Before the clock struck midnight and the Michigan Supreme Court Ruling on adopt and amend could take effect today, the Michigan Legislature passed SB 8 (Minimum Wage) and HB 4002 (Earned Sick Time Act). Both bills were signed by the Governor early this morning and both were given immediate effect. HB 4002 had an effective date of Feb. 21, 2025 at 12:02 a.m.

Many thanks go to Senate Majority Floor Leader Sam Singh (D-East Lansing) and Speaker of the House Matt Hall (R- Richland) for staying at the negotiating table to get this done before the midnight deadline.

Minimum Wage (SB 8) passed in the Senate with a vote of 20-12 and in the House with a vote of 69-40.

On ESTA, the Senate voted to approve the changes by a vote of 26-10, and the House concurred with those changes by a vote of 81-29.

While these laws are changing for the better, the business community wasn’t able to get everything we had advocated for.

What was sent to the Governor:

Minimum Wage – Under SB 8, the minimum wage rate will increase from $10.56 an hour (current) to $12.48 on Feb 21, 2025; $13.73 on January 1, 2026; and $15.00 on January 1, 2027. Inflationary increases begin January 1, 2028, and each subsequent year using the Midwest Consumer Price Index (CPI). There are also changes to the tipped minimum wage. If you want information on that, please contact Dawn Crandall at dawn@hbaofmichigan.com.

ESTA – The key changes made under HB 4002 include:

IMPORTANT TO NOTE FOR SMALL BUSINESSES:

“Small business” means an employer, for which 10 or fewer individuals work for compensation during a given week. In determining the number of individuals performing work for compensation during a given week, all individuals performing work for compensation on a full-time, part-time, or temporary basis must be counted, including individuals made available to work through the services of a temporary services or staffing agency or similar entity. An employer is not a small business if it maintained more than 10 employees on its payroll during any 20 or more calendar work weeks in either the current or immediately proceeded in calendar year.

Also says (p 3): Notwithstanding the requirements of subsection 6, this act does not require a small business to do any of the following until October 1, 2025.

Employee exemptions – Specifies the only employees exempt from the new law are (1) those who work in accordance with a policy that allows the individual to schedule his/her own hours and has a policy that prohibits the employer from taking adverse personnel action if the individual does not schedule a minimum number of working hours; (2) unpaid trainees and unpaid interns; or (3) individuals employed in accordance with the Youth Employment Standards Act, MCL 409.101-.124.

Definition of employer – Expressly exempts a “nonprofit agency” from the definition of “employer.” Beyond that, the legislation does not exempt any businesses or organizations (please see “accrual” for the new rules for small business).

Accrual – Specifies employees are eligible to accrue one hour of sick time (EST) for every 30 hours worked. While employees may accrue more than 72 hours annually, employers may cap usage at 72 hours in a given year.
Employees working for small businesses (defined as those with less than 10 employees) will accrue at the same rate (1 hour for every 30 hours worked) but will only be eligible for 40 hours of paid leave annually (no unpaid leave).

Carryover – Caps carryover time at 72 hours (use-it-or-lose-it if time is frontloaded).

Frontloading – Specifies, as an alternative to the accrual method, employers may choose to frontload 72 hours at the beginning of the benefit year (40 hours for small businesses); employers only need to track how many hours of paid leave time have used annually, no carryover is required.

• Part-time employees: Says employers may frontload the time at the start of a year 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 EST frontloaded is, at a minimum, proportional to the EST 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 will provide additional hours.

• Waiting period – Says new employees can be required to wait until the 120^th day of employment to begin using EST. (This change should help seasonal employers.)

• Combining ESTA with paid time off (PTO) – Specifies an employer is in compliance with this section if the employer meets either of the following conditions: (1) provides the employer’s employees with PTO not less than the same amounts of time off as provided under ESTA (72/40 hours) and (2) may be used for a purpose described under the act OR any other purpose. The employer is not required to allow an employee to use PTO for a purpose described in ESTA in an amount that exceeds the amount of time off provided under the act.
  • Note: While this change seems favorable, we are still working to understand how this change would apply in the real world. It seems to specify other time off that can be used for ESTA purposes is compliant and there is no need to add more EST.

• Rate of pay – Clarifies that an employee’s normal hourly rate (i.e., the rate used to calculate ESTA pay) does not include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities.

• Advanced notice –
  • Foreseeable events: Allows up to 7 days advanced notice.
  • Non-foreseeable events: Says an employer may require the employee to give notice in either of the following manners: (1) as soon as practicable or (2) in accordance with the employer’s policy on requesting/using sick time or leave IF (a) on the date of hire, or the effective date of HB 4002, whichever is latest, provides the employee with a written copy of the policy that includes procedures for how the employee must provide notice and (b) that notice requirement allows the employee to provide notice after the employee is aware of the need for the EST. HB 4002 specifies that an employer requiring notice for sick time that is not foreseeable “shall not deny an employee’s use of earned sick time that is not foreseeable if…the employer did not provide a written policy to the employee…[and/or]…the employer made a change…and did not provide notice of the change within 5 days after the change.”

• Documentation – Says the employer may require the employee to provide documentation related the EST taken within 15 days of the request (but can only require after three consecutive days off).

• Increments – Specifies time may be used in 1 hour increments or the smallest increment used to account for absences. It looks like this is now permissive and gives the employer the choice.

• Discipline/adverse actions – Specifies an organization can take adverse personnel action against an employee who fails to notify per the employer’s policy or misuses the benefit.

• Abuses – Specifies “an employer may take adverse personnel action against an employee if the employee uses earned sick time for a purpose other than a purpose described [under the act]…or violates the notice requirements under this act.”

• Reinstatements/Successors – Specifies employees who leave an organization or move to a successor employer, but return within two months, must have unused, accrued time reinstated unless the employer paid out the unused EST. (This should help seasonal employers.)

• Rebuttable presumption – Removes the problematic language specifying “[t]here is a rebuttable presumption of a violation…if an employer takes adverse personnel action against an employee within 90 days after that person…” files a complaint, cooperates with the department, etc.

• Private right of action – Removes the ability of an employee to go straight to court if they believe their employer violated the law.

• Enforcement responsibilities – Specifies enforcement responsibilities will rest with the Michigan Department of Labor and Economic Opportunity.

• Penalties – Specifies employers failing to provide EST are liable for a civil fine of not more than eight times the employee’s normal hourly wage.

• Complaints – Says an employee must file a complaint with the state within three years of the violation (strips “or the date when the employee knew of the violation”)

• Posters and notification to employees – Gives employers 30 additional days to post new posters and provide employees with written notice to each employee about the amount of EST required to be provided under ESTA, the employer’s choice of how to calculate a “year,” the terms which EST can be used, etc.

• Collective bargaining agreements – Expands on the existing CBA language to specify “[i]f an employer’s employees are covered by a collective bargaining agreement on the effective date of this act and the collective bargaining agreement conflicts with this act, this act applies beginning on the state expiration date in the [CBA]….” HB 4002 also provides that employers who participate in a multi-employer collective bargaining agreement and contribute to a multi-employer paid sick leave plan are in compliance with ESTA.