Updates to Michigan's ESTA/Sick Leave Law

In 2024, the Michigan Supreme Court decision Mothering Justice v. Attorney General and State of Michigan resulted in major changes to the Michigan Earned Sick Time Act (ESTA). The amendment was approved and signed by Governor Gretchen Witmer, going into effect February 21, 2025.

The ESTA updates expand most Michigan employees' rights to paid sick time, and the minimum wage is also due to increase. Employers also have more responsibilities to document how employees accrue paid sick leave, but small businesses have extra time to comply. Here's what you need to know about the Michigan sick leave law changes that went into effect this year and how Workforce PayHub can assist with compliance.

Key Changes to the Michigan ESTA

Several key changes to ESTA were made under HB 4002, ensuring that most Michigan employees have expanded rights to paid sick time:

• Clarification on the Definition of "Employee": The amendments specify exemptions for certain groups such as those who can set their own schedules, unpaid trainees, and individuals employed under the Youth Employment Standards Act.
  
  
• Employers Can Now Cap the Carryover of Unused Paid Sick Time to 72 Hours: Employers may also choose to frontload paid sick time at the beginning of a benefit year, which eliminates carryover requirements.
  
  
• Accrual Method Adjusted: Employers must accrue one hour of paid sick time for every 30 hours worked, not including hours clocked as paid time off, with an annual cap of 72 hours, or 40 for eligible small businesses.
  
  
• New Small Business Rules: Small businesses, defined as having fewer than 10 employees, will have a three-year grace period after hiring their first employee to comply with the ESTA, and until October 1, 2025, to meet requirements..

Implications for Employers

Under the new Michigan sick leave law, eligible employees start to accrue earned paid sick time on the later of their hiring date or February 21, 2025. If you are an eligible small business, this effective date is October 1, 2025. One hour of paid sick time is accrued for every 30 hours worked, up to 72 hours (40 if a small business).

Alternatively, Michigan employers can frontload paid sick time instead of tracking accrual. Giving employees their paid sick time upfront eliminates carryover requirements or the need to track paid sick time accrual. Employers may also implement a waiting period of up to 120 days before new employees can use accrued sick time, unless it is provided upfront, in which case it is available immediately.

Exempt Workers

Full-time, part-time, permanent, and temporary employees must accrue paid sick time. Only the following groups of employees are exempt:

• Unpaid interns and trainees
• U.S. government employees
• Individuals employed in accordance with the Youth Employee Standards Act
• Individuals with the ability to schedule their own working hours under a policy that prohibits their employer from taking adverse action if they do not maintain a minimum number of scheduled work hours

Implications for Employees

Under Michigan employment law, employees are mandated to receive sick pay that is greater than or equal to the rate of their normal base wage or the state minimum wage. Overtime, holiday pay, bonuses, commissions, and tips can factor into the base wage but are not required to.

While this is a win for workers' rights, employers also gained the right to take adverse action if an employee used paid sick time for any other purpose other than what ESTA outlines (namely, resting from sickness or caring for a sick family member). Employees can engage with the Department of Labor and Economic Opportunity if they believe they have been illegally denied sick pay, paid less than what ESTA outlines, or were unlawfully terminated for using their sick time.

Steps for Ensuring Compliance

The ESTA updates went into effect at very short notice, and Michigan employers have had little time to prepare for such a sweeping change. This checklist of sick leave compliance tips can help ensure that your workplace meets ESTA mandates:

• Frontload paid sick time if possible, as it eliminates many recordkeeping hurdles and quickly ensures compliance.
• If frontloading is not feasible for your organization, namely those that depend on variable workforces, time tracking should become a top priority as even salaried employees will need their work hours tracked for compliance purposes.
• If your business is at risk of losing its small business status, comply with the rules for all other entities.

Immediate changes to compliance requirements can be challenging to navigate. Workforce PayHub is here to assist employers in navigating these changes and ensure that they have the tools they need to best fit their organization's payroll needs while retaining adaptability for time-tracking mandates.

Need help navigating Michigan's sick leave laws? Contact our experts today for guidance!