Compliance FYI: Changes to Michigan’s Earned Sick Time Act
On February 21, 2025, Michigan Governor Whitmer signed House Bill 4002 amending portions of the Michigan Earned Sick Time Act (ESTA). The amendments are effective immediately and alter several important provisions of the ESTA.
Updated Definition of Employee
For the purposes of ESTA, the term “employee” now does not include:
- An individual who works for an employer whose policy:
- Allows an individual to schedule their own working hours; and
- Does not allow the employer to take adverse personnel action against the individual if they do not schedule a minimum number of hours
- An unpaid trainee or intern
- An individual employed according to the Michigan Youth Employment Standards Act.
Updated Small Business Requirements
Small businesses, which are businesses with 10 or fewer employees, are now required to only provide up to 40 hours of paid sick leave. Previously, small businesses were required to provide up to 40 hours of paid sick and up to 32 hours of unpaid sick leave.
Carryover
The carryover of earned, but unused, paid sick leave can now be capped at 72 hours for most employees and 40 hours for employees of small businesses. Previously, there was no cap on the amount of earned but unused leave that could be carried over from year to year.
Frontloading
Employers are now permitted to frontload either 72 or 40 hours of paid leave, depending on employer size, at the beginning of the year. If an employer frontloads the required amount of paid sick leave they are not required to:
- Track accrual of paid sick leave
- Allow unused hours to carry over; or
- Payout any unused paid sick leave at the end of the year.
Previously, frontloading was not permitted by the ESTA.
Use of an Existing Leave Policy to Comply
The ESTA continues to permit the use of an existing paid leave policy to comply with ESTA’s requirements instead of tracking accrual of paid sick leave. Employers may now comply with the requirements of ESTA as long as they provide at least as much paid leave as ESTA requires and that paid leave can be used for the same reasons permitted by ESTA. Previously, employers who wanted to use an existing paid leave policy to comply with ESTA’s requirements also had to meet the law’s accrual and usage conditions requirements.
Rehire Requirements
Individuals who terminate employment must have any earned, but unused, paid sick leave reinstated if they are rehired within 2 months of separation. Reinstatement is not required if the employer pays out any unused paid sick leave at termination.
Previously, reinstatement was required if an individual was rehired within 6 months of separation, regardless of if the employer paid out the unused sick leave or not.
Employer Notice Requirements
Employer’s must provide their employees with a notice regarding ESTA within 30 days of February 21, 2025 (March 23, 2025). Going forward the notice must be provided to new hires as well.
Key Takeaways:
Employers subject to the Michigan Earned Sick Time Act would be well served to review the recent amendments. Employers may find their existing paid leave policies can be used to comply with the law’s requirements or that they may need to implement some changes to get into compliance.
The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.
