Publication

21 February 2025

Michigan Legislature Passes Significant Changes to the ESTA and Minimum Wage; Changes Take Effect Immediately

Today the Michigan legislature passed significant changes to the Earned Sick Time Act (ESTA) and minimum wage law.  These changes will take effect immediately.

The amendment to ESTA makes a number of important changes, including the following:

Definition of “Employee” Covered by the ESTA

  • Certain workers are not considered covered “employees” under the Act: certain workers who schedule their own hours and are not required to work any minimum hours (such as gig workers); certain “unpaid interns” and “unpaid trainees;” minors employed in accordance with the Youth Employment Standards Act.

Frontloading and Carryover

  • Employers are explicitly allowed to frontload paid sick leave at the start of the year and not track accruals.
  • Employers may limit annual carryover of paid sick leave to 72 hours or the employee’s annual accrual limit if lower, like part-time employees. Small businesses may limit annual carryover of paid sick leave to 40 hours.
  • No carryover is required if employers frontload.
  • Employers can calculate the minimum required front-loaded sick leave differently for part-time employees
  • Tracking ESTA accrual for full-time employees is not required if employers front load.

PTO

  • So long as PTO banks provide at least 72 hours (or 40 hours, if a small business), or accrue at least the minimum ESTA rate, employees are not entitled to additional paid days off for ESTA absences.

Notice to Use ESTA

  • Employers may write their own notice policies, but the policies must provide employees with a procedure for how an employee must provide notice to their employer when using sick leave when the need for sick leave is not foreseeable.
  • After three consecutive absences, employers can require documentation to substantiate the employee’s reason for absence, and can require the employee to provide that documentation within 15 days

Calculation of Pay for ESTA Absences

  • The wage an employer must pay an employee when using paid earned sick time is the greater of either the “normal hourly wage” or “base wage;” neither include overtime, holiday pay, bonuses, commissions, tips, piece rates, or gratuities.

Notice to Employees

  • Employers must provide notices to employees including specific information about ESTA rights by March 23, 2025.

Unionized Workforces

  • Employers with employees covered by collective bargaining agreements on the law’s effective date are exempt from ESTA if the bargaining agreement conflicts with the new law’s requirements (which is basically inevitable).
  • Employers who contributed to ERISA multi-employer plans that provide paid sick leave benefits for the reasons covered by the Act and in an amount equal to the Act comply with the Act. However, the 120-waiting period to use accrued paid sick time does not apply to new hires for these employers.

Small Businesses

  • Defined as businesses with 10 employees or less
  • Usage of paid sick time is capped at 40 hours
  • Effective date delayed until October 1, 2025.

Enforcement

  • Employees no longer have the right to file lawsuits against their employers for alleged violations.
  • There is no longer a rebuttable presumption that employers have violated ESTA if they take an adverse employment action against an employee within 90 days of the employee exercising their rights under ESTA. Employers are permitted to take adverse employment action against an employee if the employee uses earned sick time for a purpose not covered by ESTA, or if the employee violates the employer’s notice requirements.
  • Enforcement of ESTA is now exclusively within the province of the Department of Labor and Economic Opportunity (LEO). LEO may still file lawsuits against employers, including on behalf of multiple employees at the same worksite.

Miscellaneous

  • Employers must allow sick time to be used in the smaller of 1-hour increments, or the smallest increment the employer uses to account for absences or use of other time (employer is no longer required to provide sick time in the smallest increment their payroll uses).
  • With only very limited exceptions, employers can require new hires to wait 120 days before they may use paid sick leave.
  • An employee’s paid sick leave must only be reinstated if employees are rehired within two months (previously six months), and reinstatement is not required if leave was paid out upon separation.

As before, ESTA still applies to all employers except the federal government, and all employees (unless employed by the federal government) who are physically located in Michigan.

In addition, the revised minimum wage law caps the tipped wage at 50% of the minimum wage, gradually increasing from 38% effective February 21, 2025 to 50% beginning on January 1,  2031.

The overall minimum wage increases from $10.56 currently to $12.48 effective February 21, 2025, and gradually increases to $15.00 by January 1, 2027.

Questions

Please don’t hesitate to contact one of the authors or another Miller Johnson employment attorney if you have any questions.