Michigan’s Earned Sick Time Act & Minimum Wage Act: What Employers Need to Know

After months of uncertainty, Michigan’s Legislature has officially amended the Earned Sick Time Act (ESTA) and Minimum Wage Act, with changes taking effect February 21, 2025. These updates impact businesses of all sizes, and understanding the new requirements is essential for compliance. Below, we break down the key changes and what they mean for Michigan employers.

Small Business Definition & Compliance Timeline

• Maintains the definition of "small business" as one that employs fewer than 10 individuals.
• New businesses will have a three-year grace period to comply.
• Small businesses (fewer than 10 employees) have until October 1, 2025, to meet ESTA requirements.

Exemptions & Employee Classification

• Unpaid trainees and unpaid interns are now excluded from ESTA coverage.
• Non-profit agencies are no longer required to comply with ESTA provisions.

Accrual, Frontloading, and PTO Integration

• If provided in writing, small businesses may delay paid sick time accrual for part-time employees until October 1, 2025, unless they choose to frontload hours.
• Employers may combine PTO and ESTA banks if they meet either of the following:
  • Provide PTO that is equal to or greater than ESTA requirements (72/40 hours).
  • Allow PTO to be used for any purpose, including ESTA-covered reasons.
• Frontloading Option: Employers may frontload 72 hours of paid sick time (40 for small businesses) at the beginning of a benefit year instead of using an accrual system. No carryover is required if this method is used.
• Allows for pro-rata frontloading of paid sick time for part-time employees.

Usage & Carryover Limits

• The smallest increment of earned sick time an employee can use is one hour.
• Carryover caps:
  • Small businesses: 40 hours per year.
  • Larger employers: 72 hours per year, unless unused PTO is paid out at the end of the year.
• Hourly rate calculations exclude overtime, bonuses, commissions, supplemental pay, tips, and gratuities.
• New hire waiting period: Employees must wait 120 days (previously 90) before using accrued sick time.
• Employees who separate from employment may retain earned sick time for two months (previously six), unless unused time is paid out at separation.

Multi-Employer Collective Bargaining Agreements (CBA)

• ESTA applies to employers in multi-employer CBAs, with certain conditions:
  • Employees in a CBA are excluded from the 120-day waiting period.
  • An employer cannot require a CBA-covered employee to wait 90 days if they have worked for another employer under the same multi-employer CBA.

Employer Rights, Notice, and Documentation Requirements

• Employer notice procedures for unforeseeable absences must outline how and when an employee must provide notice:
  • As soon as practicable.
  • In accordance with the company’s sick leave policy.
  • At the time of hire or when the law takes effect, with a written copy of the policy provided.
• Employees must provide medical documentation within 15 days of an employer’s request.
• Employers may take adverse action against employees who:
  • Fail to provide proper notice of an absence.
  • Misuse sick time for reasons not covered under ESTA.

Legal & Penalty Changes

• • Employees may file an ESTA violation claim with the Department of Labor and Economic Opportunity (LEO) within three years but can no longer file a civil lawsuit against their employer.
  • ESTA references to the Department of Licensing and Regulatory Affairs (LARA) have been changed to LEO.
  • Employers failing to provide required sick time may face fines up to eight times the employee’s hourly wage.
  • Retaliation protections have been removed, giving employers more discretion in ESTA-related disciplinary actions.
  • Employers must provide written notice of these changes within 30 days and update workplace posters accordingly.

Michigan’s Minimum Wage Act Updates

The new wage schedule is as follows:

Minimum Wage Increases

• February 21, 2025 – $12.48 per hour
• January 1, 2026 – $13.73 per hour
• January 1, 2027 – $15.00 per hour

Tipped Wage Increases

The tipped wage rate will increase gradually as a percentage of the minimum wage, reaching 60% by 2035. The updated schedule begins with:

• February 21, 2025 – $4.74 (38% of the minimum wage)
• January 1, 2026 – $5.49 (40%)
• January 1, 2027 – $6.30 (42%)

The scheduled increases stem from a 2024 Michigan Supreme Court ruling aimed at gradually raising wages over time.