Advocacy News – Jan. 10, 2025
What happened: The Michigan Supreme Court (“Court”) ruled July 31, 2024, that two 2018 ballot initiatives to increase the state’s minimum wage and mandate paid sick leave requirements for employers should be put into effect – despite never being voted on by the people – saying the strategy the Michigan Legislature used to adopt alternative legislation violated the Michigan Constitution.
- The countdown is on to Feb. 21, the date these sweeping new laws will take effect.
- The Michigan Chamber has been working hard to help businesses understand their compliance obligations and lawmakers understand the negative implications the decision could have on employers and workers alike.
- The Michigan Chamber is working tirelessly to see legislation passed and sent to the Governor’s desk prior to the February deadline.
What’s on the table: During the first week of the 2025-26 legislative session, the Michigan House and Senate introduced legislation to address the issues with laws. While the starting details vary significantly, the House version is highly preferred. Here’s our analysis and take of the two Earned Sick Time Act (House Bill 4002 and Senate Bill 15) and minimum wage (House Bill 4001 and Senate Bill 8) bills.
Earned Sick Time (ESTA) – A Comparison of HB 4002 vs. SB 15
| Issue | HB 4002 | SB 15 | Comments |
| Benefit year definition | Allows employers to use any consecutive 12-month period used by an employer. | Allows employers to use any consecutive 12-month period used by an employer. | Both bills allow an employer to determine what is a benefit year (calendar year, anniversary date, fiscal year, etc.). |
| Definition of an employee (Contractors) | Clearly states that an eligible employee is an individual for whom an employer is required to withhold pay for federal income tax purposes. | Not addressed. | This issue needs clarification. The Department, in its FAQ, has said an “eligible employee is an individual engaged in service to an employer in the business of the employer, except those employed by the U.S. government. Michigan case law uses the economic reality test to determine whether an individual is an employee.” |
| Definition of an employee (seasonal employees) | Exempts individuals employed by an employer for 25 weeks or less in a benefit year for a job scheduled for 25 weeks or less in a benefit year. | Not addressed (must be covered). | Only HB 4002 excludes seasonal employees from the coverage mandate. |
| Definition of an employee (part-time) | Exempts any individual who worked less than 25 hours per week during the immediately preceding benefit year or is expected to average less than 25 in the current benefit year. | Not addressed (must be covered). | Only HB 4002 exempts part-time workers from the coverage mandate. |
| Variable hour, out of state, rail and flight employees | Exempts those whose primary work location is not in Michigan, variable hour employees, certain rail and flight deck employees. | Not addressed (must be covered). | Only HB 4002 exempts these employees. |
| Definition of a “small Business” | Exempts employers with 50 or fewer employees. | Businesses with 25 employees or fewer need to provide 40 hours paid leave, 30 hours unpaid (but not exempt from the Act). Note: We believe the 30 hours of unpaid leave should read 32 hours (i.e., a typo seems to exist). | Currently, ESTA defines “small business” as a business which employs 10 or fewer employees and would align Michigan with a number of federal laws, including the Family Medical Leave Act (FMLA). SB 15 does NOT create an exemption; rather, it simply expands the current bifurcated approach to ESTA (currently requires employers will less than 10 employees to provide 40 hours paid, 32 hours unpaid). |
| Definition of “health care professional/provider” who can provide documentation necessary under ESTA | Changes definition to mirror the FMLA. | Not addressed. | ESTA allows “ANY person licensed under federal law of this state to provide health care services” and provide documentation to an employee, which is a broader, more nebulous term than exists in the FMLA. HB 4002 puts Michigan in line with federal standards. |
| “Retaliatory action” definition | Removes “threat” of action as retaliatory personnel action violation. Also removes nonsensical language prohibiting sanctions against an employee who is a recipient of public benefits. | Not addressed. | HB 4002 peels back some of the harsh restrictions on employers that may wish to take disciplinary action against an employee. |
| Combination with other paid time off (PTO) benefits | Specifies that ESTA may be combined with other paid leave, which can include, but is not limited to, paid vacation days, paid personal days, paid sick leave, or paid time off. Removes problematic language that requires all paid time off to be provided under the “same conditions” as provided under the ESTA. | Retains problematic language specifying an “employer other than a small business is in compliance…if the employer provides any paid leave time off in at least the same amounts amount as that provided under this act that may be used for the same purposes and under the same conditions provided in under this act and that is accrued at a rate equal to or greater than the rate described” in the ESTA. | Only HB 4002 allows employers to count existing PTO benefits they offer towards ESTA requirements – even if all of that time doesn’t mirror the ESTA requirements on advanced notice, increments of time, documentation, etc. Gives employers more flexibility to keep their PTO policies in place without having to make changes that don’t work for their business or employees. |
| Carryover of benefits | Employers can limit carryover of unused benefits to 72 hours from one benefit year to another. | If an employer pays the employee out for unused sick time, they can limit carryover to 144 hours, but if they do not pay the employee the value of unused sick time, they must allow up to 288 hours to be carried over. | Under ESTA, employers can limit the use of earned sick time to 72 hours in a given benefit year, but all unused time must carry over from year to year with no cap. In many circumstances, this leads to an orphaned benefit for employees, who gain no value in having an endless bank of a benefit they can only use on a limited basis. Restricting carryover to 72 hours, as HB 4002 does, ensures that an employee could enter a benefit year with the maximum amount of earned sick time they could use in that benefit year. It also allows employers to continue to elect payouts – a pro-employee benefit offering. |
| Frontloading | As an alternative to the accrual method, an employer may provide 72 hours at the beginning of a benefit year. | As an alternative to the accrual of earned sick time, an employer may provide the benefit at the beginning of a year. | Both HB 4002 and SB 15 allow employers to frontload their earned sick time benefit. HB 4002 specifies that this frees employers from tracking and carryover requirements, while SB 15 does not. |
| Year one calculation | If the benefit year begins before HB 4002 is signed into law, all time provided to an employee in the current benefit year can count towards the employer’s compliance obligations. | Not addressed. | HB 4002 clarifies that any time given prior to the passage of the bill will count towards compliance obligations in year one, avoiding a scenario where employers are forced to reset their benefit years to Feb. 21. |
| Calculation of sick time pay rate | Clarifies an employer is not required to include overtime, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities in the calculation of an employee’s normal hourly rate. | Not addressed. | Under ESTA, employers must account for overtime, commissions, etc., when calculating an employees’ rate of pay. HB 4002 limits the calculation to just the normal pay obligations an employer would pay (normal wage). SB 15 does not change this provision. |
| Advanced notice and disciplinary actions | An eligible employee shall comply with the employer’s usual and customary notice, procedure, and documentation requirements for requesting or using sick time or leave. | An employer with mandated staffing ratios may require an employee to comply with the employer’s leave policy; otherwise, an employer may require seven days’ advanced notice if the need for leave is “foreseeable” and “as soon as practicable” if “unforeseeable.” | ESTA has the potential to create severe staffing issues for employees and takes disciplinary and personnel decisions out of the hands of employers by not allowing them to take any adverse personnel action against an employee who used earned sick time. HB 4002 restores that flexibility for all employers, while SB 15 partially restores it for a narrow group of employers who are subject to staffing ratios. |
| Disciplinary action for abuses | An employer may take disciplinary personnel action against an eligible employee if the employee fails to comply with the employer’s usual and customary notice requirements. | Not addressed. Retains language specifying an “employer’s absence control policy shall not treat earned sick time taken under this act as an absence that may lead to or result in retaliatory personnel action.” | Under ESTA, employers are forbidden from any adverse personnel action and are thus unable to endorse their customary notice, procedure and documentation requirements for use of leave. HB 4002 allows employers to manage their own HR decisions, but SB 15 is extremely limited. |
| Documentation and three day no-call-no-show | For earned sick time of more than three consecutive days, an employer may require reasonable documentation or a certification that meets the requirements under the FMLA. Specifies an employer may take disciplinary personnel action against an eligible employee if either of the following conditions is met:(A) The eligible employee fails to comply with the employer’s usual and customary notice, procedure and documentation requirements for requesting or using sick time or leave.(B) The eligible employee is absent from work for a period of three or more consecutive work days without contacting the employer in a manner that is acceptable to the employer. | Not addressed beyond what’s in the ESTA (i.e., retains language allowing an employer to require documentation after three consecutive days and specifying an “employer’s absence control policy shall not treat earned sick time taken under this act as an absence that may lead to or result in retaliatory personnel action”). | Under ESTA and SB 15, employers are only allowed to require documentation from an employee after three consecutive days of no-call-no-show. HB 4002 allows employers to take disciplinary action after three days of no-call-no-show – an action that is typically considered synonymous with resignation. |
| Increments of time (how time can be used) | While employers may limit use of leave to one-hour increments, they are also allowed to choose a different policy (if put in writing). | Earned sick time must be used in one-hour increments. | Both bills remove the language allowing time to be used in the smallest increments that the employer tracks for payroll (e.g., one- or six-minute increments). However, HB 4002 gives employers more flexibility on a policy that works for them. |
| Concurrent leave | If earned sick time also qualifies as leave under FMLA, the Americans with Disabilities Act (ADA), or other federal or state laws, an employer may require time be taken concurrently. | Not addressed. | Under ESTA, the language is silent as to whether earned sick time can be required to run concurrently with, for example, FMLA time. HB 4002 specifically authorizes this. |
| Documentation timeline | An employee must provide documentation not more than 15 days after the employer’s request. | Not addressed. | There is no requirement in ESTA or in SB 15 for timely acquisition of a doctor’s note. |
| Reinstatement / succession | An employer is not required to restore previously accrued unused earned sick time if the employer pays them out for unused time at termination. The same is true for situations when a different employer succeeds or takes the place of an existing employer. | Not addressed. | Allows for (but does not mandate) payouts at separation (and avoids reinstatement upon return). Allows the same instances of a successive employer. This is a pro-employee change. |
| Rebuttable presumption | The rebuttable presumption is eliminated. | The rebuttable presumption is eliminated. | ESTA contains a rebuttable presumption against the employer in any dispute for ESTA use, meaning the onus is on the employer to prove they are not guilty. Both HB 4002 and SB 15 remove that and put employers and employees on equal footing. |
| Statute of limitations | Not addressed. | One year. | Affected employees have three years to file a complaint under ESTA. SB 15 reduces this to one year; HB 4002 does not. |
| Private right of action | The right to file a civil action is eliminated. Enforcement rests with the state. | The right to file a civil action is eliminated. Enforcement rests with the state. | ESTA allows affected employees to go straight to court by bringing a civil suit against their employers for an alleged violation of the act. This is in addition to administrative remedies through the state. Both SB 15 and HB 4002 eliminate this problematic private right of action and designate the Department as the singular avenue for complaints and remedies. |
| Additional remedies | Retains language in ESTA that specifies employers who fail to provide earned sick time in violation of the act are subject to a $1,000 civil fine. | Employers who take retaliatory action are subject to a $1,000 civil fine; employers who fail to provide earned sick time are subject to a civil fine of eight times an employee’s normal hourly rate. | HB 4002 removes any civil fine for retaliatory action and allows employers to enforce their own leave and attendance policies, while SB 15 still maintains that restriction. SB 15 introduces a new calculation for failure to provide earned sick time, which is $1,000 in HB 4002. |
Minimum Wage – A Comparison of HB 4001 vs. SB 8
| Issue | HB 4001 | SB 8 | Comments |
| Minimum wage rate | Increases the minimum wage rate from $10.56/hour (current) to $12 Feb. 21, 2025; $12.50 Jan. 1, 2026; $13 Jan. 1, 2027; $14 Jan. 1, 2028; and $15 Jan. 1, 2029. Inflationary increases would follow in 2030 and each subsequent year. | Increases the minimum wage rate from $10.56/hour (current) to $12.48 Feb. 21; $13.73 Jan. 1, 2026; $15 Jan. 1, 2027. Inflationary increases would follow Jan. 1, 2028, and each subsequent year. | The Senate bill would be more difficult for employers to implement because it increases the minimum wage by approx. $4.50/hour over three years. |
| Tipped employees | Retains the current 38% tipped minimum wage. | Increases the tipped minimum wage over 10 years from 38% (current) to 40% Jan. 1, 2026; 42% in 2027; 44% in 2028; 46% in 2029; 49% in 2030; 51% in 2031; 53% in 2032; 55% in 2033; 57% in 2034; and 60% in 2035. | The Senate version is expected to be disruptive for those businesses relying on tipped employees. It’s important to remember that, regardless of whether the tipped minimum wage is 38% or 60%, tipped employees are guaranteed to make the full minimum wage. If an employee’s hourly rate does not meet or exceed the full minimum wage when the tipped minimum wage and tips are added together, the employer must pay the difference. |