What happened?

On February 21, 2025, the Michigan Governor signed into law House Bill (HB) 4002, amending the Earned Sick Time Act (ESTA), and Senate Bill (SB) 8, amending the Improved Workforce Opportunity Wage Act.

Overview:

The main changes for compliance can be viewed in this section:

Minimum Wage and Tipped Credit (SB 8)

• The minimum wage in Michigan will increase to $12.48/hour on February 21, 2025, $13.73/hour on January 1, 2026, and $15.00/hour on January 1, 2027, with inflationary adjustments starting January 1, 2028.

• The tipped minimum wage will remain at 38% of the minimum wage in 2025, increasing by 2% annually until reaching 50% in 2031.

• Employers face a $2,500 fine for non-compliance, and One Fair Wage is planning a referendum to potentially repeal SB 8.

Earned Sick Time Act (ESTA)

• Applicability and Accrual: Small employers (10 or fewer employees) must comply by October 1, 2025, with employees accruing up to 40 hours of paid sick time annually (40-hour carryover cap). Larger employers (11 or more employees) must comply immediately from February 21, 2025, with employees accruing up to 72 hours annually (72-hour carryover cap).

• Exemptions and Notification: Exemptions include seasonal employees, unpaid trainees, interns, youth employees, and variable hourly employees who set their hours. Employees must provide seven (7) days’ notice for foreseeable sick time usage and as soon as practicable for unforeseeable usage.

• Frontloading and Compliance: Employers can frontload sick time for immediate use without carryover or payout requirements. Written notice of employee rights under ESTA must be provided by March 23, 2025, with civil fines for non-compliance up to eight times the employee’s hourly wage.

Additional Details:

Minimum Wage and Tipped Credit (SB 8)

• Minimum Wage Increases:
  • February 21, 2025: $12.48/hour
  • January 1, 2026: $13.73/hour
  • January 1, 2027: $15.00/hour
  • Inflationary adjustments starting January 1, 2028.

• Tipped Minimum Wage: Remains at 38% of the minimum wage in 2025, increasing by 2% annually until reaching 50% in 2031.

• Penalties and Referendum:
  • Employers face a $2,500 fine for non-compliance.
  • One Fair Wage is planning a referendum to potentially repeal SB 8.

• Effective Dates and Adjustments: Minimum wage and tip credit adjustments will occur annually each January, except for the initial increase on February 21, 2025.

Earned Sick Time Act (ESTA)

• Applicability:
  • Small Employers (10 or fewer employees): Compliance required by October 1, 2025.
  • Larger Employers (11 or more employees): Changes effective immediately from February 21, 2025.

• Accrual and Carryover:
  • Small Employers: Employees accrue up to 40 hours of paid sick time annually, with a 40-hour carryover cap.
  • Larger Employers: Employees accrue up to 72 hours of paid sick time annually, with a 72-hour carryover cap.

• Exemptions: Seasonal employees, unpaid trainees, interns, youth employees, and variable hour employees who set their own hours.

• Notification Requirements:
  • Seven (7) days’ notice for foreseeable sick time usage.
  • For unforeseeable usage, notice should be given as soon as practicable or per employer policy.

• Frontloading Allowance: Employers can frontload sick time, allowing immediate use without carryover or payout requirements.

• Part-Time Employees: Proportional frontloading based on initial work estimates, with additional hours accruing at the normal rate if exceeded.

• Legal and Compliance:
  • Employers must provide written notice of employee rights under ESTA by March 23, 2025.
  • Civil fines for non-compliance can be up to eight times the employee’s hourly wage.

• Additional Provisions:
  • Waiting Period: New employees may need to wait 120 days before using the sick time earned.
  • Combining ESTA with PTO: Employers can use PTO plans that meet or exceed ESTA requirements.
  • Rate of Pay: Sick time pay excludes overtime, bonuses, and other supplemental pay.
  • Discipline and Adverse Actions: Employers can take action against misuse of benefits, but the presumption of violation for actions within 90 days of a complaint has been removed.
  • Reinstatements: Reinstated employees within two months must have unused sick time reinstated unless they paid out at separation.
  • Private Right of Action: Removes the ability for employees to go directly to court for violations.
  • Compliance Requirements: Employers must update posters and notices by March 23, 2025. Small businesses have until October 1, 2025, to comply.
    
    Updated Poster: Employers, regardless of size, have until March 23, 2025, to provide the mandatory poster that can be found on the following page.

Source References

• Michigan HB 4002
• Michigan SB 8: Minimum Wage and Tip Credit
• Michigan ESTA Required Poster
• Michigan Supreme Court: Revives ESTA and IWOWA as Originally in the Ballots (VensureHR)
• Michigan 2025 Minimum Wage Increase Rate Schedule (VensureHR)

Resources

• Michigan ESTA Required Poster
• Michigan ESTA FAQ

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