What the Revised Earned Sick Time Act Means for Michigan Employers

On Feb. 21, Governor Whitmer signed an amendment to the Earned Sick Time Act (“ESTA”), which became effective immediately. The law requires most Michigan employers to permit employees to accrue and use paid earned sick time.

1. Definitions of “Employee,” “Employer,” and “Small Business.” The only employees exempt from the new law are: individuals employed by the federal government, individuals who work under a policy that allows the individual to schedule their own working hours and prohibits the employer from taking an adverse employment action if the individual does not schedule a minimum number of hours, unpaid trainees or interns, and individuals employed under the youth employment standards act.

“Employer” is defined as any person, firm, business, educational institution, corporation, limited liability company, government entity (but not the United States government), or other entity that employs one or more individuals. According to the Department of Labor and Economic Opportunity, nonprofit agencies remain employers for purposes of ESTA.

“Small businesses” are defined as those with 10 or fewer employees on their payroll for 20 or more calendar workweeks in either the current or immediately preceding calendar year.

2. Benefit Accrual and Carryover. All covered employees are eligible to accrue one hour of earned sick time for every 30 hours worked. While employees may accrue more than 72 hours of earned sick time annually, employers with more than 10 employees may cap usage at 72 hours each year, and small businesses may cap usage at 40 hours annually.

Employers using the accrual method must carry over up to 72 hours of unused earned sick time (or 40 hours for small businesses) to the following benefit year. Employers are not required to payout accrued, unused paid earned sick time upon separation from employment.

3. Benefit of Frontloading and No Carryover. As an alternative to the accrual method above, employers may choose to frontload 72 hours of paid sick time (or 40 hours for small businesses) at the beginning of a benefit year for immediate use.  If earned sick time is frontloaded, employers are not required to pay out unused paid earned sick time at the end of the year in which the time was accrued or to carry over unused hours.

For part-time employees, employers may frontload hours 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 hours frontloaded is, at a minimum, proportional to the hours 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 must provide additional hours.

4. Clarification Regarding “General Use” Paid Time Off. Employers can provide a combined “bank” of time, which includes paid time off, vacation, and sick time, so long as the policy pertaining to those hours provides at least the same benefits as provided by ESTA and may be used for the same purposes, under the same conditions, and accrued or provided for at a rate equal to or greater than that described in ESTA.

5. Notice to Use Earned Sick Time. If the need for paid sick time is foreseeable, the employer can require up to seven days advance notice. If the need is unforeseeable, notice should be given: (1) as soon as practicable; or (2) consistent with the employer’s policy on requesting/using sick time.

6. Increments of Use and Calculation of Pay. Paid sick time may be paid in one-hour increments or the smallest increment used to account for absence for other time off.  The wage an employer must pay an employee when using paid earned sick time is the greater of either the “normal hourly wage” or “base wage” and need not include overtime, holiday pay, bonuses, commissions, supplemental pay, tips, piece rates, or gratuities.

7. Request for Documentation. Employers may require the employee to provide reasonable documentation related to earned sick time within 15 days, but only after the employee takes three consecutive days off.

8. Compliance for Small Businesses. Small businesses have until Oct. 1 to comply with the act’s requirements. New employers with less than 10 employees, who had no employees prior to Feb. 21, are not required to comply with ESTA until three years after the first employee is hired.

9. Required Posters and Notice to Employees. Employers have until March 23 to post posters consistent with the amended ESTA and provide written notice to employees. Posters are currently available through the Department of Labor and Economic Opportunity.

10. No Retaliation. Employers are prohibited from taking retaliatory personnel action or discriminating against an employee because the employee has exercised a right under the act. Employers are also prohibited from interfering with, restraining, or denying the exercise of, or attempting to exercise, any right protected under the Act.

11. No Private Cause of Action. Employees who believe their employer has violated ESTA may file an administrative claim with the Department of Labor and Economic Opportunity within three years. However, ESTA does not provide employees with a private cause of action to file a lawsuit.

Employers should take immediate action to understand what ESTA means for their business and employees to ensure compliance. If you have any questions or would like further guidance, please contact Nina Jankowski or Hannah Reisdorff.

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