icon on Michigan lawmakers approved a compromise on the ESTA shortly before midnight on Thursday, February 20, 2025. HB 4002 was presented to the Governor at 1:30 am and signed with an effective date of February 21 at 12:02am. Below are key changes to the ESTA:
- New Businesses: New businesses have a three-year grace period after forming. Small businesses (10 or fewer individuals working for compensation during a given week) have until October 1, 2025, to comply.
- Accrual and Usage Caps: Employees accrue 1 hour of paid earned sick time for every 30 hours worked. Usage can be capped at 72 hours annually. Small business employees will accrue at the same rate but usage can be capped at 40 hours of paid leave annually (no unpaid leave).
- Carryover: Can be capped at 72 hours (40 hours for small business). Use-it-or-lose-it applies if time is frontloaded.
- Frontloading: As an alternative to the accrual of paid earned sick time, an employer may provide an employee not less than 72 hours of paid earned sick time (40 hours for small businesses) at the beginning of the year for immediate use. If frontloaded, employers are not required to do any of the following: (a) carryover any unused time; (b) calculate and track employee’s accrual; (c) pay out unused sick time at the end of the year in which accrued.
- Waiting Period: New employees can be required to wait 120 calendar days before using accrued earned sick time.
- Current Policies: An employer is in compliance if either of the following conditions are met: provides employees with PTO not less than the same amounts of time off as provided under ESTA (72/40 hours) that may be used for a purpose described under Section 4 of the act OR any other purpose. The employer is not required to allow an employee to use PTO for a purpose described in ESTA in an amount that exceeds the amounts of time off provided under the act. Note: While this change seems favorable, it is unclear how it would apply in the real world.
- Rate of Pay: Normal hourly rate excludes overtime, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities.
- Advanced Notice:
- Foreseeable events: Allows up to 7 days' advanced notice.
- Not foreseeable events: An employer may require the employee to give notice in either of the following manners: (a) as soon as practicable or (b) in accordance with the employer’s policy on requesting/using sick time or leave IF both of the following are met: (i) on the date of hire, or the effective date of HB 4002, whichever is later, provides the employee with a written copy of the policy that includes procedures for how the employee must provide notice and (ii) that notice requirement allows the employee to provide notice after the employee is aware of the need for the ESTA.
- HB 4002 specifies that an employer requiring notice for sick time that is not foreseeable “shall not deny an employee’s use of earned sick time that is not foreseeable if…the employer did not provide a written policy to the employee… [and/or]…the employer made a change…and did not provide notice of the change within 5 days after the change.”
- Documentation: Employers can require documentation after three consecutive days off, to be provided within 15 days of the request.
- Increments: Sick time can be used in 1-hour increments OR the smallest increment used for absences.
- Rebuttable Presumption: Removes the presumption of violation if adverse action is taken within 90 days of protected activity.
- Private Right of Action: Employees cannot go straight to court for violations.
- Enforcement Responsibilities: Handled by the Michigan Department of Labor and Economic Opportunity.
- Posters and Notification: Employers have 30 additional days from the effective date of the amendment to post new posters and provide written notice to employees as required by ESTA.
Please review HB 4002 for the exact language of the amendment: 2025-PA-0002.pdf.
For more information on Michigan's ESTA updates, please contact Brian Kreucher of Howard & Howard Attorneys.