Michigan has enacted amendments to its paid sick time (HB 4002) and minimum wage laws (SB 8), effective February 21, 2025. These changes provide relief for small businesses while expediting wage increases for workers. Here’s what employers need to know.
Paid Sick Leave Changes
The amendments revise Michigan’s Earned Sick Time Act (ESTA), introducing key adjustments and clarifications, including the following:
- Redefining Small Employers – Small employers are now defined as those with 10 or fewer employees (previously nine (9) or fewer).
- Effective Date Changes – Delays paid sick time requirements for small employers until October 1, 2025 (previously February 21).
- Amount of Leave – Removes the requirement for small employers to provide 32 hours of unpaid leave in addition to 40 hours of paid leave.
- Use of PTO – Employers who offer a single bank of paid time off (PTO) must treat 72 hours as earned sick time (EST) (or 40 hours for small employers).
- Carryover and Usage Cap Requirements – Small employers may cap carryover of leave at 40 hours per year (previously 72 hours).
- Frontloading and Carryover Requirements – Frontloading is now permitted to eliminate the need for carryover.
- Waiting Period – Employers may require new hires to wait until their 120th day of employment (previously 90th day) to use accrued paid sick time.
- Rehire Provisions – Employees rehired within two months (previously six months) must have their unused paid sick time restored, unless it was paid out upon termination.
- Exemptions – Certain employees are exempt, including those who set their own hours, unpaid trainees, interns, and minors under child labor laws.
Background on ESTA
Under ESTA, employers must provide paid earned sick time to all Michigan employees.
- Large employers (more than 10 employees) must offer up to 72 hours per year.
- Small employers (10 or fewer employees) must provide up to 40 hours per year.
- Employees at small businesses will begin accruing paid sick time on October 1, 2025, while all others began accruing on February 21, 2025.
- Employees earn one hour of paid sick time for every 30 hours worked.
- Exempt employees accrue sick time based on a 40-hour workweek unless they work fewer hours.
- Employees may carry over unused paid sick time, but employers may cap carryover at 40 or 72 hours, depending on employer size.
Employees can use paid sick time for various health-related reasons, including their own or a family member’s illness, medical care, domestic violence-related issues, or public health emergencies.
Employers must provide written notice of ESTA rights to employees by March 23, 2025, or upon hire, and display a workplace poster with the same information. The notice and poster must be provided in English, Spanish, and any other primary language spoken by at least 10 percent of employees, provided the state offers a translation in that language. The state has also created frequently asked questions (FAQs) and a model notice, which can be found here.
Minimum Wage and Tip Credit Changes
The amendments accelerate the scheduled increases to Michigan’s minimum wage while maintaining the tip credit:
- Minimum Wage – A revised wage schedule will raise Michigan’s minimum wage to $15 per hour by 2027. The minimum wage increases as follows:
- February 21, 2025 – $12.48 per hour
- January 1, 2026 – $13.73 per hour
- After 2027, the minimum wage will be adjusted annually each January based on inflation.
- Tip Credit – The tip credit will be preserved, whereas it was previously set to phase out by 2031. Effective February 21, 2025, the tip credit is $4.74 per hour for tipped employees.
Next Steps for Employers
Employers should review and update their sick leave policies and procedures to comply with the new ESTA requirements. The ESTA notice must be added to new hire/onboarding packets and displayed prominently in the workplace. Employers should also familiarize themselves with state guidance and ensure that managers are trained on the updated requirements.
Additionally, businesses should adjust payroll systems to accommodate the revised minimum wage schedule and ensure compliance with tip credit changes. By taking these steps now, employers can stay ahead of regulatory requirements and maintain a compliant workplace.
