Amended Earned Sick Time Act and Minimum Wage Laws

Sourced from the American Society of Employers‘s newsletter.

On Thursday, February 20, 2025, just before the Earned Sick Time Act and Minimum Wage Act (ESTA) were to take effect, the Michigan Legislature amended the two laws. The Governor is expected to sign these amendments into law soon.

The following are the amendments to these laws.

Earned Sick Time-off Act (ESTA)

The amendments to the Earned Sick Time Act (ESTA) are:

• • Maintains the definition of “small business” as one that employs fewer than 10 individuals.

• Excludes unpaid trainees or unpaid interns from the definition of employee.
• Excludes non-profit agencies from coverage.
• New businesses will have a three-year grace period after forming to comply with the ESTA, and small businesses – defined as those with less than 10 employees – will have until Oct. 1, 2025, to comply with the ESTA requirements.
• If in writing, the amendments delay accrual by a small business of any paid time off for part time employees until 10/1/2025. Unless the accrual is provided by frontloading it.
• An employer may combine PTO and ESTA banks if the employer meets either of the following conditions: (1) provides the employer’s employees with PTO not less than the same amounts of time off as provided under ESTA (72/40 hours) and (2) may be used for a purpose described under the act OR any other purpose.
  • The employer is not required to allow an employee to use PTO for a purpose described in ESTA in an amount that exceeds the amounts of time off provided under the act.
• As an alternative to the accrual method, employers may choose to frontload 72 hours at the beginning of a benefit year (40 hours for small businesses); employers only need to track how many hours of paid leave time employees have used annually. No carryover is required.
• Allows for front loading of paid time off for part time employees on a pro-rata basis.
• Caps the amount of accrued sick time for a small employer that can be carried over to 40 hours per year and of all larger employers to 72 hours per year unless the employer pays off unused PTO by the end of the year. Carryover does not have to be made if an employer pays out the unused earned sick time at the end of the year.
• Excludes from the calculation of an hourly rate overtime, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities.
• Delays use of accrued earned sick time for employees hired after enactment to 120 days rather than the 90 days under the previous ESTA law.
• Specifies that the Act would apply to an employer that was a member of a multi-employer collective bargaining agreement under certain circumstances.
  • Excludes employees in a CBA from the 120 day waiting period specified for non-union employees.
• Provides that an employer that was a member of a multi-employer collective bargaining agreement could not require a qualifying employee to wait 90 days before using accrued sick time if the qualifying employee also were employed by another member of the multi-employer collective bargaining agreement.
• States that in the event the absence is not foreseeable an employer’s written notice procedures can specify when an employee must provide notice of absence to the employer.
  • As soon as practicable
  • In accordance with the employer’s policy on requesting/using sick time or
  • On the date of hire or the effective date of the Act, whichever is latest, provides the employee with a written copy of the policy that includes the procedure for how the employee must provide notice and that the notice requirement allows the employee to provide notice after the employee is aware of the need for earned sick time.
• Employers may take adverse action against an employee that fails to notify per the employer’s policy or misuses the benefit.
• The employer may also take adverse action against an employee that uses earned sick time for a purpose other than a purpose described by the act or violates the notice requirements under the act.
• Sets the smallest increment of earned sick time that can be used by an employee under this act at 1 hour.
• Changes the medical documentation requirement from a providing it in “timely manner” to providing it to the employer not more than 15 days after the employer’s request.
• Reduces the length of time an employee may maintain their earned sick time after separation from employment from 6 months down to just 2 months unless the employer pays out the unused earned sick time at the time of separation or transfer in which case no earned sick time may transfer.
• Removes provisions about the rebuttable presumption of retaliation if a) the adverse action was taken within 90 days of the filing of a complaint against the employer, b) informs any person about an employer’s violation, c) cooperates with the department (LEO) or another person in the investigation of prosecution of any violation or d) expresses opposition to a policy, practice of act that is prohibited under this law or informs any person of his or her rights under the law.
• Allows an employer to take adverse action against an employee that uses earned sick time for a purpose other than allowed by this law or violates the notice requirements under the law.
• Allows an employee to bring a claim for breach of the act to Department of Labor and Economic Opportunity (LEO) not later than 3 yrs after the violation.
• Deletes a provision allowing an employee to bring a civil action against the employee’s employer for appropriate relief due to a violation of the Act.
• Modifies references to the Department of Licensing and Regulatory Affairs (LARA) to instead refer to the Department of Labor and Economic Opportunity (LEO).
• Provides that if an employer failed to provide sick time to an employee as required, the employer would be subject to a civil fine of up to eight times the employee’s normal hourly wage.
• As noted above, the law also expands the terms for employees under a collective bargaining agreement (CBA) to include provisions addressing multi-employer CBA’s. These new provisions extend ESTA benefits and protections to multi-employer bargaining agreements beginning on the date the agreement expired or was terminated, amended, extended or renewed if the agreement was in effect on the effective date of the act or if the agreement conflicts with the Acts’ provisions. Other qualifying provisions for multi-employer CBA’s apply.
• Penalties for violation of the Act such as retaliation or failing to provide earned sick time are $1000 per violation or the employer could be subjected to a civil fine of up to eight times (8x) the employees normal hourly wage.
• Employers must still provide written notice as specified by the current ESTA law at the time of hiring or to current employees not later than 30 days after the effective date of this act’s enactment. In addition to the previous law’s provisions for notice the definition of the employer’s “year” must be included.
• Employers must have new posters up within 30 days and provide employees with written notice about the amount of earned sick time required to be provided.

Michigan Minimum Wage

This law is more accurately known as the Improved Workforce Opportunity Act, which was amended by Senate Bill 8.

Under the new law, Michigan’s minimum wage is:

• Beginning February 21, 2025, $12.48
• Beginning January 1, 2026, $13.73
• Beginning January 1, 2027, $15.00

The tipped wage rate was also amended, the new schedule is:

• Beginning February 21, 2025, 38% of the minimum hourly wage rate ($4.74)
• Beginning January 1, 2026, 40% of the minimum hourly wage rate ($5.49)
• Beginning January 1, 2027, 42% of the minimum hourly wage rate ($6.30)
• Beginning January 1, 2028, 44% of the minimum hourly wage rate
• Beginning January 1, 2029, 46% of the minimum hourly wage rate
• Beginning January 1, 2030, 49% of the minimum hourly wage rate
• Beginning January 1, 2031, 51% of the minimum hourly wage rate
• Beginning January 1, 2032, 53% of the minimum hourly wage rate
• Beginning January 1, 2033, 55% of the minimum hourly wage rate
• Beginning January 1, 2034, 57% of the minimum hourly wage rate
• Beginning January 1, 2035, 60% of the minimum hourly wage rate

The schedule of increases stemming from a 2024 Michigan Supreme Court ruling.

CPA Nerds will provide more information on the amended Acts on our website and newsletter as it becomes available.