After extended litigation and many last-minute changes, Michigan’s Earned Sick Time Act (“ESTA” or “Act”) finally took effect on February 21, 2025, replacing the Michigan Paid Medical Leave Act. Leave disputes with employees are among the top issues resulting in protracted and expensive lawsuits against employers. So, here is an overview of some key ESTA time off provisions employers should know about to stay compliant and avoid costly legal fees and penalties.
Who is Covered Under the New Law and How Time is Accrued:
Covered Employers
Michigan employers with one or more employees, excluding the United States Government, are covered by ESTA. An employer is considered a “small business” under ESTA for coverage purposes if it has 10 or fewer employees. All employees of an employer within the United States and its territories are counted in determining the total number of employees.
Employers with over 10 employees needed to comply with ESTA starting February 21, 2025. Small businesses, however, have until October 1, 2025, to comply with the Act. If a small business did not employ any employees on or before February 21, 2025, the business does not need to comply with ESTA requirements until three years after the employer first hires a worker.
Eligible Employees
An ESTA-eligible employee is an individual working in Michigan for a covered employer, including full-time, part-time, temporary, seasonal, exempt, nonexempt, and remote employees. However, workers employed by the United States government, railway workers, unpaid interns and trainees, and individuals employed under the Youth Employment Standards Act are examples of employees excluded from the Act’s coverage.
If employees are covered by a collective bargaining agreement on February 21, 2025, and the collective bargaining agreement conflicts with ESTA, the Act’s requirements apply commencing on the agreement’s stated expiration date.
Leave Accrual and Use
Workers accrue one hour of earned sick time for every 30 hours worked. Employees may use up to 72 hours of accrued leave in a year, but for small businesses, the yearly limit on leave use is 40 hours. Earned sick time may be taken in one-hour increments or the smallest increment the employer uses to track other absences.
Incorporating workforce absence software into your organization’s digital infrastructure can significantly streamline how leave accrual and use are managed, helping your operations stay aligned with ESTA’s requirements.
If employers use the accrual method, they may create a policy for employees hired on or after February 21, 2025, requiring them to wait up to 120 days before being eligible to use accrued sick time.
Leave Carryover
Employees may carry over unused sick time from year to year. Employers, however, may limit leave use to 40 hours per year for employees of small businesses and 72 hours per year for all other qualifying employers.
Frontloading as an Alternative to the Accrual Method
Alternatively, instead of employees accruing time off, employers may frontload at least 40 hours of earned sick time for employees of small businesses and 72 hours for other employees at the beginning of the year for immediate use (or on a prorated basis when the employee is hired during the benefit year). If an employer frontloads leave, it need not carry over unused sick time to the next year.
To frontload sick time for part-time employees, employers must provide the worker with a written estimate of the number of hours the employee is expected to work that year, an amount of earned sick time equal to one hour for every 30 hours expected to be worked that year, and verify each year that the number of hours frontloaded met or exceeded the amount the employee would have received if the accrual method was used. If a part-time employee works more than the hours indicated in the written notice, the employer must provide the part-time worker with additional earned sick time in line with accrual requirements.
Pay Rate While on Leave
Earned sick time may be paid in one-hour increments or the smallest increment the employer uses to account for other absences. The wage an employer must pay when earned sick time is used is the greater of the employee’s normal hourly wage or base wage or the Michigan minimum wage. Employers are not required to include overtime, holiday pay, bonuses, commissions, supplemental pay, tips, piece rates, or gratuities in calculating an employee’s normal hourly wage or base wage.
Existing Leave Policies
An employer’s existing paid time off policy may be used for time off under ESTA if the existing policy can be used under the same terms and conditions as ESTA and accrues time off at an equal or greater rate.
Earned Sick Time Uses
Employees may use earned sick time for the following purposes:
- The employee’s or covered family member’s physical or mental health condition, including medical diagnosis, treatment, and preventative care
- Where the employee or covered family member is a victim of domestic violence or sexual assault and needs time off for these reasons:
(1) medical care or psychological or other counseling for physical or psychological injury or disability;
(2) to obtain services from a victim services organization;
(3) to relocate for safety reasons;
(4) to obtain legal services; or
(5) to participate in any civil or criminal proceedings related to or resulting from the domestic violence or sexual assault
- For meetings at their child’s school or place of care relating to the child’s health or disability or the effects of domestic violence or sexual assault on the child
- The closing of the employee’s business or their child’s school or place of care by order of a public official due to a public health emergency
- When it is determined by a proper health authority or by a health care provider that the employee’s or family member’s presence in the community would jeopardize the health of others because of the employee’s or family member’s exposure to a communicable disease
If employers have not already done so, they should immediately add a new paid sick leave policy to their employee handbook that complies with ESTA and seek assistance from legal counsel, if necessary, to draft the policy. Employers should determine whether ESTA requirements affect their duty to provide leave under any federal law, state law, company policy, or collective bargaining agreement. You should also institute procedures to properly track accrual, use, and carryover of earned sick time. Investing in comprehensive workforce software solutions can help organizations automate their procedures when updating workforce compliance with evolving federal and state regulations like ESTA.
Integrating the appropriate workforce software solution for your organization’s needs can set parameters for assisting with updating policies to comply with regulations like ESTA.
