Last-Minute Changes to Michigan Earned Sick Time and Wage Laws: Effective February 21, 2025

We’ve all been waiting to see if Michigan legislators would reach a deal to amend the Earned Sick Time Act and the Improved Workforce Opportunity Wage Act, which became effective today, Friday, February 21, 2025.

The votes are in – and the midnight amendments were signed into law by Governor Whitmer on Friday.

What should employers do today?

Revisit your paid and unpaid time off policies and attendance policies as well as your wages and tip policies (yes, all those policies you just had to draft) to be sure they comply with the newly-amended laws, and distribute them as soon as possible along with the mandated notice posters. Regardless of the status of your policies, employers must make sick time available to employees on an accrual or frontloaded basis starting today. Contact an employment lawyer if you have concerns.

Amendment Summary

The midnight amendments include the following changes (note that these summaries are not comprehensive):

The Michigan Earned Sick Time Act:

Small Business Adjustment

• Now, it only includes businesses with 10 or fewer employees. An employer is not a small business if it has more than 10 employees on its payroll during any 20 or more calendar workweeks in either the current or immediately preceding calendar year. 
• Only 40 hours of paid sick leave is required for small businesses. The required 32 hours of unpaid sick leave is eliminated.
• Small businesses do not need to provide Earned Sick Time (EST) under this new law until October 1, 2025. 

Part-Time Employee Adjustment

• Part-time employees can be given frontloaded sick time in lieu of sick time on an accrual method provided certain notice and proportionality requirements are met.

Other Adjustments

• Unpaid trainees, youth employees, and certain employees who do not have set or minimum hours are excluded from coverage.
• EST can be used in 1-hour increments or the smallest increment that the employer uses to account for absences of use of other time; it is the employer’s option.
• Accrual Method and Caps on Usage – Employees must accrue paid EST at a rate of at least 1 hour for every 30 hours worked. 
  • Small employers can limit EST usage to 40 hours per year. 
  • All other employers can limit EST usage to 72 hours per year.
  • Employers using the accrual method must allow employees to carry over unused EST into the next benefit year up to 40/72 hours. 
• Frontloading – Employers can frontload EST instead of using the accrual method. If frontloading, employers do not need to permit carryover of unused EST from year to year and do not need to track accruals. 
• Employers may require new employees to wait until 120 calendar days after commencing employment before using EST (rather than 90).
• If a separated employee is rehired not more than 2 months (rather than 6 months) after the initial separation from employment, the employer must reinstate previously accrued, unused EST and allow the reinstated employee to use that EST immediately upon reinstatement – unless the employer elected to pay out accrued, unused PTO at the termination of employment.
• Employers may – but are not required to – pay out unused EST upon termination of employment.
• Paid sick time need not include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities.
• Employees can no longer directly file a civil action against an employer. Instead, remedial action is through filing a complaint with the labor department.
• Notice posters must be delivered to all employees and posted in English and Spanish. Present copies are available here under “Posting Requirements.”

What's the Same?

• Reasons to use ESTA.
• Notice requirements for use of ESTA are effectively the same.
• Employers can define a benefit “year,” and must advise employees of the employer’s chosen “year” measuring period for ESTA.
• Employers are not required to pay out unused EST upon termination of employment or at year-end or at any other time. 
• Retaliation remains prohibited.
• Employers cannot require employees to search for or secure a replacement worker as a condition for using EST.
• For EST of more than 3 consecutive days, employers can require reasonable documentation that supports that the EST was used for a permitted purpose, but will have to pay for it.
• PTO continues to satisfy ESTA requirements if it can be used in accordance with ESTA .
• Current collective bargaining agreements that do not conflict with ESTA continue until the agreement’s stated expiration date.

Improved Workforce Opportunity Wage Act:

The amendments to IWOWA include the following:

• Minimum wage adjustments:
  • 2/21/25 – minimum wage $12.48.
  • 1/1/26 – minimum wage $13.73
  • 1/1/27 – minimum wage $15.00
• Tipped minimum wage adjustments:
  • 2/21/25 is 38% of minimum wage ($4.74)
  • 1/1/26 40% of minimum wage ($5.49)
  • 1/1/27 42% of minimum wage ($6.30)
  • 1/1/28 44% of minimum wage
  • 1/1/29 46% of minimum wage
  • 1/1/30 48% minimum wage
  • 1/1/31 50% of minimum wage
• Tip sharing is permitted (subject to federal standards) provided the employer notifies the employee in writing at the time of hire of tip sharing and the employee freely and voluntarily consents in writing. Employers must provide employees with written notice of how the employer will distribute service charges (tips remain the property of the employee unless there is a tip-sharing agreement).
• Recordkeeping for 3 years is required.
• Failure to pay minimum hourly wages subjects the employer to a civil fine of $2,500, among other remedies.
• Exceptions apply to certain domestic workers and agricultural workers.

Disclaimer

This Client Alert is informational only and does not replace legal counsel, and you are encouraged to contact a Dickinson Wright employment attorney to learn how these Michigan laws apply to you and your business. Please note that this publication is not a comprehensive analysis of these laws and is not intended to analyze laws specific to any individual client circumstances.