What You Need to Know:
- Effective February 21, 2025, Michigan’s Earned Sick Time Act (“ESTA”) will replace the Paid Medical Leave Act (“PMLA”). As detailed in our prior update, the ESTA is a significantly more pro-employee mandate than the current standards under the PMLA, and it will provide more generous paid sick leave rights than many other states.
- The ESTA includes, among other updates: broader employee eligibility; broader employer coverage; a faster paid sick leave accrual rate; an increased annual usage cap; likely no annual accrual cap or year-end carry over cap; and broader reasons for use and covered family members.
- The Michigan Department of Labor and Economic Opportunity (the “Department”) has published ESTA FAQs, the first administrative guidance interpreting the amendments.
- In addition to issuing FAQs, the Department released a new ESTA model poster required to be posted in the workplace and a brochure providing general information about the paid sick leave law.
On the heels of the Michigan Supreme Court’s July 2024 ruling that shook the State’s sick leave foundation and reinstated the ESTA, the Department published Frequently Asked Questions regarding the upcoming amended Michigan paid sick leave law. These FAQs provide the first guidance on the Michigan ESTA, which goes into effect on February 21, 2025. Generally, the FAQs set forth requirements regarding employer coverage, accrual, the definition of the benefit year, year-end carryover, frontloading, usage (including reasons for use and increments of use), covered family members, interplay with other leaves and time off, rate of pay, payout upon separation of employment, employee notice, documentation, confidentiality, anti-retaliation, recordkeeping, notice and posting, and penalties for violations, as well as information about filing a claim.
Key FAQs provide the following insights and reminders:
Employee Threshold: The ESTA applies broadly to all employers with at least one employee in Michigan, excluding only employees of the United States government. While ESTA allows for reduced paid sick leave obligations for “small businesses,” the threshold to qualify is having fewer than 10 individuals work for compensation during a given week, and even then the majority of the paid sick leave standards still apply. An employer meets the 10-employee threshold (i.e., it is not a “small business”) if it employs 10 or more employees in 20 or more workweeks in the current or previous calendar year. It is currently unclear from the ESTA and the updated FAQs whether only Michigan employees are counted when assessing the 10-employee threshold. That said, certain details about the calculation are known, such as:
- The 20 workweeks need not be consecutive.
- Notably, in counting the number of employees, employers must include full-time, part-time, and temporary employees, including those provided through a temporary service or staffing agency or similar entity.
- The FAQs clarify that only employees engaged in service to an employer in the business of the employer and from whom an employer is required to withhold for federal income tax purposes are eligible to earn and use paid sick leave.
Accrual and Year-End Carryover: Accrual begins on February 21, 2025, or upon commencement of the employee's employment, whichever is later. Eligible employees must accrue at least one hour of paid sick leave for every 30 hours worked. There is no cap on accrual. All accrued, unused paid sick leave must be carried over from year to year. Notably, the FAQs do not currently provide guidance for employers on transitioning paid sick leave benefits between the PMLA and the ESTA, which is an especially important gap given the ESTA’s effective date.
Annual Usage Cap: Regardless of the amount of paid sick leave accrued or carried over, an employer is not required to permit an employee to use more than 72 hours of paid sick leave in a benefit year. Small businesses may limit the use to 40 hours of paid sick leave and an additional 32 hours of unpaid sick leave per benefit year. Employees of small businesses must be allowed to use their 40 hours of paid sick leave before using unpaid sick leave.
Frontloading: While the ESTA is silent regarding whether frontloading is permissible, the FAQs, indicate that an employer may provide the total amount of paid sick leave at the beginning of the benefit year, provided it complies with the accrual, use, carryover, and other provisions of the ESTA during the benefit period. Thus, it appears that employers who choose to provide a frontloaded grant of paid sick leave will need to continue to track employees’ paid sick leave accrual based on hours worked, and will not be able to avoid the ESTA’s year-end carryover requirements.
Rate of Pay: Under the ESTA, employees must be paid their normal hourly wage (but not less than minimum wage) for sick leave absences. Per the FAQs, sick leave must be paid at a pay rate equal to the greater of either an employee's regular rate of pay or the Michigan minimum wage rate. It remains to be seen whether the FAQs’ use of the phrase “regular rate of pay” is meant to indicate a departure from the statute’s “normal hourly wage” standard.
Increments of Use: Under the ESTA, employees may use paid sick leave in the smaller of hourly increments or the smallest increment that the employer's payroll system uses to account for absences or use of other time. The FAQs provide an example: if an employer uses 1/10th (6 minutes) of an hour for tracking attendance/absences, then this would be the minimum increment of use allowed for paid sick leave.
Notice and Documentation:
- If the need for paid sick leave is foreseeable, an employer may require the employee to provide advance notice of their intention to use available paid sick leave not to exceed 7 days prior to the date the paid sick leave is to begin.
- If the need for paid sick leave is not foreseeable, an employer may require the employee to give notice of their intention to use available paid sick leave as soon as practicable.
- For paid sick leave absences of more than 3 consecutive days, an employer may require reasonable documentation that the paid sick leave has been used for a covered ESTA reason. Upon request the employee must provide this documentation in a timely manner.
- Employer-required documentation should not include a description of the illness or details of the violence.
- If an employer requires documentation, it is responsible for paying all out-of-pocket expenses the employee incurs in obtaining the documentation.
- An employer cannot delay commencement of the leave based on a failure to receive documentation.
Recordkeeping: Employers must retain records that document the hours worked and paid sick leave used by employees for not less than 3 years. These records shall be available to the Wage and Hour Division with appropriate notice and at a mutually agreeable time.
Model Poster/Notice: In addition to issuing new FAQs, the Department released an updated paid sick leave poster to reflect the ESTA’s requirements. The FAQs remind employers that they must display the poster in the workplace. Specifically, the poster must be placed in a conspicuous place that is accessible to employees. Under the ESTA, the poster must be displayed in English, Spanish, and any language that is the first language spoken by at least 10% of an employer’s workforce, so long as the Department has translated the poster into that language. However, the model poster has not yet been translated into any languages other than English and Spanish. Employers are also required to provide a notice of rights to all new employees at the time of hiring. Though not entirely clear, the FAQs imply that this notice must be provided to current employees by February 21, 2025.
Brochure: Additionally, the Department published an ESTA brochure “for general information only.” The brochure includes information regarding filing a claim, the definition of employee and employer, accrual, reasons for use, usage, rate of pay, and employees’ rights under the ESTA.
Next Steps: As the Michigan ESTA’s February 21, 2025 effective date is mere months away, here are some next steps for employers to consider:
- Review existing sick leave or PTO policies and practices, and either implement new policies and practices or revise existing policies and practices to ensure compliance with the ESTA while doing the same for any related attendance, conduct, anti-retaliation, and discipline policies and practices.
- Train supervisory and managerial employees, as well as HR, on the new requirements.
- Monitor the Department’s website for the release of additional administrative guidance, updated FAQs, and potential rulemaking on employers’ paid sick leave compliance obligations.
