Michigan Department of Labor and Economic Opportunity Issues Updated FAQs on the Earned Sick Time Act

In October 2024, Michigan’s Department of Labor and Economic Opportunity (LEO) issued its first set of Frequently Asked Questions (FAQs) regarding the ESTA (Earned Sick Time Act), which we highlighted in one of our previous client alerts here.  Recently, LEO expanded upon and revised its responses through updated FAQs.

Below are a few highlights of the updated FAQs:

Employees Eligible to Receive Sick Time:

LEO previously stated that only employees for whom employers are required to withhold taxes are eligible for EST (Earned Sick Time).  The updated FAQ now aligns with the more vague statutory language, defining an eligible employee as “an individual engaged in service to an employer in the business of the employer.” 

Documentation:

In the updated FAQs, LEO elaborates that employers may ask questions of an employee to determine if their leave meets the eligible uses for EST. Employers may require reasonable documentation for absences exceeding three consecutive days but cannot request details about the illness or specifics of any violence that serves as the basis for the EST usage.

Sick Time Payment in Place of Carryover:

Employers have sought clarification on whether they can maintain policies that allow for the payout of unused sick time at the end of the year in lieu of carryover.  LEO clarified that unused sick time cannot be paid out at year-end; instead, it must carry over to the next year. If an employee is rehired within six months, any unused time must be reinstated.

Employee Threshold:

Employers must count all U.S. employees to determine if they meet the 10-employee threshold. For example, a company with nine employees early in the year that hires a 10th employee for 20 weeks later in the year is classified as a large employer for the remainder of that year and the following year.

Unionized Workplaces:

Under the ESTA, the law specifies that, for employees covered by a collective bargaining agreement (CBA) in effect on the Act’s effective date, the provisions of the ESTA will apply starting on the CBA’s stated expiration date. The updated FAQs introduce a new interpretation, however: if the CBA does not address sick time, the ESTA will apply to employees covered by that agreement as of February 21, 2025, regardless of when the CBA is set to expire.

Front Loading Hours:

Prior LEO guidance indicated that employers could front load sick time under the Act.  In the updated FAQ, LEO confirmed that front loading is permissible but clarified that, since there is no cap on the amount of sick time an employee can accrue or carry over, employers should review employee accruals at least annually to ensure they are proportionate to hours worked and carry over any remaining balance.

Additionally, LEO noted that employers are permitted to recover frontloaded time if an employee uses more sick leave than they would have accrued by the time of their separation.  This deduction cannot reduce the final paycheck below minimum wage, and the employer must have a prior written, voluntary agreement with the employee for the deduction.

Use of Sick Time:

The Act outlines that earned sick time can be used in either (i) one-hour increments or (ii) the smallest time increment used by the employer’s payroll system to track absences or other time off.  The new guidance provides an example to clarify this rule for employers.  LEO explains that, if an employer tracks time in 1/10th of an hour (six minutes), then earned sick time must be used in six-minute increments. Alternatively, if the employer tracks time in 1/2 hour (thirty-minute) blocks, then sick time must be used in thirty-minute increments.

Concurrent FMLA & the ESTA Time:

The ESTA leave may run concurrently with FMLA (Family Medical Leave Act) leave, but the ESTA notice and documentation requirements take precedence while the ESTA time is in use. Once exhausted, standard FMLA notice and documentation rules apply.

As the February 21, 2025, implementation date approaches, employers are left with several unresolved questions and uncertainties. Moreover, a bill to amend the ESTA has been introduced in the Legislature, and further updates are possible. For now, Employers are encouraged to attend Honigman’s webinar on December 11, 2024, for a comprehensive overview of the ESTA.  Clients can otherwise reach out to one of Honigman’s Labor and Employment attorneys here for further assistance.