Michigan's Earned Sick Time Act: Key FAQs for Employers

As we previously noted here, Michigan’s Earned Sick Time Act (“ESTA”), effective February 21, 2025, will implement expanded paid sick leave requirements for all Michigan employers.  The Michigan Department of Labor and Economic Opportunity has now published a FAQ guide to provide employers with guidance on the new ESTA regulations. While these FAQs provide valuable guidance, they are not legally binding and may be subject to a different interpretation by the courts.  Nonetheless, staying informed about these FAQs will help ensure compliance and navigate the legal complexities associated with the ESTA.  Below is an overview of key FAQs employers should be aware of:

1. Coverage Threshold

The ESTA applies to all employers in Michigan with at least one employee, with the sole exception being employees who work for the United States government.  While the ESTA is silent on whether the 10-employee threshold is calculated based on total employees nationwide or solely those in Michigan, the FAQs indicate that the threshold is determined by a nationwide count, similar to the approach taken by the PMLA, though only employees in Michigan would be entitled to the ESTA benefits. 

2. Eligibility

The ESTA mandates that all employees accrue sick time.  One ambiguous issue under the ESTA is whether independent contractors are covered, as the definition of “employee” covers “an individual engaged in service to an employer in the business of the employer.”  The FAQs clarify that eligibility applies to individuals performing work for the employer’s business who are on payroll and subject to federal income tax withholding.  The FAQ would thus exclude properly classified independent contractors from coverage under the Act. 

3. Permissible Uses and Sick Time

The FAQs remind employees that under the ESTA, sick leave can be used for:

• The employee’s or family member’s physical or mental health issues;
• Medical diagnosis, treatment, or preventive care;
• Public health-related closures affecting work or school;
• Meeting at a child’s school or place of care related to the child’s health or disability;
• Exposure to a communicable disease; and/or
• The employee’s or family member’s status as a victim of domestic violence or sexual assault.

Notably, the definition of a “family member” under the ESTA includes an individual related by “affinity whose close association with the employee is the equivalent of a family relationship.”  The FAQs do not provide any guidance on this issue.

4. Accrual and Frontloading

Under the ESTA, employees accrue sick time at a rate of 1 hour for every 30 hours worked.  Employees may use up to 72 hours of paid leave annually.  For small businesses (fewer than 10 individuals), the limit on paid leave usage is 40 hours, with an additional 32 hours to be used as unpaid leave.  Critically, unlike the Paid Medical Leave Act, the ESTA has no weekly or annual accrual cap.

One open issue under the ESTA is whether employers can frontload sick leave to employees.  The FAQs indicate that frontloading is permitted.  The FAQs create additional questions on this point, however, by stating that, if an employer opts to frontload hours, it must still adhere to the accrual, use, carryover and other provisions of the ESTA.  

5. Rate of Pay and Increments of Use

The FAQ states that sick leave pay is based on the higher of an employee’s regular rate of pay or the state minimum wage.  Notably, the FAQ does not reconcile the use of “regular rate of pay,” which has a specific meaning in the wage law context, with the “normal hourly wage” language used in the ESTA.  Additionally, the FAQs do not address other open issues under the ESTA, such as the treatment of employees paid on a basis other than an hourly wage.  

In terms of sick leave use, the ESTA specifies that leave may be taken in increments aligned with the smallest unit the employer uses for other types of absences.  The FAQs reinforce that, if an employer tracks attendance and absences in increments of 1/10th of an hour (6 minutes), that would be the minimum increment permitted for using paid sick leave.

6. Year Definition and Treatment of Existing PMLA Time

The FAQs highlight that employers can define the 12-month “benefit year” period based on their chosen calendar or fiscal cycle.  The FAQs do not provide any guidance on how to handle the initial, partial year of coverage if an employer is using a benefit year that does not commence on February 21, 2025.  Moreover, the FAQs lack guidance for employers on how to treat existing PMLA balances. 

7. Documentation Requirements and Advance Notice

The FAQs reiterate that employers may require a doctor’s note only after three consecutive days of absences but cannot ask for illness details or delay leave if documentation is not immediately provided.  Employees must submit documentation promptly if requested, with employers covering any associated costs.  For foreseeable absences, employers may request advance notice (up to seven days).  For unforeseen absences, employees should give notice as soon as practicable.

8. Recordkeeping and Poster Requirements

Employers must retain sick leave records for three years and display the ESTA compliance posters in their workspace.  They are also required to provide written notice of an employee’s rights under the ESTA to all new employees at the time of hiring.  The FAQs remind employers to display the Department of Labor and Economic Opportunity’s updated paid sick leave poster, or an equivalent poster, reflecting the ESTA’s requirements in a prominent, accessible location for employees.

9. Employee Protections and Private Right of Action

Lastly, the FAQs reiterate that the ESTA includes strong protections against retaliation for using sick leave, seeking redress, or filing complaints.  Adverse actions within 90 days of a protected activity are presumed retaliatory.  The ESTA also allows employees to file lawsuits directly, seeking extensive damages.  As a result, employers face heightened liability exposure, making compliance crucial.

Next Steps:

Although it is uncertain whether the Legislature will amend the ESTA before the February 21, 2025, effective date, clients should begin preparing new sick leave policies now.  Clients can reach out to one of Honigman’s Labor and Employment attorneys here for further assistance.  In addition, for a comprehensive overview of the ESTA’s provisions, including clarification on ambiguities, clients are encouraged to attend Honigman’s Webinar on Wednesday, December 11, 2024.  An invitation for the webinar will be forthcoming.