Key Amendments to Recently Enacted Michigan Earned Sick Time Act

The Earned Sick Time Act (ESTA) and Improved Workforce Opportunity Wage Act (IWOWA) have become effective as of February 21, 2025, but last-minute amendments were made to both on February 20 and signed into law by Governor Gretchen Whitmer.

The amended ESTA still requires most Michigan employers to permit employees to accrue and use paid earned sick time annually. However, the amendments removed certain provisions from the previous version of the ESTA and some changes were made to the IWOWA. Here is a list of key amendments:

Earned Sick Time Act

Employer notice & compliance deadlines

• Employers must post ESTA-compliant notices in the workplace and provide written notice to employees within 30 days of February 21, 2025.
• Small businesses (10 or fewer employees) have until October 1, 2025, to comply with ESTA regulations and provide required notices.

New sick time requirements for small businesses

• Small businesses must provide 40 hours of paid sick time per year (previously 40 paid + 32 unpaid).
• The law now defines a small business as having 10 or fewer paid workers in any given week.
• Small businesses offering 40 hours upfront are not required to track accrual, allow carryover, or calculate ongoing earned sick time.

Accrual & carryover adjustments

• Employers have the option to frontload the full amount of 72 hours of earned sick time for large employers and 40 hours for small businesses or use an accrual method of one hour of earned sick leave for every 30 hours worked. With the accrual method, employers must track accrued hours. 
• Employers using the accrual method may cap the carryover of unused sick time at 72 hours for large employers and 40 hours for small businesses.
• Employers that frontload required sick time do not need to track accrual, allow carryover, or pay out unused time at year-end.

Integration with PTO policies

• Employers may use an existing PTO policy to comply with ESTA, if it meets the minimum sick leave requirements.
• Employees may use PTO for any purpose, and employers are not required to offer additional sick leave if PTO is used for other reasons.

Employee waiting period & documentation requirements

• New hires must wait 120 days before using accrued sick time (previously 90 days).
• Notice requirements for sick leave usage:
• Foreseeable leave: Employers may require up to 7 days’ advance notice for planned sick leave.
• Unforeseeable leave: Employees must notify employers as soon as practical, or according to the employer’s written policy (if established after Feb. 21, 2025).
• Extended leave (3+ consecutive days): Employers may require reasonable documentation and must allow 15 days for employees to submit it. Employers must pay any costs incurred for obtaining documentation.

Employer disciplinary rights & exemptions

• Employers may take disciplinary action against employees who misuse sick time.
• New exclusions from ESTA coverage: Certain categories of workers are now exempt, including:
• Not-for-profit organizations
• U.S. government employees
• Unpaid interns and trainees
• Employees covered under the Youth Employment Standards Act
• Workers with flexible schedules who are not penalized for not working a minimum number of hours

Sick time usage & pay rate changes

• Employers may require sick time be used in one-hour increments or the smallest increment allowed under employer payroll policies.
• Employees must be paid the greater of their base wage or the state minimum wage when using sick time.
• Overtime, holiday pay, bonuses, commissions, tips, and other supplemental pay do not count towards the calculation of sick leave pay.

Rehire & separation provisions

• Employers must reinstate unused sick time if rehiring an employee within two months (previously six), unless the employee was paid out for accrued sick time upon separation.

Fines & legal adjustments

• Employers may be fined up to 8x an employee’s hourly wage for failing to provide earned sick time as required by ESTA in addition to a $1,000 administrative fine.
• Employees can no longer file private lawsuits for ESTA violations. Instead, all complaints must be submitted to the Michigan Department of Labor and Economic Opportunity (LEO).
• The previous “rebuttable presumption” (which assumed employer wrongdoing if adverse action was taken within 90 days of an employee using sick time) has been eliminated.

Improved Workforce Opportunity Wage Act

Accelerated $15 minimum wage, slower increase in tipped minimum hourly wage

Below is the updated chart for minimum wage and tipped minimum hourly wage increases.

• Starting in 2028, the minimum wage will rise annually based on inflation every year, and the tipped minimum hourly wage will increase to 50 percent of minimum wage by January 1, 2031.
• Potential $2,500 fine for violation of tipped minimum hourly wage provision

Next steps for business owners

The final version of the ESTA and the IWOWA are vastly different from the previous Michigan sick leave requirements in place since 2018 and the unamended laws.

We recommend that you review the amendments and understand how they will impact your business and update your policies to comply with the new laws. We advise you to contact your legal counsel to discuss the changes and align your policies accordingly.