State updates sick time guidance — key changes employers need to know

Advocacy News – July 31, 2025 

What’s new: The Michigan Department of Labor and Economic Opportunity (LEO) recently released an updated FAQ document for the state’s Earned Sick Time Act (ESTA), which took effect in February for businesses with 10 or more employees and will apply to small businesses — those with fewer than 10 employees — starting Oct. 1.

Why it matters: The updated FAQ clarifies that employees who work out of state — such as those in the trucking or airline industries who travel in and out of Michigan — must continue to accrue and remain eligible for leave under ESTA, even while working outside the state. It also defines “volunteer” in line with the federal Fair Labor Standards Act (FLSA) exemption, meaning individuals such as certain volunteer firefighters are not considered employees under ESTA. Additionally, the FAQ provides new guidance on how ESTA applies to collective bargaining agreements (CBAs) covered by the Railway Labor Act.

Specific changes:

• What employees are exempt from the Act?  Specifies exempt employees include volunteers under certain circumstances, referencing 29 C.F.R. §553.100 (2025).
• How does the ESTA apply to work performed outside the state of Michigan, or to employers located outside the state of Michigan? 
  • The ESTA applies to work performed by employees who are physically located in Michigan, regardless of the employer location.
    • Example: Kyle works remotely for an employer based in Chicago; he lives in Michigan and works out of his home office. Kyle would be entitled to the accrual and use of ESTA.
  • The ESTA applies to work performed by employees whose employment is based in Michigan that are sent out of state by their employer to work in another location.
    • Example: Kyle works for an employer in Michigan; he is assigned to perform work in Texas with his same employer. While in Texas Kyle continues to accrue and may use ESTA time.
  • The ESTA may not apply to an employee traveling into Michigan for an employer when both are generally based outside of Michigan. An out of state employee and coming into Michigan would not be covered unless the employee earned 50% or more of their compensation for time spent in Michigan.
    • Example: Kyle is a delivery driver who lives and works in Ohio. His employer routinely has deliveries in Michigan, for which Kyle makes the deliveries. Kyle would not be covered by ESTA unless 50% or more of his compensation was derived while working in Michigan.
  •  The ESTA applies to an employee accepting a Michigan based job regardless of the employee’s residency.
    • Example: Kyle works in construction and lives in Ohio. Kyle accepts a job for a project in Detroit that is expected to last several months. While employed in Detroit, Kyle is covered by and can use ESTA.

• What effect does the ESTA have on collective bargaining agreements on or after Feb. 21, 2025?  (Note: The changes reflect that, while some collective bargaining agreements expire, those covered by the Railway Labor Act are only amended.)
  • If an employer’s employees are covered by a collective bargaining agreement in effect on the effective date of this act and the collective bargaining agreement conflicts with this act, this act applies beginning on the stated expiration or amendable date in the collective bargaining agreement.
    • The collective bargaining agreement includes terms regarding sick time or sick leave benefits: Provided that the collective bargaining agreement includes terms related to sick leave, sick time, PTO with uses for sick time, or a similar benefit, the collective bargaining agreement terms apply, even if the benefit is less than what is required by the ESTA, until the agreement expires, becomes amendable, or is renewed, extended, or otherwise renegotiated.
    • The agreement also applies in situations where the agreement expressly excludes sick leave benefits.
      • Armando’s works for an employer that is covered under a collective bargaining agreement. This agreement was signed November 2024 and includes 40 hours of sick time to covered employees. This agreement offers a benefit that conflicts with ESTA. The act would apply upon expiration of their collective bargaining agreement.
    • The collective bargaining agreement is silent as it relates to sick time or sick leave benefits: Employees covered by a collective bargaining agreement that is completely silent on sick leave, either for the entire unit or for specific classifications covered by the agreement, are covered by the ESTA and begin accruing benefits on February 21, 2025, unless they are a small employer as outlined above.
      • Nick works for an employer that has signed a collective bargaining agreement. The agreement expires June 2026 and does not include sick time benefits. On February 21, 2025, Nick would be entitled to ESTA.

Go deeper: View the State’s updated FAQ and the Chamber-updated FAQ found in our ESTA Compliance Toolkit. For questions, contact Wendy Block.