued under predecessor employers, but removes that requirement if employees are paid the value of their accrued but unused benefits at the time of succession.
• Confirms that individuals covered by an employment agreement (contract) that conflicts with ESTA and was in place before Dec. 31, 2024, are not subject to ESTA for the period of the agreement (up to three years) so long as the employer notifies the Department of Labor and Economic Opportunity of the existence of the agreement.
• Gives employers the option to require employees use paid time off in one-hour increments or smaller increments used by the employer to account for absences.
• Confirms that the state is solely responsible for enforcement and that employees must pursue complaints within three years from when they know of an alleged violation.
• In addition to the prior civil remedies and fines provided, provides additional liability for civil remedies for any employer failing to provide earned sick time to an employee in an amount not more than eight times the employee’s normal hourly rate.

Minimum Wage and Tip Credit

The Michigan Department of Labor and Economic Opportunity has already updated the English version of the required notice postings, which can also be used for the individual notice required for all employees and new hires. However, the department has not yet completed the Spanish version or other documents related to ESTA. Employers subject to the act must post these notices and provide notice to employees and new hires, in both English and Spanish (as well as any other language spoken by 10 percent or more of its workforce), by March 23, 2025.

In addition to the ESTA amendments, the legislature also passed an amendment to Michigan’s Improved Workforce Opportunity Wage Act. In doing so, the minimum wage still increased from $10.56 an hour to $12.48 an hour on Feb. 21, 2025. However, the tipped minimum wage was retained, though it will increase by 2 percent each year beginning in 2026 until it hits 50 percent of the minimum wage in 2031.

The amendments also added a $2,500 fine for employers who fail to ensure tipped workers get paid at least minimum wages and increases the minimum wage to $13.73 effective Jan. 1, 2026, and $15 effective Jan. 1, 2027. Thereafter, annual increases to the minimum wage rate will occur based on inflation.

Takeaways

While these amendments would appear to finally put an end to the disputes related to ESTA which have occurred since signatures were initially submitted to put the provision on the ballot in 2018, we may not be done yet. Groups supporting the original ballot proposals have already announced plans for statewide referendums restoring the amendments. However, such an effort would require they gather signatures from over 223,000 Michigan voters to qualify for a spot on a future ballot.