Earned Sick Time and Minimum Wage Laws Set to Alter Michigan Business Landscape February 21

Two important laws for Michigan business owners are scheduled to take effect in less than one month, but many business owners are unfamiliar with either, potentially exposing themselves to significant financial penalties and risks.

The Earned Sick Time Act (ESTA) and the Improved Workforce Opportunity Wage Act (IWOWA) were introduced last year and will have serious implications for Michigan business owners, but there’s a possibility that amendments will be made to make them less costly for Michigan employers. With just less than one month until they are scheduled to be enacted, our professionals have outlined the most relevant details of each, as well as the potential amendments. 

It is important to note, that even if amendments are made, they would not take place until after February 21, so it is best to plan and prepare for the February 21 deadline.

Earned Sick Time Act

As it is currently written this law will have a major impact on Michigan business owners and could cause cost increases with the following requirements:

• ALL employers with at least one employee will be required to offer paid sick leave. Employers with more than 10 employees will have to offer 72 hours as of February 21, 2025. 
• Employers with under 10 employees will be required to offer 40 hours of mandatory paid leave PLUS up to 32 hours unpaid. 
• All employees will earn one hour of paid sick leave for every 30 hours of work, but employers could offer a faster accrual rate.

The new law applies to part-time, per diem, and temporary workers, exceeding similar laws in other states. It also allows medical leave for meetings and the child’s school or daycare, related to several different factors.

Improved Workforce Opportunity Wage Act

IWOWA would impact minimum wage and tipped wages, having a major impact on the hospitality industry. The law would institute yearly minimum wage increases following this schedule:

Starting in 2029, the minimum wage will rise annually based on inflation every year, and the tipped hourly wage will be 90 percent of the minimum wage by 2029, increasing to 100 percent starting in 2030.

Michigan Legislature motivated to protect business owners

With both of these laws scheduled to take effect in roughly 30 days, both houses of the Legislature have introduced separate bills to amend each of the impending laws. Currently, there are two bills from the Senate and two from the House that contain amendments to ESTA and IWOWA.

Proposed ESTA amendments

Among changes to the ESTA are provisions to allow employers to frontload the required 72 hours of sick leave instead of utilizing an accrual process and removing provisions that allow for employees to file administrative charges in the event of an ESTA violation. Amendments to ESTA have been proposed to change the definition of small business from 10 to 25 employees or changing which employers are subject the act from one employee to 50 or greater in the form of SB 15 and HB 4002, respectively, and like any proposed legislation are subject to revisions before passing or being eliminated.

Proposed IWOWA amendments

Recent proposed amendments include allowing employers to continue paying a reduced wage (38 percent of state’s standard minimum wage) to tipped workers so long as it equates to the standard minimum wage when factoring in tips. This means that the tip credit would likely remain. While SB 8 and HB 4001 both aim to amend IWOWA in response to industry criticism, they have different ideas on the gradual increase of tipped wages.