Beginning February 21, 2025 all businesses operating in the state of Michigan will be subject to new minimum wage and paid sick leave requirements. This is the result of a July 31st, 2024 Michigan Supreme Court decision. The three main areas to be aware of are: (1) minimum wage increase, (2) elimination of the tipped wage, and (3) new accrual based sick leave requirements. BR1 is a member of the Small Business Association of Michigan, who has done a remarkable job of keeping us informed and up-to-date.
Minimum wage increase
The current Michigan minimum wage of $10.33 will undergo an unusually complex to calculate schedule of increases.
Tipped wage elimination
Currently, Michigan allows employers to pay tipped workers 38% of the normal minimum wage, as long as these tipped employees never earn less than the standard minimum wage. Most tipped workers earn far more than the standard minimum wage. A recent survey shows that 83% of servers are not in favor of this change. Under these new regulations, the Michigan tipped wage will be phased out and these workers will fall under the standard minimum wage.
Accrual based sick leave requirements
This is the part of the new requirements that will impact the most Michigan businesses. Basically, all Michigan businesses that have employees! The Michigan Department of Labor and Economic Opportunity has issued a few answers to frequently asked questions, which you'll find below.
Our biggest concern is that the Michigan Legislature and Supreme Court have created a situation that seems to steer the employer and employee relationship in an adversarial direction. This regulation becomes effective on February 21st, 2025 and applies to all employers, regardless of size (excluding federal employees). It applies to both hourly and salary, exempt and nonexempt employees, full-time and part-time.
Here is SBAM's special briefing on the Earned Sick Time Act and FAQs from September 4th, 2024:
What can you do?
The Small Business Association of Michigan is urging lawmakers to act swiftly but deliberately to protect small business owners from the fallout of this unfortunate ruling. Business leaders... Please contact your legislators!
Earned Sick Time Act Frequently Asked Questions (FAQ)
These are the frequently asked questions and answers provided by the Labor and Economic Opportunity Department. If you find your head spinning or blood pressure rising, you're not alone!
What employers are covered by the act?
- All Michigan employers that have one or more employee, excluding employees of the United States Government.
How to determine if an employer meets the 10-employee threshold?
- An employer meets the 10 employee threshold if it employs 10 or more employees in 20 or more workweeks in the current or previous calendar year. The 20 workweeks need not be consecutive. This includes full-time, part-time, and temporary employees including those provided through a temporary service or staffing agency or similar entity.
- Once an employer meets the 10 or more-employee threshold, the employer will remain covered until the remainder of the current and following calendar year or no longer meets the definitions in the first bullet.
- What employees are eligible to receive earned sick time?
- An eligible employee is an individual engaged in service to an employer in the business of the employer and from whom an employer is required to withhold for federal income tax purposes.
When does an eligible employee begin to accrue earned sick time?
- Accrual begins on February 21, 2025, or upon commencement of the employee's employment, whichever is later.
What is a benefit year?
- A benefit year is a regular and consecutive twelve-month period, as determined by the employer
May an employee carry over unused earned sick time from one benefit year to the next?
- Yes. Any unused earned sick time carries over from year to year; however, an employer is not required to permit an employee to use more than the annual allowed maximum time (paid or unpaid) in a 12-month period.
May an employer provide the total amount of earned sick time all at once?
- There is no prohibition in the law preventing an employer from providing the total amount of sick time at the beginning of the 12-month period provided it complies with the accrual, use, carryover, and other provisions of the Act during the benefit period.
When is earned sick time available for use by an eligible employee?
- An employee may use earned sick time as it is accrued except an employer may require an employee to wait until the 90th calendar day after commencing employment before using accrued earned sick time.
Does earned sick time have to be taken in 1-hour increments?
- Maybe. The Act provides that earned sick time may be used in the smaller of hourly increments or the smallest increment of time used by the employer’s payroll system for absences or use of other time.
- For example, if an employer uses 1/10th (6 minutes) of an hour for tracking attendance/absences, then this would be the incremental use allowed for earned sick time.
When can an eligible employee use earned sick time?
- An employer shall permit an employee to use the earned sick time accrued for any of the following:
- The employee’s or the employee’s family member’s mental or physical illness, injury, or health condition; medical diagnosis, care, or treatment of the employee’s mental or physical illness, injury, or health condition; or preventative medical care for the employee.
- If the employee or the employee’s family member is a victim of domestic violence or sexual assault, for medical care or psychological or other counseling for physical or psychological injury or disability; to obtain services from a victim services organization; to relocate due to domestic violence or sexual assault; to obtain legal services; or to participate in any civil or criminal proceedings related to or resulting from the domestic violence or sexual assault.
- For meetings at a child’s school or place of care related to the child’s health or disability, or the effects of domestic violence or sexual assault on the child; or
- For closure of the employee’s place of business by order of a public official due to a public health emergency; for an employee’s need to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency; or when it has been determined by the health authorities having jurisdiction or by a health care provider that the employee’s or employee’s family member’s presence in the community would jeopardize the health of others because of the employee’s or family member’s exposure to a communicable disease.
- An employer shall not require an employee to search for or secure a replacement worker as a condition for using earned sick time.
Who is considered a family member?
- Family member includes:
- Biological, adopted or foster child, stepchild or legal ward, or a child to whom the employee stands in loco parentis
- Biological parent, foster parent, stepparent, adoptive parent, or legal guardian of an employee or an employee’s spouse or domestic partner or a person who stood in loco parentis when the employee was a minor child.
- Grandparent
- Grandchild
- Biological, foster, and adopted sibling
- Any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.
Can an employer require an employee to use other employment benefits, such as vacation pay, in lieu of or prior to using earned sick time?
- An employer’s paid time policies, that provide at least the same amounts as that provided in the Act and may be used for the same purposes and under the same conditions and that is accrued at a rate equal to or greater than the rate described in the act may be in compliance.
- For small employers, employees must be allowed to use paid earned sick time before using unpaid sick time provided for under the Act.
What is the required wage rate for earned sick time?
- Earned sick time must be paid at a pay rate equal to the greater of either an employee's regular rate of pay or the Michigan minimum wage rate. The regular rate for a tipped employee is the applicable full minimum wage rate.
- For any employee whose hourly rate varies depending on work performed, the “normal hourly wage” means the average hourly wage of an employee in the pay period immediately prior to the pay period in which the employee used paid earned sick time.
Does accrued, unused earned sick time need to be paid upon termination of employment?
- No. Employees do not need to be paid for unused accrued earned sick time at separation under the Act. However, there may be other laws, such as 1978 Public Act 390, the Payment of Wages and Fringe Benefit Act, that may require payment upon termination pursuant to the employer's written policy or contract.
Can an employer require an employee to provide notice of and documentation for the use of earned sick time?
- If the need for earned sick time is foreseeable, an employer may require advance notice not to exceed 7 days prior to the date the earned sick time is to begin, of the intention to use the earned sick time.
- If the need for earned sick time is not foreseeable, an employer may require the employee to give notice of the intention as soon as practicable.
- For earned sick time of more than 3 consecutive days, an employer may require reasonable documentation that the earned sick time has been used for a purpose covered by the Act. Upon request the employee must provide this documentation in a timely manner.
- Employer required documentation should not include a description of the illness or details of the violence.
- If an employer requires documentation, it is responsible for paying all out-of-pocket expenses the employee incurs in obtaining the documentation.
- An employer cannot delay commencement of the leave based on a failure to receive documentation
Does the employer have a duty to maintain the confidentiality of the information provided by the employee?
- Yes. Employers must maintain the confidentiality of health, domestic violence, sexual assault information about an employee or his or her family member and cannot disclose the information to others without the employee's permission.
What recourse does an employer have for an employee failing to follow established notice and documentation policies?
- Employers should consult with an attorney for guidance concerning the creation of notice and documentation requirements.
- Employers may not retaliate against an employee for engaging in activity protected by the act. Importantly, there is a rebuttable presumption that an employer violated the act if it takes any adverse personnel action against an employee within 90 days after the employee engages in protected activity.
What are employer recordkeeping requirements under the act?
- Employers must retain records that document the hours worked and earned sick time taken by employees for not less than 3 years. These records shall be available to the Wage and Hour Division with appropriate notice and at a mutually agreeable time.
Does the Earned Sick time Act contain a notice or posting requirement?
- Yes, Employers must provide written notice of an employee’s rights under the act at the time of hiring or on are after February 21, 2025, whichever is later. Required notice contents can be found at www.michigan.gov/wagehour.
- Employers are also required to display a poster at the place of business. The department shall create the poster which can also be found at www.michigan.gov/wagehour.
What remedy is available to employees or others who believe an employer has violated the act?
- A claim may be filed with the Wage and Hour Division within 3 years of the alleged violation date. An investigation will be completed, and mediation attempted if appropriate. If a violation is found, the department may award all appropriate relief including but not limited to payment of all earned sick time improperly withheld, any and all damages incurred by the complainant as a result of violation of this act, back pay and reinstatement in the case of job loss.
What penalties are imposed against an employer for violating the act?
- An employer who fails to provide earned sick time is subject to a $1,000.00 administrative fine. An employer who willingly violates the posting requirement is subject to a $100.00 administrative fine for each separate violation.
How do I file a claim for violations of the Earned Sick Time Act
- Claims may be filed online at www.michigan.gov/wageclaim or in person at a Wage and Hour Division office (see website for locations); or a form may be requested by calling 855-464-9243 (4MI-WAGE). Claim forms are available in English, Spanish, and Arabic.
What if I have additional questions?