On July 31, 2024, Michigan Supreme Court made the decision to reinstate the Earned Sick Time Act (ESTA) and Improved Workforce Opportunity Wage Act (IWOWA). As of 11 p.m. February 20, 2025 the Michigan Legislature passed House Bill 4002 and Senate Bill 8, which modifies the state’s sick leave and minimum wage policies in response to the Michigan Supreme Court’s recent ruling. Governor Whitmer is expected to sign these bills into law shortly. Once signed, the Amendment takes effect immediately and employers will have 30 days from 2/21/25 to provide employees notice concerning their rights and obligations under ESTA, as amended. While many of the details are still coming in, below is a summary of how things currently stand.

This is intended to be an informational resource and not legal advice, please contact your legal and financial advisors with any questions.

Updated 2/21/2025

Earned Sick Time (ESTA):

Takes effect on February 21, 2025 for businesses with more than 10 employees and October 1, 2025 for businesses with 10 or less employees.

Employee Exemptions - The new law exempts only the following employees: (1) those who work under a policy that allows them to set their own hours, with a provision preventing the employer from taking adverse action if the individual does not meet a minimum number of working hours; (2) unpaid trainees or interns; and (3) individuals employed under the Youth Employment Standards Act, MCL 409.101-.124.

Accrual - Employees are entitled to accrue 1 hour of earned sick time for every 30 hours worked. Although employees may accumulate more than 72 hours annually, employers can cap usage at 72 hours per year. Employees working for small businesses (defined as those with fewer than 10 employees) will accrue at the same rate but will only be eligible for up to 40 hours of paid leave per year.

Frontloading - Employers have the option to frontload 72 hours of paid leave at the start of the benefit year (40 hours for small businesses). Employers are only required to track the amount of paid leave used by employees each year. Carryover of unused hours is not mandatory.

Waiting Period – New employees can be required to wait until they have reached 120 day of employment to being using earned sick time.

Combining Earned Sick Time with Paid Time Off - An employer is considered in compliance with this section if they meet either of the following conditions: (1) they provide employees with paid time off (PTO) that is at least equivalent to the time off required under ESTA (72/40 hours), and (2) the PTO can be used for any purpose outlined in the act or for any other purpose. The employer is not obligated to allow employees to use PTO for purposes described in ESTA beyond the time off specified in the act.

Rate of Pay - Clarifies that an employee’s regular hourly rate (the rate used to calculate ESTA pay) does not include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities.

Advance Notice – In the case of foreseeable events employees may provide up to 7 days' advance notice. For non-foreseeable events employers may require employees to give notice in one of the following ways: (1) as soon as practicable, or (2) according to the employer’s policy on requesting or using sick time or leave, provided that: (a) the employee receives a written copy of the policy, including the procedure for providing notice, either on the date of hire or the effective date of HB 4002 (whichever is later), and (b) the policy allows employees to provide notice after becoming aware of the need for sick time.

Documentation – An employer may require an employee to provide documentation related to the earned sick time taken, but only after three consecutive days off and within 15 days of the request.

Increments – Previously the law was written requiring that earned sick time could be used in 1 hour increments or the smallest increment the employer allows for absences, but it looks like this is now permissive and gives employers the choice.

Discipline/Presumption/Right of Action - Clarifies that an organization can take adverse personnel action against an employee who fails to follow the employer’s notification policy or misuses the benefit. The provision stating there would be a presumption of violation if an employer takes adverse action within 90 days after an employee files a complaint or cooperates with the department has been eliminated. Additionally, the option for an employee to go directly to court if they believe their employer violated the law has been removed.

Reinstatements – Employees who leave an organization but return within two months must have unused, accrued earned sick time reinstated unless the employer paid out the unused time.

Penalties – An employer who fails to provide earned sick time may be liable for a civil fine of up to eight times the employee’s normal hourly wage.

Minimum Wage (IWOWA):

Minimum Wage Increases:

• 21, 2025: Increase from $10.56/hour to $12.48/hour.
• 1, 2026: Increase to $13.73/hour.
• 1, 2027: Increase to $15.00/hour.
• 1, 2028 (and beyond): Inflationary increases based on the Midwest Consumer Price Index (CPI) each year.

Tipped Employees:

• Tipped minimum wage will remain at 38% of the regular minimum wage in 2025.
• Tipped minimum wage will increase by 2% annually starting in 2026 until it reaches 50% in 2031.

Penalties- Employers who fail to ensure tipped workers are paid at least the minimum wage will be subject to a $2,500 fine.

 

There are still many unknowns; Keweenaw Economic Development Alliance will continue to monitor and update as new information comes out. If you would like to be added to KEDA’s mailing list, please email nikki@kedabiz.com.

 

 

Information gathered from Warner Norcross + Judd, Small Business Association of Michigan, Michigan Departments of Labor & Economic Opportunity, & Michigan Chamber of Commerce.