Understanding ESTA: Key Provisions For Employers

The following are the key provisions of the Amended ESTA:

Employers Are Now Expressly Authorized to Frontload ESTA Paid Leave

• The Amended ESTA clarifies that employers may provide employees with seventy-two (72) hours of paid sick time at the beginning of a year (meaning a regular and consecutive 12-month period – g., a calendar year or a 12 month period from a work anniversary) for immediate use.
• If an employer chooses to frontload 72 hours of paid sick time, which can be designated as PTO (including by frontloading the entire amount of PTO), the employer does not have to:
  • Allow an employee to carry over any unused sick time from one year to the next;
  • Calculate and track an employee’s accrual of paid sick time; or
  • Pay the unused sick time out at the end of the year.

ESTA Paid Leave Obligations May be Satisfied Using Existing PTO and Sick Leave Banks

• The Amended ESTA expressly clarifies that employers are in compliance with ESTA as long as they provide employees with paid time off of at least seventy-two (72) hours and allow such time to be used for the purposes described in the ESTA or any other purpose.
• The prior ambiguous and troubling language requiring any combination of time to be used “under the same conditions” and “accrued at a rate equal to or greater than” the rate described in ESTA has been removed.
• The Amended ESTA allows employees to take ESTA time in 1 hour increments or the smallest increment that the employer uses to account for absences of use of other time.
• The Amended ESTA makes clear that employees must be paid their base hourly wage for ESTA time, which excludes bonuses, commissions, tips, and likely fringe benefits.

New and Clarified Administrative Obligations Under Amended ESTA

• The Amended ESTA allows employers to impose a 120-day waiting period before employees hired after February 21, 2025, may use ESTA time.
• Under the Amended ESTA, employers may require medical documentation after more than three (3) consecutive days of leave, at the employer’s expense.
• Employers may insist that such medical documentation is provided within 15 days of leave under the Amended ESTA.
• In certain circumstances, employers may discipline employees who use ESTA time for reasons inconsistent with the Amended ESTA.
• Part-time employees are entitled to a proportional amount of paid sick time consistent with the time of their leave.
• Existing PTO and/or sick leave policies may require amendment to ensure compliance with ESTA.

Employers May Require Employees to Abide with Certain Notice Requirements

• Employers may continue to require employees to provide advance notice of up to seven (7) days of an employee’s intention to use sick leave if the need for leave is foreseeable.

• If the need for leave is not foreseeable, an employer may require the employee to provide notice of the intention to use leave in accordance with the employer’s policy related to requesting or using sick leave as long as:

• The employer provides the employee with a written copy of the sick time policy describing procedures as to how an employee must provide notice; and
• The notice requirement allows the employee to provide notice after the employee is aware of the need to use sick leave.

Certain “Employees” Are Exempted from the Amended ESTA

• The Amended ESTA clarifies that the following will not be considered “employees” for the purposes of entitlement to earned sick time:
  • US government employees;
  • Unpaid trainees and interns (based on FLSA definition of intern);
  • Individuals employed in accordance with the Youth Employee Standards Act (Youth Work Permits); and
  • Individuals who work independently (independent contractors) in accordance with a policy of the employer if both of the following are met:
    • The policy allows the individual to schedule their own working hours; and
    • The policy prohibits the employer from taking adverse personnel action against the individual if they do not schedule a minimum number of working hours.
• Employers should review existing independent contractor agreements and policies to ensure the above conditions are satisfied.

Small Businesses Are Not Required to Provide Unpaid Leave

• A “small business” is defined as an organization which employs 10 or fewer employees (including full time, part time and temporary employees) during a given week. An employer is not considered a small business if it maintained more than 10 employees on its payroll during any 20 or more calendar work weeks in the current or immediately preceding calendar year.
• Small businesses are only required to provide up to 40 hours of paid sick leave to employees. The former requirement that employers allow employees to use an additional 32 hours of unpaid sick leave was eliminated.
• Small businesses have until October 1, 2025, before they are required to comply with the Amended ESTA (e., employees will not begin to earn sick time until October 1, 2025).

New Small Businesses Have Three Years to Comply

• New small businesses which did not employ anyone prior to February 21, 2022, are not required to comply with the Amended ESTA for a period of three (3) years following the date the small business first employed an employee.

Written Notices Do Not Have to be Distributed for 30 Days

• Employers have thirty (30) days from the effective date of the Amended ESTA (or until March 23, 2025) to provide written notice to employees describing the amount of ESTA time available to employees; how the employer will define a “year;” the terms under which sick time can be used; and that retaliatory action taken against an employee for requesting or using sick time is prohibited. This notice may be satisfied by distributing a new policy which complies with the Amended ESTA.
• The department has created a poster for employers to display in a conspicuous place that is accessible to employees, which can be found here(goes to new website).

The Private Cause of Action and Rebuttable Presumption Are Eliminated

• Employees are not permitted to file a lawsuit in court to obtain relief under the ESTA (although the State of Michigan retains the discretion to bring a civil action against an employer for violations of the ESTA).
• Although anti-retaliation provisions remain, employers are no longer presumed to have violated ESTA if an adverse action is taken against an employee within ninety (90) days of that employee engaging in certain protected activities.
• Under the Amended ESTA, employers may be fined up to eight (8) times their hourly wage as a penalty.

Existing Contracts in Conflict with the Amended ESTA May Continue through the Contract Expiration

• The Amended ESTA now provides that if certain contracts signed by the employer and employee prior to December 31, 2024, contain language that conflicts with the Amended ESTA, then the Amended ESTA will not become effective until the expiration of the contract.
• Employers must notify the department of the existence of the contract and the contract must not be for a period of more than 3 years.

Collective Bargaining Agreements Will Continue Until Expiration

• For any collective bargaining agreement (“CBA”) which conflicts with the Amended ESTA, the Amended ESTA will not apply until the expiration date of the CBA.
• New issues FAQs published by the Michigan Department of Labor & Economic Opportunity (which are not legal advice and are subject to change at any time), continue to assert that the Amended ESTA will immediately apply if a CBA is silent as to sick time or sick leave benefits. This inexplicable interpretation is in direct conflict with the plain language of the Amended ESTA.