We have received a lot of questions about Michigan’s newly implemented Earned Sick Time Act (ESTA), which took effect on February 21, 2025. This significant legislative development warrants immediate attention from all Michigan employers to ensure compliance with the statutory requirements and avoid potential liability.

Implementation Timeline and Applicability

The ESTA establishes a tiered implementation schedule based on employer size. For most employers with 11 or more employees, accrual of earned sick time began immediately on February 21, 2025. Small businesses with 10 or fewer employees have until October 1, 2025, to comply if they had employees on or before February 21, 2022. Notably, small businesses without employees on or before February 21, 2022, are exempt until 3 years after hiring their first employee.

It is important to note that pursuant to statutory requirements, all covered employers must provide written notice to employees regarding ESTA provisions no later than March 23, 2025 (30 days following the effective date) or at the time of hiring for new employees.

Key Provisions of the ESTA

Accrual Methodology

The statute mandates that eligible employees accrue one hour of paid sick time for every 30 hours worked. Employers must permit accrual up to 72 hours annually (40 hours for small businesses), with carryover of unused sick time to subsequent years. Usage may be limited to 72 hours per 12-month period (40 hours for small businesses).

As an alternative to tracking accruals, employers may elect to frontload paid sick time by providing at least 72 hours (40 hours for small businesses) at the beginning of each benefit year. This approach, which makes frontloaded hours available for immediate use, eliminates carryover and accrual tracking requirements for full-time employees. For part-time employees, a prorated front-loading approach is permissible, subject to specific notice and true-up requirements.

Under the accrual method, employers may implement a waiting period policy for employees hired after February 21, 2025, requiring these individuals to wait up to 120 calendar days before utilizing accrued sick time. However, sick time accrual must continue during this waiting period, and this restriction is not applicable if you are utilizing the frontloading approach.

Paid Time Off Integration

Employers may satisfy ESTA requirements through establishment of a combined Paid Time Off (PTO) policy, provided that the total available paid leave meets or exceeds statutory minimums, permits usage for all purposes authorized under the ESTA, and adheres to all other substantive requirements of the statute.

For ESTA purposes, an employee’s compensation rate is limited to their normal hourly wage or base rate, expressly excluding overtime premiums, holiday pay, bonuses, commissions, gratuities, and other supplementary compensation.

Collective Bargaining Agreement Considerations

The ESTA contains specific provisions governing its interaction with collective bargaining agreements (CBA). Where a CBA in effect on February 21, 2025, contains terms regarding sick leave benefits, those terms supersede ESTA requirements until the CBA expires or is renegotiated. However, where a CBA is entirely silent regarding sick leave, ESTA provisions apply immediately (subject to small business exceptions).

Enforcement and Minimum Wage Amendments

The Michigan Department of Labor and Economic Opportunity is vested with enforcement authority under the ESTA. Concurrent with ESTA implementation, Senate Bill 8 has modified Michigan’s minimum wage provisions, establishing a regular minimum wage of $12.48 effective February 21, 2025, incrementally increasing to $15.00 by 2027, with subsequent inflation adjustments. Additionally, the minimum cash wage for tipped employees will gradually increase from 38% to 50% of the regular minimum wage by 2031 (currently $4.74 for 2025).

Proactive Compliance Recommendations

To ensure full compliance with these significant statutory changes, we advise our clients to immediately review and update employee handbooks and sick leave policies, develop appropriate recordkeeping systems, prepare and disseminate required employee notices prior to the March 23, 2025, deadline, and train human resources personnel on new statutory requirements. Organizations should also carefully consider whether front-loading options or accrual-based tracking systems better align with their business needs.

The implementation of the ESTA represents a substantial change to Michigan’s employment landscape, necessitating prompt and thorough compliance measures. Dawda’s Labor and Employment Practice Group stands ready to provide tailored guidance to ensure your organization’s full compliance with these new statutory requirements.

For further information or assistance with implementation, please contact our Labor and Employment Practice Group or visit Michigan.gov/EarnedSickTime for additional resources.