News/Event

ELEVENTH HOUR CHANGES TO EARNED SICK TIME AND MINIMUM WAGE

Well last night at the eleventh hour (literally midnight and 1:30 am) the legislature passed changes to the Earned Sick Time Act (HB 4002) and Minimum Wage (SB 8). So far it has not been reported whether Governor Whitmer signed these bills, but it was expected that she was going to do so.

The following is a summary of the changes in these bills:

Minimum Wage
The minimum wage rate will increase from $10.56/hour (current) to $12.48 on Feb. 21, 2025; $13.73 on Jan. 1, 2026; and $15 Jan. 1, 2027. From there, inflationary increases will follow Jan. 1, 2028, and each subsequent year using the Midwest Consumer Price Index.

For tipped employees, the tipped minimum wage will stay at 38% in 2025 and jump 2% per year beginning in 2026 until it hits 50% in 2031. The legislation also added a $2,500 fine to be assessed to employers who fail to ensure tipped workers get paid at least minimum wage.

Earned Sick Time Act
Certain Exempt Employees: There are now certain employees who are exempt from the ESTA law: (1) those who work in accordance with a policy that allows the individual to scheduled his/her own hours and has a policy that prohibits the employer from taking adverse personnel action if the individual does not schedule a minimum number of working hours; (2) unpaid trainees or unpaid interns; and (3) individuals employed in accordance with the Youth Employment Standards Act.

Added Exempt Employer: “Nonprofit agencies” are not exempt from the definition of “employer.”

New Business Grace Period: New businesses who have yet to hire an employee before House Bill 4002 takes effect would also be exempt from the new law for three years after hiring their first employee.

Small Businesses Extended Deadline with less than 10 employees have until Oct. 1, 2025, to comply with the ESTA requirements. Employees of small businesses will only be eligible for a total of 40 hours of paid leave annually and no unpaid leave.

Carry over: Is now capped at 72 hours. If the employer chooses to front load, then employer can have a use it or lose it policy and the time will not rollover.

Frontloading: Employers may choose frontload 72 hours at the beginning of a benefit year (40 hours for small businesses). Employers only need to track how many hours of paid leave time employees have used annually. No carryover is required.

For part time employees, employers may frontload the time at the start of a year if (1) the employer provides the employee with a written notice on how many hours the employee is expected to work in a year at the time of hire; (2) the amount of EST frontloaded is, at a minimum, proportional to the EST that the employee would accrue if they worked all of the hours expected; and (3) if the part-time employee works additional hours, the employer will provide additional hours.

New Hire Waiting Period: has been expanded from 90 days to 120 days.

Combining ESTA with PTO time: An employer will still be in compliance with ESTA if the employer meets either of the following conditions: (1) provides the employer’s employees with PTO not less than the same amounts of time off as provided under ESTA (72/40 hours) and (2) the time may be used for a purpose described under 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.

Rate of pay : Clarifies that the “normal hourly rate” used to calculate ESTA pay does not include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities.

Notice of the Need for ESTA Lease:
For “foreseeable events” still allows up to 7 days advanced notice.

For “non-foreseeable events” an employer may require the employee to give notice in either of the following manners:

(1) as soon as practicable; OR

(2) in accordance with the employer’s policy on requesting/using sick time or leave IF (a) on the date of hire, or the effective date of HB 4002, whichever is latest, provides the employee with a written copy of the policy that includes procedures for how the employee must provide notice and (b) that notice requirement allows the employee to provide notice after the employee is aware of the need for the ESTA leave.

**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: The changes now set a time limit of 15 days for employee to provide documentation when requested by the employer. Still requires 3 consecutive days before documentation can be requested and does not change requirement that employer pay out of pocket expense or define out of pocket expense.

Increment of Use: It looks like Employers now have a choice whether to use 1 hour increments or the smallest increment used to account for absences.

Discipline/Adverse Actions – Permits an employer to take adverse employment action against an employee who fails to notify of the need for leave per the employer’s policy or misuses the benefit, including falsifying the reason for the leave.

Reinstatement of Accrued Time Changes the reinstatement of accrued ESTA time from 6 month return to return within 2 months, unless the employer paid out the unused EST.

Rebuttable Violation Presumption There is no longer a rebuttable presumption that any adverse personnel action against an employee within 90 days after that person files a complaint, cooperates with the department, etc.

No Private right of action Employees no longer have a private right of action to go straight to court if they believe their employer violated the law.

Penalties – The penalty for violation has been changed to a civil fine of not more than eight times the employee’s normal hourly wage.

Complaints – Employee must file a complaint with the state within three years of the violation. No longer includes “or the date when the employee knew of the violation.”

Posters and Notice to Employees – Adds an additional 30 days to post new posters and provide employees with written notice to each employee about the amount of EST required to be provided under ESTA, the employer’s choice of how to calculate a “year,” the terms which EST can be used, etc.

Collective bargaining agreements Clarifies that for employees covered by collective bargaining agreement on the effective date of the ESTA and the collective bargaining agreement conflicts with ESTA, ESTA applies beginning on the expiration date in the collective bargaining agreement. HB 4002 also provides that employers who participate in a multiemployer collective bargaining agreement and contribute to a multiemployer paid sick leave plan are in compliance with ESTA.

Please feel free to call or write with any questions. I am happy to work with you on issuing the proper notices and revising any notices/policies that were already issued for yesterday’s deadline.

Thank you.

Sincerely,

Michelle D. Bayer Joelson Rosenberg, PLC