On February 20, 2025, Michigan lawmakers voted to amend the Earned Sick Time Act (ESTA) to provide greater clarity and flexibility to both employees and employers with respect to paid time off, taking immediate effect. This action followed earlier votes this week by the Michigan legislature on the minimum wage law. Governor Whitmer has now signed both pieces of legislation into law.
Key changes to ESTA as of February 21, 2025, are as follows:
- Employers are expressly permitted to frontload at least 72 hours of paid sick time per year, for immediate use, to satisfy ESTA’s leave requirement. Employers who frontload hours do not need to carry over unused paid sick time year to year and do not have to calculate and track the accrual of paid sick time for full-time employees. For part-time employees, frontloading in lieu of carryover is also an option, including frontloading a prorated number of hours. Employers choosing to frontload a prorated amount must follow notice, award amount, and true-up requirements.
- If paid sick time is not frontloaded, employees still must accrue 1 hour of paid sick leave for every 30 hours worked, but employers may cap usage at 72 hours per year. Only 72 hours of unused paid sick time is required to roll over from year to year for employers who provide leave via accrual.
- New hires can be required to wait until 120 days of employment before they can use accrued paid sick time, which could potentially benefit seasonal employers. This waiting period appears to be permitted for frontloading and accruing employers alike, although the bill’s language with respect to frontloading employers is somewhat unclear. This may be an issue for clarification by the Department of Labor and Economic Opportunity, which under the amendment will be responsible for all enforcement of the law.
ESTA now provides several exemptions, including:
- An individual who follows a policy allowing them to schedule their own hours and prohibits the employer from taking adverse personnel action if the individual does not schedule a minimum number of working hours is no longer an “employee” under ESTA.
- Unpaid trainees or unpaid interns are now exempt from ESTA.
- Individuals employed in accordance with the Youth Employment Standards Act, MCL 409.101-.124, are also exempt from ESTA.
- Small businesses, defined as those with 10 or fewer employees, are only required to provide up to 40 hours of paid earned sick time. The additional 32 hours of unpaid leave, required under the original version of ESTA, is no longer required. Small businesses, like other employers, are permitted to provide leave via a frontload of this entire applicable amount or to provide the time via accrual. If small businesses use the accrual method (1 hour of paid sick time for every 30 hours worked), they may cap paid sick time usage at 40 hours per year and only permit carryover of up to 40 hours of unused paid sick time year to year. Small businesses have until October 1, 2025, to comply with several ESTA requirements, including the accrual or frontloading of paid earned sick time and the calculation and/or tracking of earned sick time.
- Employers can now use a single paid time off (PTO) policy to satisfy ESTA. Earned sick time may be combined with other forms of PTO, as long as the amount of paid leave provided meets or exceeds what is otherwise required under ESTA. The paid leave may be used for ESTA purposes or for any other purpose.
- The amendments clarify that an employee’s normal hourly rate for ESTA purposes does not include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips or gratuities.
- The amendments specify that the Department of Labor and Economic Opportunity is responsible for enforcement of the Act. Prior provisions that included a private right of action for employees to sue their employers for possible ESTA violations have been removed.
- The amendments remove a “rebuttable presumption” of retaliation that was contained in the original Act.
- ESTA now permits employers to choose between one-hour increments or the smallest increment used to track absences as the minimum increment for using earned sick time.
The amendments allow a means for employers to require compliance with absence reporting guidelines for unforeseeable ESTA use. To do this, an employer must comply with steps outlined in the amendment including disclosure of such requirements to employees in writing.
- The amendments specify that employers must provide written notice to employees including specified information about the Act within 30 days of the effective date. This would mean a date of March 23, 2025.
- The amendments allow for postponement of the effective date of ESTA for employees covered by a collective bargaining agreement that “conflicts” with the Act. The effective date for such employees is the expiration date of the current collective bargaining agreement.
- The amendments likewise allow for the postponement of ESTA’s effective date for employees who are party to existing written employment agreements that “prevent compliance” with the Act. Reliance on such provisions requires notification to the state.
Some provisions of the bill give rise to continuing confusion or ambiguity, including:
- The amended law continues to contain a provision requiring the display of a poster from the Department of Labor and Economic Growth, which appears to be effective immediately upon the date the bill is signed into law. However, no updated poster exists.
- The statute’s reference to “conflict” between a collective bargaining agreement and ESTA is not well defined, including how this provision will apply to a collective bargaining agreement that, perhaps intentionally through prior negotiations, includes no current provisions for sick time.
- Whether the amended law is intended to exclude nonprofit organizations from the scope of covered employers is unclear. The reference to nonprofits was stricken, but there is no affirmative language excluding them from the broad “employer” definition that remains in the law.
- The availability of a 120-day waiting period for a frontloading employer is somewhat unclear, due to the provisions that frontloaded time must be “available for immediate use.”
- The date employees may first use earned sick time, in relation to the time frame for employers to finalize and issue policies, would benefit from clarification. The amendment states that accrual begins on the effective date of the Act, and time may be used “when it is accrued.” However, employers appear to have a 30-day time frame to finalize and issue policies defining how they choose to provide ESTA’s benefits.
- The extent of employer recordkeeping and/or inspection obligations are unclear under the current law. Previous provisions detailing such requirements are no longer included.
Additional Authors: Luis E. Avila, Francesca L. Parnham, and Carolyn M.H. Sullivan