Michigan Legislature Reaches Last Minute Compromise on Earned Sick Time Act Amendments

Late Thursday, February 20, 2025, the Michigan Legislature passed an amendment to the Earned Sick Time Act (ESTA). This amendment changes requirements under ESTA that were set to go into effect just a few hours later. Importantly, the Legislative amendments take immediate effect on February 21, 2025.  Governor Whitmer is expected to sign the bill passed by both chambers sometime today. Earlier in the year, the Michigan House and Senate introduced competing bills to amend ESTA but ultimately settled on a compromised version. Employers should be aware of the following updates to ESTA.

Changes to the Employers and Employees

Under the new Earned Sick Time Act, “employer” is modified to mean “any person, firm, business, educational institution, corporation, limited liability company, government entity, or other entity that employs 1 or more individuals.” Unlike the previous definition, nonprofit agencies are not included, although it is not clear at this point whether the scope of an “entity that employs 1 or more individuals” is broad enough to still encompass nonprofits. Similarly, the ESTA amendment revises the meaning of “employee” for purposes of the act. In addition to federal employees, the ESTA amendment excludes from its scope: (1) individuals who work under a policy provided by an employer that allows the individual to schedule the individual’s own working hours and prohibits the employer from taking adverse action against the individual if the individual does not schedule a minimum number of working hours; (2) unpaid trainees and unpaid interns; and (3) individuals employed under the Youth Employment Standards Act.

Accrual Rules are Modified

The Legislature made several changes to accrual rules, but it also maintained several key portions of ESTA as previously provided. Notably, the ESTA amendment maintains the distinction between “small businesses”—businesses that employ less than 10 individuals—and other employers that employ 10 or more individuals. However, the ESTA amendment changes small businesses’ obligations: while small businesses are still obligated to provide 40 hours of paid earned sick time, they no longer have to provide 32 hours of unpaid earned sick time in addition to paid leave.

The previous accrual method and minimum hour requirement remain in effect, but the ESTA amendment expressly allows small businesses and other employers to frontload earned sick time for both full-time and part-time employees. Importantly, employers do not have to allow the carryover of frontloaded hours from year to year, nor do employers have to pay employees the value of unused earned sick time at the end of the benefit year. If an employer chooses to frontload hours for part-time employees, there are several new employer obligations: (1) the employer must provide written notice to the part-time employee of how many hours the employee is expected work for a year at the time of hire; (2) the amount of sick time provided must be proportional to the earned sick time the part-time employee would accrue if the expected hours match the hours actually worked; and (3) if the part-time employee works more hours than provided in the written notice, employers must provide the part-time employee with additional earned sick time under the accrual method.

While the new ESTA amendment retains the carryover of unused earned sick time for employees who are using an accrual method, the amendment expressly allows employers to cap the use and yearly carryover at 72 hours (or 40 hours for small businesses).

The amendment also allows employers to require employees to wait 120 calendar days from “commencing employment” to use accrued earned sick time. Furthermore, employers may require the use of earned sick time in 1-hour increments or the smallest increment used by the employer. At this point, it is unclear whether the employer has the option to elect one method or the other.

Change to Notice Requirements

The ESTA amendment addressed employer concerns regarding the notice requirements in the original act. The amendment still provides the employer with the option to require notice for unforeseeable uses of earned sick time “as soon as practicable,” but now, employers have an additional option to require notice. Under the second unforeseeable notice option, employers can require notice per a preestablished notice policy relating to requesting or using earned sick time, so long as the employer has provided a written copy of the procedures to the employee and the policy allows employees to provide notice after the employee becomes aware of the need to use earned sick time. Latitude is provided to employers to take “adverse personnel action” against employees if they violate the notice provisions.

Under the ESTA amendment, employers may require employees to provide reasonable documentation within 15 days for uses of earned sick time that extend for three consecutive days.

Other Changes

The amendment clarifies the effect that ESTA has on employer Paid Time Off policies. While employers may still comply with ESTA by establishing an equivalent PTO policy, the amendment clarifies that for unified PTO/ESTA  policies, ESTA only applies to time taken off for ESTA purposes.

Additionally, the amendment changes the reinstatement of accrued earned sick time to previously separated employees. Under the new rules, an employee who previously accrued earned sick time only has to have that time reinstated if rehired by the same employer within 2 months.

Lastly, employees no longer have a private right of action against their employer for violating the provisions of ESTA. Employees must now file a complaint with the Department of Labor and Economic Opportunity, which will investigate alleged violations.

Timing Changes

The amendment specifically provides small businesses relief from compliance with the amendments until October 1, 2025. Additionally, for small businesses that did not employ an employee before February 21, 2022, the small business is not required to comply with ESTA until 3 years after the date the employer first employed an employee. As mentioned above, for businesses that do not qualify as small businesses, these changes are effective immediately.

Governor Whitmer is expected to sign this bill into law later today, Friday, February 21, 2025. Employers should review their paid time off policies to ensure compliance with the amendment. The Rhoades McKee Human Resource and Employment Law Team is here to help employers navigate compliance with the new changes.