Late on February 20, 2025, the Michigan Legislature approved amendments to both the Earned Sick Time Act (ESTA) and the state’s minimum wage law. While the original versions of these laws posed significant challenges for employers, the updated versions—which will take effect on February 21, 2025 (with delayed paid sick leave requirements for small and new businesses)—offer some modifications to ease the burden.
Key Changes
Minimum Wage (SB 8)
• Wage Increase: The regular minimum wage will rise from $10.56 to $12.48 per hour on February 21, 2025, then increase to $13.73 on January 1, 2026, and $15 on January 1, 2027.
• Inflation Adjustment: Starting January 1, 2028, and every year thereafter, the minimum wage will be adjusted for inflation.
• Tipped Wage: For 2025, the tipped minimum wage remains at 38% of the regular minimum wage, with a planned annual increase of 2% until it reaches 50% by 2031.
Earned Sick Time Act (HB 4002)
• Employee Exemptions: ESTA applies to nearly all workers except for:
1. Federal government employees
2. Workers under a self-scheduling policy that does not require a minimum number of hours
3. Unpaid trainees and interns
4. Individuals employed under the Youth Employment Standards Act
• Compliance Grace Period:
New Businesses: Three-year grace period to meet ESTA requirements.
Small Businesses (10 or fewer employees): Must comply by October 1, 2025.
Accrual & Usage:
o Employees accrue 1 hour of sick time for every 30 hours worked.
o Employers may cap usage at 72 hours per year (or 40 hours for small businesses).
• Frontloading Option: Employers can opt to provide the maximum annual sick leave upfront, with proration available for part-time employees.
• Carryover Provision: Employees may carry over up to 72 hours of unused sick time annually (40 hours for small businesses), unless the frontloading method is employed.
• Waiting Period: Employers may require new hires to wait 120 days before using their accrued sick leave.
• PTO Policy Use: Employers can satisfy ESTA by using a PTO policy if it (1) provides an equal or greater amount of leave (72/40 hours) and (2) permits use for both ESTA-related and other purposes.
• Rate of Pay: When calculating paid sick leave, employers may exclude overtime, holiday pay, bonuses, commissions, supplemental pay, tips, gratuities, and piece rate wages.
• Documentation Requirement: Documentation may be required after three consecutive days off, with employers obligated to cover related out-of-pocket expenses.
• Incremental Use: Sick leave can be used in one-hour increments or the smallest time unit the employer uses for other absences.
• Disciplinary Measures: Misuse of sick leave or policy violations can result in adverse action, up to and including termination.
• Reinstatement: Unused sick time must be reinstated if an employee returns within two months following termination.
• Enforcement: The private right of action has been removed; enforcement will now be the responsibility of the Michigan Department of Labor and Economic Opportunity.
• Notification Requirements: Employers have 30 days to fulfill posting and notification obligations.
These amendments necessitate a prompt review and update of current employer policies to ensure full compliance with the new regulations.
For assistance, please contact EverythingHR at support@everythinghrfs.net or call 248-983-5475.
